Fifteen Valuable Questions From The TV Show Shark Tank

I love the ABC TV show Shark Tank. It’s the only show I’ll actually try to watch live on TV (versus Hulu) since I enjoy the real-time tweets by all of the “sharks” during the show. In fact, tonight is the season three finale.

If you haven’t seen it, the premise is basically this: Entrepreneurs pitch their business ideas to a group of five gazillionaire investors (aka sharks) and offer them a share of ownership in exchange for a cash investment. If they can’t convince someone to fund at least the amount that they are asking, they walk away without a deal. However, negotiating can and does occur, and more often than not the investor gets a larger stake in the company than originally requested or something extra like a percentage of every sale. On the flip side, once in a while a business comes along that is so good the investors actually get into a bidding war and the entrepreneur walks away with an even better deal than they imagined.

I know that this isn’t totally accurate to the real world. Investors have time to think about an idea after the pitch, lower dollar amounts can be agreed upon, etc. But the questions that the investors ask the entrepreneurs are rock solid. They’re exactly the questions that any potential investor in your business would want answered.

Here is a list I’ve put together after watching way too much Shark Tank. And yes, I take notes during the show.

1 – What is unique about your product?

This question comes up at least once every episode. This, to me, is the most important question that gets asked. Is there something proprietary about your product or service? Why couldn’t one of the investors just start something similar on their own, with their own money and 100% ownership? Why can’t someone easily rip this off or duplicate it? If nothing about your business is unique, then it’s going to be hard to get an investment. And note: if there is something incredibly unique about YOU and you are the face of the brand, that can count.

2 – What do your sales numbers look like?

Know your sales information inside and out. If you don’t have any sales, then why is your business worth anything? If you do have sales, does the amount you’re asking for match up with the valuation of your business? Investors want to add to something that already has momentum. This is key for them since priority number one is getting a return on their investment.

3 – What does it sell for? What does it cost to produce?

It’s one thing to have sales. It’s another to have actual profits. Good sales numbers plus a healthy profit margin equals great things for both you and your investors.

4 – How much of your own money do you have invested into this business?

If you don’t have any money invested in something you say you believe in, why should an investor give you their money with blind faith?

5 – How much debt do you have?

Debt gets added to valuation of company. For example, someone looking for 50% partner at $100k is valuing their company at $200k, but if they already have $100k of debt they are valuing the company at $300k, thus making the shark’s cash investment worth much less.

6 – Is your idea patented?

If you have a product that is truly unique, is it protected?

7 – Can this idea be licensed?

Okay, so your idea IS unique. Is there a way to license this to other companies and expand profits exponentially?

8 – How does this business scale?

Have you thought about what’s going to be involved to take your product or service all the way to the top? What IS the top? What systems will you need in place to meet customer demand?

9 – Are you willing to send production off-shore?

In terms of increasing both scalability and profit margin, is this a USA-only product or are you okay with going overseas? It’s okay to be USA-only, but be firm in WHY you are choosing this option.

10 – How will your product be distributed?

Is this something people primarily buy through your website, or is it more likely to be found in a physical retail location? What types of retail locations? How will you get it there?

11 – How do we get this to (or find) your target market?

You’d better know who your target market is and as many statistics as you can in terms of spending habits, brand loyalty, etc.

12 – How many competitors do you have?

Know your competitors just as well as you know your target market. If there is a lot of competition in your target market, that could signal trouble to a potential investor.

13 – How many total owners are there?

Do you have 100% ownership of the business? Investors are going to want to know who they are sharing ownership with and who has the most control.

14 – What skills do YOU have that are going to make this a success?

Investors are not only buying into your business, they’re also investing in you. What are you doing with your business already that is going to make them want to partner with you? Is it you work ethic, creativity, financial know-how, forecasting, or just plain personality and likability? Know what you bring to the table, and be confident in that.

15 – Finally, what are you going to do with this investment?

There are two reasons people are generally on Shark Tank: 1) they’re looking for additional cash to develop their business, and 2) they’re looking for a business partner who knows their stuff and can provide valuable advice. Number two is a given as each investor on the show has already proven their know-how by earning millions on their businesses. So if you get an investment, how are you going to put it to use? Will you be expanding your inventory? Will it be used for marketing and advertising? Know exactly how you plan to use the investment, but also be open to suggestions from your investor’s proven expertise.

Conclusion

Now you’re all ready to make an appearance on Shark Tank. Okay, maybe not, but if you know the answers to these questions as they pertain to your business, I think you’ll be in a good position to make your pitch to any potential investor whether you’re on a TV show or not.

I believe answering all of the above will help the investor answer the real question: How am I going to make money on this deal?

Follow the Sharks on Twitter

• Barbara Corcoran – @barbaracorcoran
• Robert Herjavec – @robertherjavec
• Mark Cuban – @mcuban
• Kevin O’Leary – @kevinolearytv
• Daymond John – @thesharkdaymond

For more inside information on the show, check out Mark Cuban’s Quick and Dirty Guide to Shark Tank.

Are there other beneficial questions you’ve heard the investors ask on Shark Tank? Share them below.