Would-be entrepreneurs miss the real lessons of TV’s ‘Shark Tank’

Would-be entrepreneurs miss the real lessons of TV’s ‘Shark Tank’

What viewers often fail to realize is that not every idea or product that shows up on "Shark Tank" is actually worth an investment.

Mark Cuban of ABC's
Mark Cuban of ABC's "Shark Tank." (Screen shot, via ABC's series web site.)

TULSA, Oklahoma, January 8, 2015 – “Shark Tank,” the popular ABC business reality show (also running in syndication on CNBC) has gained fame for the pronouncements of its tough-nosed business “sharks,” such as Mark Cuban, Daymond John, and Barbara Corcoran. All are blunt with their business critiques, giving the show’s would-be entrepreneurs chills up and down their spines when they pitch their own business plans to these bigwigs, hoping for an initial investment of real money.

Ever since the show became popular, viewers have become fascinated with the notion that anyone with an idea or product has the potential to obtain some significant entrepreneurial seed money from the show’s savvy capitalists.

What viewers often fail to realize is that not every idea or product that shows up on Shark Tank is actually worth an investment. Those like Mark Zuckerberg, Bill Gates, or Michael Dell who actually become truly successful entrepreneurs are few and far between.

The reason why? In the real, cut-throat world of business, finding, creating and marketing a successful breakthrough product or service is much easier said than done. And, unless you’re born to an already wealthy dynastic family, getting your idea funded−even if it’s a brilliant one−is sometimes the toughest part of all.

For example, if you’re asking the Shark Tank panelists to invest $1 million in your brilliant idea, but only project $100,000 in sales over a year, the sharks will pounce. When will they ever get their money back let alone earn a profit on their investment?

This is simply common sense. If an individual walked into a bank and asked for a $250,000 mortgage, but only showed $50 of assets in his or her checking account and zero ownership or equity in anything else, what is the loan officer likely to say? There is nothing here to persuade the bank that this loan is worth the risk. Of course, the bank would not make the loan for essentially the same reason that the Sharks would turn down that $100,000 idea with a million dollar price tag: no possible ROI, or Return on Investment.

Viewers who think that all a would-be entrepreneur needs to get funded by ABC’s venture capitalist Sharks is simply the courage and high self-esteem needed to pitch their idea are greatly mistaken. Confidence and showmanship can help in the presentation, of course. But the only thing that will ultimately impress the Sharks is a clear presentation and business plan laying out a convincing case as to the likely success and profitability of the product in question, along with a realistic projection of sales numbers that make sense in the real world.

Bottom line: just because an individual has a bright idea for a new or better product or service does not automatically qualify it for a hefty Shark Tank investment. The way Sharks become Sharks, after all, is by ignoring clever but unprofitable ideas in favor of choosing only those that are most likely to succeed in the marketplace.

The new or improved product or service has to generate substantial sales, revenue, and profits, with projections firmly backed by realistic numbers capable of convincing any prospective investor that he or she will make their money back with greater than average profitability in a time frame of less than five years.

For those who care to look beneath “Shark Tank’s” glitzy surface, that’s the key lesson this popular business reality show has to teach.

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