What started as an obscure show many years ago, Shark Tank seems to have become the gold standard for small business success. With over 10 million viewers, many people think wherever the celebrities on Shark Tank invest means it will be a success. It doesn’t. This is not the way it works for most companies.
I don’t want to bash Shark Tank. I have met and worked with most of the Sharks and they have been generous to me. But if people want to learn what small business is all about, they should not just watch “Shark Tank” because what happens on this show is atypical of small business. In the end, it’s not small business. but reality television.
Only a tiny fraction of the 30 million small companies in the country ever have an outside investor. Most grow through getting new customers and keeping the ones they have. They do get cash loans or investments from their own bank account, banking resources, family and friends.
Far too much time is spent by small business owners seeking investor capital or “other people’s money” (OPM). Many start ups think this is the golden ticket for success. It isn’t. I remember when I was an angel investor and people pitched me all the time.
One founder said to me that “all I need is a quick $5M and I can make this business work”. I replied “Just a quick $5M?
For founders, time should be focused on finding repeat customers before it is spent in search of investors.
Businesses are built on cash made from repeatedly selling customers a product or service. What celebrities on Shark Tank are looking for is this type of established track record. They want to add capital that will exponentially grow a business that already has some success. While the Sharks are risk takers, the founder must first prove the business model before anyone else will put there money in.
Go ahead and watch Shark Tank. It’s fun to root for the small business owners or the Sharks. But also learn about what really goes into growing a small business: finding repeat customers.
