For most business owners, watching the Shark Tank would be compelling viewing – I have watched the original BBC series Dragon’s Den for many years and I just love seeing the clever, crazy, brilliant and stupid ideas, pitches and expectations presented. But I’d like to ask the question, “Would having a Shark on board really be worth giving up the equity they’re demanding?”
If a would-be Shark Tank entrepreneur came to me for business advice, I would first look to see if the investment being asked for was really necessary. Is the business in good shape and able to pay its own way? In other words, do they really need the cash now? If yes, then my next question is have the alternative methods of raising cash been explored thoroughly enough and a proper comparison of all the pros and cons been performed? If the entrepreneur has a really solid plan and is capable of executing it successfully (and their business is in reasonable financial health) then debt finance could be a really good alternative. Giving away equity means giving away not only part ownership, but also potentially, some of the power (decision making) and could even open up potential liabilities (depending on how the resulting organisation is structured).
If the cash is not really needed, then what is the entrepreneur really looking for when inviting the Sharks to participate in the business? Are they looking for a truly active partner? Are they looking for a door-opener? Or are they looking for a mentor? The “want-trepreneurs” we see on the show might be looking for exposure on national television, but the truth is that they are probably looking for a bit of all of these things.
So how ‘active’ as a partner would a Shark be? Consider the panel of Sharks: Janine Allis of Boost Juice fame, Andrew Banks, Steve Baxter, John McGrath (love his book You, Inc!), and Naomi Simson (a LinkedIn Influencer, along with only a few other hundred to achieve this status, such as Sir Richard Branson and Deepak Chopra).
These Sharks are pretty busy people, who are already involved in some significant businesses, so it would be fair to say that their ‘active’ involvement would be limited and therefore the value that they might offer in being involved in the day-to-day running of the business would be limited.
How many doors can they open? I think this is the area of help most commonly sought – access to significant contacts. Sharks are connected to other Sharks and if they can each see a dollar to be made they will be interested. But if you have a good product or service that one Shark is interested in, wouldn’t it follow that you could gain the interest of others – yourself? All you really need is a good sales process, some good marketing and the determination to make it happen.
So perhaps it is the mentoring that is the most attractive element on offer by Sharks? Entrepreneurs are human after all and they would want to mitigate their risks and reduce their chances of failure. Having someone to guide you, who has achieved success and been there, seen it and done it before, has to be advantageous. BUT is that worth giving up equity for? Being offered advice, held accountable and responsible is a truly great thing in business, but giving away significant slices of your company in return for this?
What most of the participants in the Shark Tank really need is an experienced business coach*. They need someone who can help them understand their real business drivers; fine tune their strategies and tactics; make sure that their team is capable and disciplined to do what needs to be done; and fine tune their systems. Business coach is a fee-based service, so the entrepreneur can keep 100% of their hard-earned equity and take pride in building the successful and profitable business themselves. An investment in coaching will provide the desired returns and you don’t have to give up any control. Which would you choose? To jump in the tank with Sharks or to be the captain of your own ship?
*Some people might think I’m biased to say that, because I am a business coach but I believe it’s an informed perspective not a biased one. Is it biased when a doctor hears someone coughing and says “You should see a doctor about that.”? That said, if you’d like a health check for your business, contact us for a complementary business diagnostic in Melbourne on 03 9813 8777.