HOSTING A NEW RADIO SHOW

I am very pleased to announce that I will be hosting a new radio show on Hunter’s Bay Radio, FM 88.7 in Huntsville Ontario. The show, called “Taking Care of Business” with Larry Wilson will air Wednesday afternoons at 3:05PM and is targeted at small business owners and budding entrepreneurs. Various topics of interest to SME’s (Small – Medium, size Enterprises) will be covered each week, usually from a section of my book, The Small Business Planner. Each week will also feature a guest who has expertise and experience in the topic being covered. Listeners will be encouraged to E-mail me hbr@muskokaonline.com adding Taking Care of Business as the subject line if they have any comments or suggestions for the show. I am also soliciting, via the same E-mail, success stories of entrepreneurs who have overcome adversity and how they did it. You can listen live on Wednesday afternoons at: http://74.119.88.66/test.html or visit thesmallbusinessplanner.com for the mp3 of each episode. The first episode will feature David Brushey, Executive Director of Muskoka Futures and the theme will be ‘Resources available to entrepreneurs.’

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JUST UPDATED

I just updated my WordPress to the newest version and in the middle of converting files and restoring the archives to the databases. Should be done in a day or two and I will have new posts for you. Also, a new season of Shark Tank and Dragons’ Den is coming up in a month or two, so stay tuned for my regular reviews.
Thank You …….. Larry Wilson
Don’t forget to visit http://thesmallbusinessplanner.com for all the entrepreneur resources you may need.

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ASSESSING YOUR BUSINESS FEASIBILITY

If you are considering an appearance to pitch your business idea on the television shows, The Shark Tank or The Dragon’s Den to secure an equity investment, pay close attention to this excerpt from The Small Business Planner.

You have a business idea and it involves doing something that you really have a passion for. It may have been a hobby in the past, but your hard work and savings over the years have put you in a position to go out on your own, trying something you really have fun with. Congratulations! You have just satisfied the first part of the equation in becoming a successful entrepreneur. How about the second part – making a profit? Oh – forgot about that one! Most fledgling entrepreneurs do forget about this part and they jump in with both feet. Some do stay afloat – but most don’t. Why? They didn’t conduct any pre-planning to determine if their new business can actually earn a market share and be profitable. Prior to spending any money on your new business, do yourself a big favor and conduct a feasibility study. The results of this exercise will provide you with enough information to make an informed decision about moving forward. The study involves two parts: a Market Attractiveness Study and a Financial Analysis.

Market Attractiveness Study

In business planning, nothing can be assumed. If the market is not attractive for a new player, then you will struggle and most likely fail. A Market Attractiveness Study is conducted by looking at several important factors that include the number of accessible customers, competition, and market growth.

Accessible Customers: How large is the market for your product or service and are the customers readily accessible? There should be enough customers available for you to obtain a market share that will sustain your business and favor future growth. Customer accessibility determines your cost to deliver the goods or services. Once you have an idea how large the market is, the number of people your company will be competing against must be determined.

Competition: How many direct competitors are there, or other businesses that are providing the same product or service to the same market group? Of course, the smaller the number of players, the better it is for you. If you can take a totally unique idea to the market place, competition will not be a factor – at least in the early going.

Market Growth: It may be something you always wanted to do, but if it is not an area of growth, then you will have a long uphill battle. Be sure to do your homework! Any business involving new technology (especially wireless apps), computer training and services for seniors are examples of growth markets. A special note here, if you are planning to start an Internet based business, the operating costs will be lower than a brick and mortar storefront. However, unless you are introducing something that no one else has thought of, the competition is likely to include thousands of other web enterprises. To succeed on the Internet you need a unique idea or delivery system. People generally purchase on-line because it is convenient and the price is lower.

Financial Analysis

Profit and Loss Projection: The most important tool in business for completing any kind of financial analysis is the spreadsheet. It is described in more detail in my book, The Small Business Planner. The P&L Projection, also known as an Income Statement, is a yearly projection covering the first three to five operating years. It will tell the new entrepreneur if the business can be profitable and the break-even point. Remember to be conservative with revenue figures and liberal with expenses to provide a cushion. A Cash Flow Projection for the same period should also be completed.

Determining Start-Up Costs: There are substantial costs associated with starting a new business and they must be carefully researched and listed. These may include a facility and equipment, leasehold improvements, office furniture, supplies and equipment, computer hardware and software, initial cost of supply or inventory, vehicle, marketing collateral and advertising costs, web site, professional fees, working capital and your own living expenses for three to six months of operation. These, and many other business templates, are available for free download at: thesmallbusinessplanner.com/downloads, The free, fully formatted templates applicable to this study are: – Profit & Loss Projection; – Cash Flow Projection; – Start-Up Cost Analysis: – and Competitive Analysis, all in MS-Excel file format.

Capital Availability: Once the complete list of start-up costs has been established, a determination can be made as to the amount of capital required to launch your new business. Subtract from this amount the money you can personally invest and you will know how much funding must be obtained from other sources such as loans and investors.

Making the Decision

Now that you have completed your Market Attractiveness survey and a comprehensive Financial Analysis, it is time to make a determination on moving forward with your business idea. Keeping in mind the critical factors of making a profit; being competitive; and having enough money to do it right; you will be faced with one of three decisions. You can move forward – comfortable that all indicators are good and start developing a more comprehensive business plan and marketing strategy. It is then safer to start making the increased investment required. However, if it does not appear that your business can be profitable and competitive, you can either abandon the idea entirely and save yourself from a large financial loss, or, re-work the venture until it looks feasible. A special note here on starting an Internet based business. Many people are under the false assumption that it is easier to become successful with a web based business because the expenses are lower than those of a typical brick and mortar establishment. This couldn’t be further from the truth. Sure, you won’t have the rent and other fixed costs, but you will have competition, and lots of it. Just conduct a search for the key words that will be critical to people finding your product or service. There will likely be millions of sites returned and thousands of other similar on-line businesses pitching the same idea. Money can be made on the Internet, but only if you have a unique product, service or delivery system, or the available capital for mass marketing to send people to your url. Many people think they can develop a web site and the traffic will come flooding in and this just doesn’t happen without great expense or unique key words.

Larry Wilson is author of the best selling book, The Small Business Planner and operates Dynamic Performance Group - a consulting firm specializing in Strategic and Marketing Planning.

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SHARK TANK REVIEW – Episode 529

This review makes a great forum for a critique and learning experience valuable to all entrepreneurs. Learn what to do and what not to do from entrepreneurs making a pitch for money in the Shark Tank. The review complements my book, The Small Business Planner and there are also great free resources including fully formatted planning and marketing templates on the book’s web site. In addition, my regular Blog, along with the Video Series on my You Tube channel can be very helpful to budding and seasoned Entrepreneurs. Of primary interest to those making a pitch on the program is the Feasibility Study as described in the book. If completed in detail, this study will indicate if there is a viable market for the product or service and if the business can be profitable. An added feature to my reviews is a rating on the company’s web site – if available. The web site has become the number one marketing tool for most businesses today and my observations are based on a quick overview whether accepted web design and development standards are met. Remember – you have a very short period of time to hold the attention of a new visitor. Therefore, the web site deserves the appropriate investment and professionalism to be effective. Constructive comments are most welcome on any of these reviews.

Larry Wilson is author of the bestselling book, The Small Business Planner, and is the founder of Dynamic Performance Group, a strategic and marketing planning firm.

Season 5 – Episode 29. Original air date: May 16, 2014

Pitch One: The Baker’s Edge - Asking $400K for 20%

Valuation: $2 million.

Matt and Emily Griffin own a tiny bake ware company that makes super funky, high quality pans and baking accessories and they are best known for their invention, the Edge Brownie Pan. They have created a whole line of bake ware that bakes and caramelizes brownies and other foods quicker and more evenly than conventional bake ware. This new design is protected by a utility patent and their products have been widely acclaimed for their innovation since launching in 2006.

Sales:  $5.8 million.   (Since launch in 2006.)      $256K   (2012)    What happened?

There was a huge spike of high sales ($1.5 million in one year) for a very brief time after an appearance on Oprah, which the Sharks said was both a blessing and a curse because of the comparables that will never again be met. Robert wanted to know how they were planning to get back to 1.5 million in sales and Matt explained that their new innovation, a revolutionary muffin pan will be launched. Kevin reminded them that the base line business was still only $256K in sales making the 2 million valuation unsubstantiated. Matt tried to argue that it was worth 2 million because of the patent and the lack of innovation in their industry, which Mark described as tiny. He couldn’t understand why they didn’t practice aggressive R&D years before to do something about the slumping sales and dropped out.

Robert thought they were too comfortable during a flat-line period in sales of three years and was the next out. Kevin didn’t care about the past but was only interested in the future of Baker’s Edge as an investment and felt that they had burned out – as was he on making a deal. Lori defended them as innovators – coming up with something revolutionary, however she didn’t feel that they had done enough to regenerate the business since the success of the brownie pan and opted out. This left Barbara who lacked confidence in the business and completed the sweep of abstinence.

My entrepreneur ratings:

Idea: good; Competence: high; Knowledge of Market and Competition: good; Competitive Advantage: unique; Preparation / Planning: unjustified valuation; Chance of Success: questionable.

The valuation was way out of whack on this one. The business is not worth eight times gross sales and it will always be hard to convince an investor to buy into an enterprise that is flat-lining or suffering from negative growth. The lack of R&D to stay innovative is another real negative for investors. The couple started out with a great idea but seem to have rested on their laurels for sometime until the warning bells rang that they needed to stay hungry for growth. They should have waited until the business could demonstrate a substantial growth in sales with the new product, then made a pitch with a realistic valuation.

Web Site:    bakersedge.com

The web site is excellent featuring great design with a home page that is brief and to the point. It is easy to buy product and navigate to pages of interest. The site is also optimized for search engines.

Pitch Two: Foot Fairy - Asking $75K for 15%

Valuation: $500K.

Moms – Dr. Sylvie Shapiro and Nicole Brooks, developed a free iPad app called Foot Fairy which makes foot measuring and shoe shopping simple. The app assists in measuring a child’s growing feet. The app automatically scans the shoe size when the child’s foot is placed against the iPad. The user then has the option to go directly to a pre-populated page on Zappos filled with shoes in the child’s shoe size. They have a deal with Zapos which pays them a commission of 8 to 15% and there have been 13,000 downloads of the app to date. They want to build up the back end to store and market to existing customers who sign up.

Sales:  Launched only three weeks earlier and no commissions paid by Zappos yet.

Nicole explained that a glitch in their app made it impossible to track sales. Although the ladies made a good, but nervous presentation, they lacked the presence of mind to listen when Lori started asking questions; trying to speak – both at once – a real problem. She finally got her question in – wondering if Zappos was advertising the app to drive prospects to their Foot Fairy site. Nicole admitted that they weren’t but insisted they didn’t need the link back from their primary source of revenue! Robert wanted to know why Zappos wouldn’t list them on their site and Nicole kept interrupting before the questions were finished. Kevin was the first out because there was nothing proprietary about the app and anyone could copy it. Nicole said that no one could  copy their expertise and passion, which didn’t quit cut it as a barrier for competitive entry. Lori politely coined the constant interrupting and jabbering as exuberance but because the business was still in its infancy, she also dropped out. Robert repeated Kevin’s concern about a lack of intellectual property protection and opted out.

Barbara said they were a perfect example of ‘enthusiasm is not enough‘ and since there was no indication that the idea would work, she followed the others. This left Mark who wanted to know why their app would be better than something a well known podiatrist could create. When Sylvie started to say because of her passion – Mark told them that if they mentioned passion again then he would be out. Obviously Barbara’s exit statement didn’t get through about enthusiasm alone not cutting it. When they described how they were more accurate then the two competitive apps available, he showed some interest because he believes that metrics will be part of the future and he has an interest in a similar business sizing men’s shirts. His concern is that working with them will drive him batty! He did make an off of $100K for 40% with a contingency that testing showed it was accurate and a competitive analysis proved that there was nothing comparable. The partnes wisely accepted.

My entrepreneur ratings:

Idea: good; Competence: questionable; Knowledge of Market and Competition: good; Competitive Advantage: claim of accuracy; Preparation / Planning: good; Chance of Success: reasonable good with Mark as a partner.

The idea was sound, but people making a pitch have to know when to stop talking and start listening. They were very close to not getting a deal because of the poor listening skills displayed and also because Zappos was not promoting their app. This should have been a number one priority. They are fortunate that Mark had an interest in the metrics presented – but remember, to be successful, an entrepreneur must be passionate about what they are doing – and – it must be profitable!

Web Site:    footfairy.com

The web site is good and meets current W3C standards. It appears professional in design, is easy to navigate and find what you are looking for, however, it is not fully optimized for search engines.

Pitch Three: Tie-Not - Asking $125K for 10%

Valuation: $1.25 million.

Wayne Sikorcin, invented, as well as patented, his unique device for tying and filling water balloons. In 2010 the product was launched at the annual toy show with much interest and robust sales. He appeared in the Tank with Scott Smith to demonstrate that Tie-Not is the best way to fill and tie water balloons in seconds, using their device which attaches quickly to a standard garden hose. From campgrounds to specialty toy stores and even making appearances in mass retail, the Tie-Not water balloon filler and tying device has shown parents and children alike that water balloons are great summer fun. Now, the kids can save the parents this monotonous task as the kids can now tie balloons themselves. Obviously, one of the major factors here will be the small market sector and a high valuation which will need to be substantiated by impressive sales numbers to be viable. Ten percent doesn’t give the Sharks much wiggle room here.

Sales:  $112K.  (First year.)   $385K.  (Past year.)       Retail:  $4.99          Cost:  $1.50

Kevin wanted to know why the price wasn’t $7.99 and they explained that they got into a licensing arrangement with a large toy company for six percent (instead of the seven to eleven Kevin insisted they should have received). The agreement is still in place and is re-negotiated yearly, which made the Sharks breath a sigh of relief because the terms would not be conducive to a favorable return on an investment of this size. Kevin was concerned that the cash flow did not substantiate the valuation which does not reflect the current state of the company – but instead a state that they wanted him to take it to in the future. While he was considering, Mark flatly dropped out. Robert said he liked the toy business and products that bring smiles to faces but they needed to make money. However, because of the crazy valuation he was out. Lori said it was too inexpensive to be a QVC product and the valuation wasn’t there for her, so she also opted out.

Scott asked the Sharks what they would value the company at. MISTAKE – this is such an important part of the pitch to get right that it should have been properly determined beforehand! The Sharks wanted to know what they made last year on the $385K and the answer was only $40K without taking a salary. Much went on trade show appearances. Kevin said that a business like this would be worth about five times cash flow or $200K. That would mean the amount they were asking for would require the investor to take over sixty percent equity. Kevin commented that he may have been interested before they cut the licensing deal and he thought the business was too small, so he was out. This left Barbara who loved the product and made an offer of the $125K for 25% in the form of $50K cash and a $75K credit line. Scott came right back, not appreciating that they were very lucky to get any kind of deal, countering with 18% equity and a credit line of $100K in addition to the $50K cash. She said her offer was non negotiable and wouldn’t budge. They foolishly refused and lost the great resources she could bring to the table.

My entrepreneur ratings:

Idea: good; Competence: questionable; Knowledge of Market and Competition: good; Competitive Advantage: unique; Preparation / Planning: questionable – high valuation; Chance of Success: they will likely struggle.

This is like a broken record. Two big problems – an unsubstantiated high valuation and they should not have come into the Tank with a current licensing deal in place. The partners should have waited until the current terms expired as licensing for a product like this is attractive to the Sharks, especially Kevin who knows the toy industry. Kevin pegged their current valuation at $200K, yet when they were lucky enough to get a generous offer from Barbara, giving them  a valuation at half a million, they turned it down!

Web Site:    tie-not.com

The web site is easy to navigate and find information. It is graphically pleasing although the main center pics use up too much valuable home page real estate. Unfortunately, just one look at the title tag indicates that the site is not optimized for search engines as important key words have been omitted. It is also obvious that a template has been used with a web site development program. Many of these can be quite useful and inexpensive in the short-term but very problematic in many ways in the long-term.

 

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SHARK TANK REVIEW – Episode 527

This review makes a great forum for a critique and learning experience valuable to all entrepreneurs. Learn what to do and what not to do from entrepreneurs making a pitch for money in the Shark Tank. The review complements my book, The Small Business Planner and there are also great free resources including fully formatted planning and marketing templates on the book’s web site. In addition, my regular Blog, along with the Video Series on my You Tube channel can be very helpful to budding and seasoned Entrepreneurs. Of primary interest to those making a pitch on the program is the Feasibility Study as described in the book. If completed in detail, this study will indicate if there is a viable market for the product or service and if the business can be profitable. An added feature to my reviews is a rating on the company’s web site – if available. The web site has become the number one marketing tool for most businesses today and my observations are based on a quick overview whether accepted web design and development standards are met. Remember – you have a very short period of time to hold the attention of a new visitor. Therefore, the web site deserves the appropriate investment and professionalism to be effective. Constructive comments are most welcome on any of these reviews.

Larry Wilson is author of the bestselling book, The Small Business Planner, and is the founder of Dynamic Performance Group, a strategic and marketing planning firm.

Season 5 – Episode 27. Original air date: May 2, 2014

Pitch One: The Bouqs Company - Asking $258K for 3%

Valuation: $8.6 million.

John from Pittsburg, PA, introduced The Bouqs Company which ships fresh, sustain-ably farmed flowers from around the world to customer’s loved ones nationwide with all-in pricing, no additional fees and 100% free delivery for clients that register on the site. $40 flat pricing for flowers delivered straight from the Volcano, and $50 flat for next day delivery from their California farms. The Bouqs App for iPhone and Android makes ordering easy with 2-click checkout, and Concierge Services make auto-delivery easy for pre-arranged occasions with discounts up to 25% off! There was a chuckle when he announced the offer with such a high valuation and he started by giving both of the gals a fresh bouquet of flowers. The business is entirely e-commerce based and was launched eleven months earlier.

Sales:  $700K  (to date.)   Asking for a valuation of almost 12 times revenue. (1.5 times is common)

Cost per customer acquisition (Kevin’s question, of course) is $13 and they have spent $70K on advertising to date to attract visitors – prospects – customers. Margins range from 40% to 50% depending on the size of the bouquets. The shipping time frame is currently six days – a big problem according to the Sharks. However, overnight shipping options launch in a few weeks. The overnight shipping adds ten dollars to the price and changes the margins, and it changes the entire model, as Barbara pointed out. Their flowers are fresher than traditional brick and mortar florists and the roses can last up to three weeks because of the proprietary hydration system. Kevin wanted to get back to the numbers and pointed out that he would make as profit after tax about $250K. He wanted to know the metrics used to come up with a valuation of 8.6 million. John described how they started the business ten months ago with a #13K investment (I thought he said eleven months ago) and that growth has been astronomical.

Mark asked how much has been raised and at what valuation and he responded $1.1 million at 5.2 post money and that prompted Mark to immediately withdraw as he doesn’t want to be one of many. Lori opted out as she couldn’t see how the idea was protected from copying as other floral companies could set up the same system. Robert commented on the 3% equity being such an irrelevant amount and couldn’t see a sustainable competitive advantage so he dropped out as well and Barbara thought the business name was terrible. This left only Kevin who couldn’t see paying forty times net and thought the exit risk was high because he didn’t adequately differentiate himself.

My entrepreneur ratings:

Idea: good; Competence: high; Knowledge of Market and Competition: good; Competitive Advantage: questionable; Preparation / Planning: unjustified valuation; Chance of Success; questionable.

There were too many question marks on this one. When making a pitch, all investors should be announced along with the equity taken and available.

Web Site:    thebouqs.com

The web site is very good meeting all current web standards. The professionally designed layout also features a pop up box at the start prompting visitors to register if desired, or they can close the box. This is an excellent idea for sites where visitor names are King and the database (with e-mail addresses) rules.

Pitch Two: Angel Lift - Asking $500K for 10%

Valuation: $20 million.

Aaron Bruce demonstrated his product, Angellift – a face lifting technology used to address facial aesthetic issues including nerve damage, premature aging and lip volume loss. Angellift Dermastrips are the first ‘under the skin’, over-the-counter facial lifting strips. Similar to teeth whitening strips, Angellift Dermastrips are worn inside the mouth, over the teeth for 10-30 minutes a day. Dermastrips replace the natural pressure lost through aging, lifting the facial skin and forcing lines and wrinkles out from the inside. After a successful trial they pulled the product and didn’t pursue a lucrative deal with Lori’s QVC when they had the opportunity.

Sales:  $3 million w/ 1.2 profit from test market on Shopping Channel.       Retail: $49.00

Of course, the Sharks were all very impressed with the initial interest and sales numbers along with the healthy margins. Aaron also had very convincing before and thirty days after photos. In answer to Lori’s common question, he has a patent pending to protect the intellectual property. Barbara wanted to know if there was any proof that it works to eliminate lines and wrinkles (in addition to the photos which were convincing in their own right) and he confirmed that they had obtained third party clinical trials. After the initial successes he stopped selling the product to try and perfect it and this met with much negativity on the part of the Sharks who couldn’t understand the logic and prompted Robert to be the first to drop out. He was followed by Barbara who thought it would cost too much to make the product a hit because it had to be demonstrated. Kevin said it was evil to stop selling something that was working and he also opted out.

Mark asked how much he had in the bank and Aaron reported on over $1 million. Since Mark didn’t think he was in the Tank for the right reasons (it should have been all about increasing sales) he joined the others on the sidelines leaving just Lori who believed it was an infomercial QVC product. She did express her concern at the withdrawal of the product from the market and didn’t understand why he failed to follow through with the QVC opportunity. She was nervous about his previous actions but made an offer for 25% equity based on proof of the patent pending, clinical trial results and sales he reported. Aaron thought his start-up was worth more and surprised all the Sharks by countering with 15% instead of accepting with Mark commenting that he was a gold digger, and he agreed. Lori came back agreeing to the 15% if the $500K investment was used solely to fund the QVC purchase orders and Aaron wisely accepted. They all agreed that there was more to the story if he sold $3 million initially and as always, it will come out in the due diligence process. A majority of deals made on the show do not go through for one reason or another.

My entrepreneur ratings:

Idea: good; Competence: high; Knowledge of Market and Competition: good; Competitive Advantage: unique process simplifies a solution to an age old problem; Preparation / Planning: good – he appears to have covered all the bases; Chance of Success; high if all his statements are proven.

There is no doubt that Aaron was very greedy as Kevin and Mark commented, and that’s okay if you have the goods to justify the valuation: innovative product; market; margins; intellectual property protection and sales. It is highly unusual for a product to be pulled from the market after a successful launch and Aaron’s intentions were suspect from the beginning which prompted all but one of the Sharks to withdraw. It is important to be clear about the intended use of the investment from the start and it should always lean toward a return on their investment by growing sales or improving profitability in some way.

Web Site:    angellift.com

The has a professional look to it but displays a couple of really nasty flaws straying from accepted design standards. The obvious one is that the home page scrolls forever and if a visitor had the patience, the sign up form is several screens down. The site is not optimized for search engines and should be for this type of product.

Pitch Three: Hangease - Asking $80K for 30%

Valuation: $266K.

Ryan, a nineteen year old student from Texas pitched HangEase®,  his collapsible hanger that makes it easier to get clothes on or off the rack. This saves time and money by eliminating stretched out shirt necks and broken hangers. The principle is a hinge in the center of the hanger which allows a shirt to drop off into your hands when released. Ryan made a very confident pitch and demonstrated how easy it is to use while explaining how the idea came to him many years earlier during a third grade Invention Convention. Initially the hanger got into Walmart through a friend’s mother and sold thousands but he was too young to pursue and commercialize it further. He is now in college and literally dusted off the samples which had been in boxes all of these years. He made $70K from the initial sale but thought that it didn’t go further because if wasn’t marketed properly.

Retail:  $3.89  (4 pack)   Much more than traditional hangers.

Lori learned that there was a utility patent on the design yet said that she had seen similar products to Ryan’s surprise. Robert couldn’t see the application and Kevin thought it was too expensive to be successful. Barbara said that she had invested in a couple of businesses that had been dusted off without the enthusiasm initially displayed so she was out. Both Lori and mark questioned the competition saying that they had seen a similar hanger that folds and Ryan repeated that his research had revealed no such product. Mark saw the benefit as he yanks his shirts off hangers causing them to stretch and despite the uncertainty about competitive products or someone infringing upon the patent, he made an offer of $80K for 30% contingent on patent verification. He offered to include Lori in the deal and she accepted exclaiming that Ryan deserved a chance. Of course, he accepted.

My entrepreneur ratings:

Idea: good; Competence: high; Knowledge of Market and Competition: good; Competitive Advantage: unique process simplifies a solution to another age old problem; Preparation / Planning: good; Chance of Success; high with Mark and Lori as partners.

This is one of those feel good stories and you have to hand it to Ryan’s entrepreneurial spirit. He came up with a great idea when he was nine years old and it obviously stood the test of time because it earned an investment when taken out of mothballs a decade later.

Web Site:    hangease.com

The web site is very simple in design, in fact too simple as it is missing key information elements, such as where and how to buy. The font is far too small and it is not optimized for search engines. When the title of the index page is ‘home’ – there is a real problem.

 

 

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SHARK TANK REVIEW – Episode 526

This review makes a great forum for a critique and learning experience valuable to all entrepreneurs. Learn what to do and what not to do from entrepreneurs making a pitch for money in the Shark Tank. The review complements my book, The Small Business Planner and there are also great free resources including fully formatted planning and marketing templates on the book’s web site. In addition, my regular Blog, along with the Video Series on my You Tube channel can be very helpful to budding and seasoned Entrepreneurs. Of primary interest to those making a pitch on the program is the Feasibility Study as described in the book. If completed in detail, this study will indicate if there is a viable market for the product or service and if the business can be profitable. An added feature to my reviews is a rating on the company’s web site – if available. The web site has become the number one marketing tool for most businesses today and my observations are based on a quick overview whether accepted web design and development standards are met. Remember – you have a very short period of time to hold the attention of a new visitor. Therefore, the web site deserves the appropriate investment and professionalism to be effective. Constructive comments are most welcome on any of these reviews.

Larry Wilson is author of the bestselling book, The Small Business Planner, and is the founder of Dynamic Performance Group, a strategic and marketing planning firm.

Season 5 – Episode 26. Original air date: April 25, 2014

Pitch One: Crio Bru - Asking $1 million for 10%

Valuation: $10 million.

John Fotheringham and Dr. Eric Durtschi are partners in a new drink called Crio Bru. Eric is the son of a chiropractor, a nutritionist and a chocolate fanatic. He wanted to take what he knew about the amazing health properties of cacao beans and create a delicious new drink with all of the benefits of cacao and none of the bad. Crio Brü is a brewed drink made from 100% cacao beans (also known as cocoa beans), and is named after the most prized of cacao beans, the Criollo. It is 100% natural and 100% pure.  They served the Sharks a sample as Mark commented that it had better taste good for a million dollars. Unfortunately, they winced at the bitter taste and right off the bat Mark apologized and dropped out as did Robert and Daymond. Kevin commented that it could be the shortest pitch in Shark Tank history but wanted them to explain why they were worth ten million dollars.

John tried to substantiate the high valuation reporting that they sold 276,000 units in the past two years and were on track to do a million and a half in sales. Providing a valuable reality check, Kevin stated the obvious that anyone could duplicate it and no one has heard of it creating a marketing job from hell! He wanted to know how their valuation could make any sense to an investor and the Doc tried to justify it by reporting that there was a great deal of interest in it by some large companies and the process is proprietary with a patent pending. The products are sold in 500 grocery stores accounting for 60% of sales with regular re-orders. Then the kicker came out when asked what they will clear on the million and a half in sales and $150K did not sit well with the Sharks. Kevin couldn’t understand how they were justifying a valuation at one hundred times their profit and wanted to know why they would attach such a ridiculous valuation that made it impossible for anyone to invest. He said they were screwed and dropped out leaving Barbara who repeated his sentiments also condemning their valuation.

My entrepreneur ratings:

Idea: good; Competence: questionable given the ridiculous valuation; Knowledge of Market and Competition: good; Competitive Advantage: unique process; Preparation / Planning: poor – again citing the crazy valuation; Chance of Success; questionable.

This pitch has to go into the books as one of the highest, unsubstantiated valuations asked for in the Tank by people who otherwise would be expected to have more business smarts. Kevin made it pretty obvious when he pointed out that they were asking for one hundred times their annual profit for a company with a very short track record and no brand awareness. Did they really think that investors would be that naive?

Web Site:    criobru.com

The web site is very good with easy navigation and product purchase options. There is a good use of video where they visitor must initiate the clip instead of being forced to automatically watch it. It does not need to be optimized for search engines as most people will be directed to the url. Considering the response they got on the Shark Tank, it was not wise to include footage or mention of the episode on their web site. The sooner it is forgotten, the better for them.

Pitch Two: Rugged Maniac Obstacle Race - Asking $1 million for 10%

Valuation: $10 million.

Brad Sutter and Rob Dickens from Boston, MA pitched their 5K obstacle race to the Sharks who shook their heads at the high valuation thinking, here we go again! Their Rugged Maniac Obstacle Race is a national event series that transforms the average 5k run into an off-road adventure filled with 25 epic obstacles. Participants climb towers of stacked shipping containers, rocket down a 100’ water slide, jump over fire, and crawl through underground tunnels of mud during their day-long adventure! A large celebration follows with thousands of other maniacs in a massive after-party featuring music, beer, foam dance pits, and mechanical bulls. The Great Bull Run is an insane outdoor festival that brings the Spanish tradition of running with real bulls to the United States as people get to experience the same thrill by running a quarter-mile track with eighteen stampeding bulls hot on their heels. If the bulls are a problem, the day-long party has rockin’ music, cold beer, adult bounce houses and Tomato Royale – a massive tomato food fight free-for-all! Events are planned nationwide.

They showed a video clip and Robert said he didn’t know about them but knew their competitor and needed to know the difference. Brad reported that their events were only 3 km vs 12 km with many more obstacles putting the emphasis on physicality and not running. In answer to Marks question the events are equally competition and party as the gruelling course only takes about an hour to complete. They are located in twenty cities nationwide with annual sales of $4.5 million with 1 million in profit. Projected figures are more than double that figure. Robert asked what they were going to do with the money and Rob made the mistake of saying they wanted to grow other brands that they own after pitching only the Rugged Maniac. This resulted in some cries of foul from the Tank. Rob then reversed track and said they were investing some profits in their Running of the Bulls events all of which are priced at $50 per participant. They then reported that a deal would not include the bulls, only Rugged Maniac.

The Sharks asked how much to get 10% of the entire outfit. The partners replied that they wanted $3 million – one for Rugged Maniac and two for the Bulls. Sales at a Bull event are about $280K. Mark and Kevin didn’t like the fact that they may not concentrate on the Maniac if they are involved with other ventures, but Robert saw promise and offered $1.5 million for 25% of the entire business saying that a fair valuation would be 1.5 times revenue. Mark would have been prepared to bid if it were Rugged Maniac alone. Daymond said because of learning about the second business after the fact, he wouldn’t be able to trust them of where his million dollar investment was going. Barbara admitted that finding out about the Bulls also lost her trust leading to her withdrawal from the bidding leaving one offer on the table and Mark’s comments got Robert worrying that he was over-paying. The partners waited too long to accept Robert’s offer as Kevin said if the equity was 33% he would join him making a revised offer. Now Mark entered the fray offering $1.5 million for 25% of the two companies combined. They retired to the ante room to discuss the offers then came back and countered Mark’s offer asking for $1.75 million and he accepted.

My entrepreneur ratings:

Idea: good; Competence: high; Knowledge of Market and Competition: good; Competitive Advantage: unique take on an existing idea; Preparation / Planning: good; Chance of Success; good with Mark as a partner.

Like the first pitch, they were lucky that only half of the Shark showed mistrust for holding back on their second venture. Although the valuation was very high, there was enough wiggle room to garner a couple of offers. They may not be as happy at the end of due diligence which will be as rugged as their events.

Web Site:    ruggedmaniac.com

The web site is very good – simple with a large graphic to catch the visitor’s interest and a basic navigation scheme on the left column making it easy to get around. It is not optimized for search engines.

Pitch Three: Cerebral Success - Asking $75K for 25%

Valuation: $300K

Mr. Hillbrand entered the Tank as their teacher for today with a young male and female assistant who played the role of an inattentive and attentive college student as he pitched his Cerebral Success. The product is a premium brain supplement designed to enhance focus, memory, and mental energy. In just two years, Cerebral Success has gone from a small start-up to being one of the highest ranking brain supplements online. He showed the Sharks sample prototype bottles and they wanted to know what was in it, how he came up with it the formula and if it was proven to be effective. Hildlbrand related a story about how he lacked focus and tried a number of concoctions until he found one that worked for him. He rhymed off a number of ingredients and couldn’t respond to the test or study result question.

Sales: $16K  or  900 bottles.          Retail: $70.00     Cost: $10.00  (all stated as ‘about’)

Kevin asked why his product was different from the many other offerings on the market and Hillbrand said that their target market was college students. It is sold only on-line and in answer to Barbara’s question, they know it works from reviews posted. A check of the web site show numerous testimonials listed along with one from Barbara. Daymond was the first out citing his lack of credibility in the market followed by Robert who wasn’t a believer. While Mark, Daymond and Robert argued the ethics of the type of product taking advantage of tired students, Kevin said that he hasn’t heard how he can make a return on the investment and he also dropped out. Mark said that if he came into the Tank wanting to use some of the investment to conduct proper studies and tests on the product then he would have been in. This left only Barbara who related a story about her husband, Bill who has a high IQ but has an attention disorder. They have tried numerous products and some work that help and her son related numerous tales from school where students were using different products to help them concentrate. She is concerned with liability and offered the $75K for 40% contingent on getting liability coverage. The other Sharks expressed their disappointment in Hillbrand getting a deal on such a product and he readily accepted her as a partner.

My entrepreneur ratings:

Idea: good; Competence: high; Knowledge of Market and Competition: good; Competitive Advantage: unique; Preparation / Planning: ; Chance of Success; good with Barbara as a partner.

Hillbrand is a true entrepreneur. He saw a growth market for a product that has high demand and developed a solution with little or no outside help. He went ahead and hit the pavement running creating sales and logging positive feedback. His valuation was fair and the margins are great. He was fortunate that at least one Shark saw the benefit of what he was doing while the others were clouded with unsubstantiated morality issues. He did have the manufacturer ensure that the ingredients were safe in combination and for liability listed any possible side effect on the bottle as required. Kids will take absolutely anything to increase attentiveness and memory and I can think of many products that are worse. Well done!

Web Site:    cerebralsuccess.com

The site is has some good and some very bad features. It is easy to navigate and find info with a ‘Purchase’ link big and bold and there are numerous testimonials for the product – one of the best ways to counter the objection of skepticism. The home page scrolls for numerous screens – a major flaw. It is also not fully optimized for searches, but like previous sites in this episode, it is unlikely visitors will arrive via search links.

 

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SHARK TANK REVIEW – Episode 25

This review makes a great forum for a critique and learning experience valuable to all entrepreneurs. Learn what to do and what not to do from entrepreneurs making a pitch for money in the Shark Tank. The review complements my book, The Small Business Planner and there are also great free resources including fully formatted planning and marketing templates on the book’s web site. In addition, my regular Blog, along with the Video Series on my You Tube channel can be very helpful to budding and seasoned Entrepreneurs. Of primary interest to those making a pitch on the program is the Feasibility Study as described in the book. If completed in detail, this study will indicate if there is a viable market for the product or service and if the business can be profitable. An added feature to my reviews is a rating on the company’s web site – if available. The web site has become the number one marketing tool for most businesses today and my observations are based on a quick overview whether accepted web design and development standards are met. Remember – you have a very short period of time to hold the attention of a new visitor. Therefore, the web site deserves the appropriate investment and professionalism to be effective. Constructive comments are most welcome on any of these reviews.

Larry Wilson is author of the bestselling book, The Small Business Planner, and is the founder of Dynamic Performance Group, a strategic and marketing planning firm.

Season 5 – Episode 25. Original air date: April 18, 2014

Pitch One: ilumi - Asking $350K for 15%

Valuation: $2.3 million.

Corey Egan and Swapnil Bora from Dallas have created a set of LED light bulbs which are controlled from a mobile device. The color tunable LED smartbulbs screw in like a regular light bulb and are controlled using a free downloadable app for smart phones. The app can program the ilumi to do many things from a sunrise alarm, changing colors, intensity and warmth, to music sync. They are seven times more energy efficient than a regular light bulb and will last for up to 20 years. The system is Bluetooth based and the receivers and components are right in the bulb controlled by the app on the phone. Lori wanted to know what stage the product was in and Corey said that they had completed the development stage (alpha) and were ready to manufacture. After the app is downloaded and the bulb finds it, the system is ready to go. They have a U.S. and an International utility patent pending

Retail:  $90.00 ea.

Kevin, who is big on licensing deals, hoped when asked that they would deny any interest in becoming a light bulb manufacturer. Their answer disappointed him and he admitted that if ever there was a product brought into the Tank that was suitable for a licensing deal with one of the big manufacturers with market share, it was them. He told them that the idea sucks. Mark wanted to know when they would be ready to ship and Corey said by the end of the year as they were ready to start the tooling process and that is why they need the investment. Barbara was the first out saying that she wasn’t keen on the idea of operating her lights with an iPad and couldn’t see someone spending $90 on a light bulb vs. $3 dollars. Lori was concerned with their competition and where the product would be positioned in the market if they did get their I.P. (Intellectual Property, in this case a utility patent) and was concerned that the product would not be competitive.

Robert saw the product as fitting into the high end lighting market and made an offer for 35% and Mark trumped it with a request for only 25% equity. Mark insisted that they tell him their equity limit if they want to partner with him and when they hesitated asking if there were any other offers (only Kevin remained), he dropped out. They tried to get Mark back in and Kevin made a loan offer conditional upon clearance of the I.P. giving him the right to license the products. He wasn’t interested in funding a manufacturing business and only wanted 16% of the royalty stream on all products. While Mark (who came back in) and Kevin were arguing the virtues of their offers, Robert decided that the market was too narrow and the risk too high prompting him to reconsider and opt out. The partners told Kevin that they do indeed want to make light bulbs and countered Mark’s offer to 20%, but he stood his ground and they wisely accepted.

My entrepreneur ratings:

Idea: good; Competence: high; Knowledge of Market and Competition: good; Competitive Advantage: highly innovative and unique – makes life easier; Preparation / Planning: high; Chance of Success; moderate with Kevin as a partner but still very risky.

The partners had developed a very innovative product which generated much interest. They were still very early in the development stage just approaching beta where they traditionally would survey prices, packaging, etc. through focus groups and work to get their costs down through economies of scale and searching other sources of foreign manufacturing. Robert built the high risk into his offer but got cold feet and withdrew it while Kevin made his typical royalty / licensing deal which was risk free because of conditions. That’s why it was surprising that Mark would make an offer for only 25% on a still risky venture. The partners were very fortunate here to find someone to play ball.

Web Site:    ilumi.co

The web site is very vibrant and graphically outstanding at first glance, but the home page scrolls for a ridiculously high number of screens. Rule of thumb is generally 1.5 screens and no more. It is easy to Buy Now with numerous links in each large graphic sections leading to the purchase page. The site is not fully optimized for search engines as the title tag does not make use of key words. It is, however, unlikely that people will be going to the site via searches, rather through ads and purchased links directing them there.

Pitch Two: Zoobean - Asking $250K for 15%

Valuation: $1.65 million.

Felix Brandon Lloyd and his wife Jordan Lloyd Bookey from Washington, DC, met as teachers and later as parents, saw the need to promote reading in children. They developed Zoobean, a children’s book discovery platform and personalized subscription service. Kevin was the first to voice concerns as he lived in that space for over twelve years with educational web offerings and emphasized the challenge of customer acquisition with a target market of three to eight years olds. There must be 12 million people moving through every year. He asked if they knew their customer acquisition cost and Jordan replied that it was about six dollars and they currently have eighty-five subscribers. Robert needed correction assuming the meant eighty-five thousand with such a high valuation, but not the case. Lori wanted to know about competition and whether there was a void in the market they were fulfilling. Kevin blurted out, “Amazon,” as a primary competitor. Felix tried to explain their differentiation by the way people can list preferences and the system will acknowledge the correct genre during their visits and mark reminded him that through searches and preferences a person can also do that on Amazon. He reiterated that he was digging to see if there was a secret sauce.

Felix tried to explain why they are different by telling the Sharks that the system’s back end attached tags to visitors, again getting back to showing preferences, something that many other sites, like Amazon, are doing and Lori reminded them of that and that she doesn’t really feel that they are different prompting her to drop out followed by Barbara who didn’t see a need for the business. Robert didn’t see it because his kids could currently search for books on-line with great results and Kevin said that they would likely do fine monetizing customers once they are acquired, but the cost to acquire them would higher than the amount they could make off them. With four Sharks out, their last hope was to cut a deal with Mark who saw the future of the type of service they want to provide. Unfortunately, they couldn’t show him how Zoobean can do it in a way that no one else in the market can. Felix used the old common line that, “We can do it better.” Everyone says that, as Mark reminded them. This is generally used as a last resort statement by desperate entrepreneurs who haven’t overcome the Sharks indifference. Mark thought outside of the box and said that if their programming can go beyond books and recommend preference to all media, including appropriate Netflix programs, he would make and offer, and did so for 30% equity.  Very surprising! They settled on 25%.

My entrepreneur ratings:

Idea: good; Competence: high; Knowledge of Market and Competition: good; Competitive Advantage: questionable; Preparation / Planning: questionable; Chance of Success; moderate even with Mark as a partner but still very risky.

The couple were extremely lucky to get mark on board. They obviously hit a hot button somewhere because he actually changed their marketing strategy during the airing to justify his offer. Under most circumstances, an absence of sales, their over valuation of the company, and lack of differentiation for their offering would result in no offers. But, this was their lucky day. On a positive note, it was very beneficial that Jordan know the cost of customer acquisition.

Web Site:    zoobean.com

The site meets all current web standards, ie: professional design – easy to navigate; and is optimized for search engines.

Pitch Three: Intelli-Stopper - Asking $250K for 10%

Valuation: $2.5 million.

Chase, and his father Bob Hoyt from Phoenix, AZ, introduced the Intelli-Stopper™ for preserving food and wine. It has a built-in red indicator that lets you see that the air is gone, and that your food and wine won’t spoil due to oxygen damage. They served the Sharks a glass of wine from a bottle that had bee opened for five days. Chase demonstrated by inserting the Intelli-Stopper in a bottle of wine and how the red line disappeared as he pumped out the air, then reappeared when he slightly lifted it out of the neck introducing air back into the empty cavity of the bottle. They have a total of four skus in multiple- markets and just landed a major retailer in Bed-Bath and Beyond.

Sales:   $150K      (last year)        $300K  *projected this year)

Kevin couldn’t get his head around the high valuation and Chase said they should never argue value with a start-up company where the entrepreneur must show the financier a limited perception of risks and that they had proof of concept; growing sales; proof of market; and patented intellectual property. They showed another product called the Olive Doctor which preserves olive oil and the Coffee Doctor. They have two design patents and one utility patent pending. Barbara didn’t see a big difference from the preservative aids already on the market and no ‘wow factor’ so she dropped out followed by Mark. Lori said there were other similar products out there prompting her to drop out then Robert also said, “Not for me.” This left Kevin who couldn’t get around the greedy valuation claiming he would need to own the whole company to give them the $250K.

My entrepreneur ratings:

Idea: good; Competence: high; Knowledge of Market and Competition: good; Competitive Advantage: questionable; Preparation / Planning: questionable – ridiculous valuation; Chance of Success; moderate.

It was pretty obvious that the reason why there was no deal was because of the ridiculous, unsubstantiated  valuation. They may have succeeded with an asking price of $100K for 20% but there was no room for an investor to move when they want $250K – for any amount of equity. It really is a shame that people get this greedy because a Shark on board a good idea would see that the appropriate amount of financing is there when needed – and – make sure the business grows and with it – profits for all the owners.

Web Site:    savethewine.com

The site meets all current web standards, ie: professional design – easy to navigate; however it is not optimized for search engines. But it is a product where most visitors will be directed there through ads of links.

 

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Shark Tank Review – Episode 24

This review makes a great forum for a critique and learning experience valuable to all entrepreneurs. Learn what to do and what not to do from entrepreneurs making a pitch for money in the Shark Tank. The review complements my book, The Small Business Planner and there are also great free resources including fully formatted planning and marketing templates on the book’s web site. In addition, my regular Blog, along with the Video Series on my You Tube channel can be very helpful to budding and seasoned Entrepreneurs. Of primary interest to those making a pitch on the program is the Feasibility Study as described in the book. If completed in detail, this study will indicate if there is a viable market for the product or service and if the business can be profitable. An added feature to my reviews is a rating on the company’s web site – if available. The web site has become the number one marketing tool for most businesses today and my observations are based on a quick overview whether accepted web design and development standards are met. Remember – you have a very short period of time to hold the attention of a new visitor. Therefore, the web site deserves the appropriate investment and professionalism to be effective. Constructive comments are most welcome on any of these reviews.

Larry Wilson is author of the bestselling book, The Small Business Planner, and is the founder of Dynamic Performance Group, a strategic and marketing planning firm.

Season 5 – Episode 24. Original air date: April 11, 2014

Pitch One: Taylor Robinson Music - Asking $100K for 10%

Valuation: $1 million.

Taylor Robinson introduced his on-line platform that helps music students find, schedule, and pay for private music lessons with local music teachers for all instruments including, piano, guitar, bass, drums, violin, or voice. He appeared in the Tank with his acoustic guitar and two gospel singers who filled in the spaces with song whenever he hit a chord. The idea is for a person interesting in taking lesson to conduct a search on their web site broken down geographically then by instrument and search for through the bios for an appropriate instructor. Book them through the site which then gets a small commission.

Sales: $400K to $500K in the past two years.    Lessons: $23 (1/2 hour) Comm: $9.00

He admitted to the Sharks that profitability has been hard to come by (only $100K last year) because of two costs that were cutting into margins. They were the cost of customer acquisition and operating costs. He has improved the local search engine dilemma to find students but it still costs thirty-three dollars to acquire each customer. He wants the investment to automate their systems which currently handles over 4,000 instructors but only one rate schedule eliminating top end instructors and their higher rates for premium customers and subsequent better commissions. Kevin thought he should have come in to the Tank with everything working and opted out. Mark also thought he was too early because there were too many holes in the dike prompting him to drop out. Robert thought he was close but refrained from bidding followed by Daymond who thought he was positioned wrong with the cheaper prices and was working harder not smarter. This left Lori who said in her business she needs to convince someone in four minutes why they should buy and Taylor didn’t do that with her.

My entrepreneur ratings:

Idea: good; Competence: high; Knowledge of Market and Competition: good; Competitive Advantage: makes life easier; Preparation / Planning: high; Chance of Success; questionable until he gets his costs in order.

Taylor was definitely in the Tank too early and should have worked out all of the automation issues and shown better earnings to substantiate a million dollar valuation. None of these savvy investors will buy into a business that only shows a profit of $100K per year a short track record.

Web Site:    taylorrobinsonmusic.com

The web site is very well laid out, professionally designed and easy to navigate. It is easy to use the search function for an instructor and when I did a sample search for guitar instructors in St. Petersburg, Florida there were five returns.

Pitch One: Power Pot - Asking $250K for 10%

Valuation: $2.5 million.

Caleb Light and David Toledo from Salt Lake City developed The PowerPot which is a camping pot that generates electricity as you heat up water for outdoor cooking. It is a thermal electric generator producing five watts long enough to charge most electronic devices. The Sharks thought it was very cool when they saw a demonstration where a light began to shine as water was heated on the PowerPot. They filed a patent in 2010 which is still pending and they launched on KickStarter raising $126K and pre-sold 1,000 units. They want the money to get the product into big box stores and expand the product line.

Sales: $300K     (Current year.)

Daymond questioned a 2.5 million dollar valuation based on reported sales and when Caleb projected 2 million in sales next year he got a chuckle from the Sharks. Kevin hates camping and was the first out. Daymond enjoys the outdoors but couldn’t see a big enough market and opted out. Lori thought they were in an early phase and also dropped out then Robert felt the valuation was reflective of future market growth and not the current situation forcing him to back out. This left Mark who wanted to know where they saw the company in three years and other market opportunities. The partners related a story about Uganda’s lack of electricity in traditional homes where fires are still the norm and the opportunities there to provide light in addition to charging phones. This made him ponder the idea for some time then he made an offer for 20%.

After telling Mark that having him on board would end their capital problems forever they stalled by saying that there were other investors. Daymond reminded them of the value they said they put in Mark as a partner and Kevin reminded them that there were a lot of venture capital firms out there but only one Shark Tank (where the financier can actually make it happen and not just front funds). Caleb countered with 12% plus another 3% in adviser options and Mark accepted.

My entrepreneur ratings:

Idea: very good and highly innovative; Competence: high; Knowledge of Market and Competition: good; Competitive Advantage: unique; Preparation / Planning: high; Chance of Success; high – especially with Mark as a partner.

The valuation was high but the innovative value of the invention won out with Mark after they mentioned another use in third world countries. They should have played this card earlier and not waited until four of the five Sharks had withdrawn. They showed a great deal of busy knowledge and were good at negotiating the final deal by adding in the additional advisory shares.

Web Site:    powerpractical.com

The site meets all the criteria of good web design and development. With the exception of the title tag which does not contain key words, the index page is optimized for search engines.

 

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SHARK TANK REVIEW – Episode 23

This review makes a great forum for a critique and learning experience valuable to all entrepreneurs. Learn what to do and what not to do from entrepreneurs making a pitch for money in the Shark Tank. The review complements my book, The Small Business Planner and there are also great free resources including fully formatted planning and marketing templates on the book’s web site. In addition, my regular Blog, along with the Video Series on my You Tube channel can be very helpful to budding and seasoned Entrepreneurs. Of primary interest to those making a pitch on the program is the Feasibility Study as described in the book. If completed in detail, this study will indicate if there is a viable market for the product or service and if the business can be profitable. An added feature to my reviews is a rating on the company’s web site – if available. The web site has become the number one marketing tool for most businesses today and my observations are based on a quick overview whether accepted web design and development standards are met. Remember – you have a very short period of time to hold the attention of a new visitor. Therefore, the web site deserves the appropriate investment and professionalism to be effective. Constructive comments are most welcome on any of these reviews.

Larry Wilson is author of the bestselling book, The Small Business Planner, and is the founder of Dynamic Performance Group, a strategic and marketing planning firm.

Season 5 – Episode 23. Original air date: April 10, 2014

Pitch One: Velocity Signs - Asking $225K for 15%

Valuation: $1.5 million.

Scott Adams and Josh Faherty from California invented their patented Velocity Signs which is an “Original Sign Waving Machine” intended to help small businesses increase sales. These innovative, robotic sign waving machines are battery-operated, portable, and durable for repetitive use. The machines provide a simple and effective method for small businesses to attract creative attention to their brand, special offers, events, product launches, and more. They want the investment to add staff, primarily in sales. Lori wanted to know what kind of return their customers were getting by using the signs and Scott replied that they report a 15% return on investment, which in itself doesn’t mean much. His biggest customer is Little Caesars Pizza chain who has over 3,000 locations worldwide, but he didn’t say how many signs they had.

Sales: $257K or 125 signs in 12 months.

Retail:  $1.899. to $2.850.          Cost:  $1,000.

The Sharks were obviously not impressed with the sales numbers for such a high valuation.

Robert invested in a billboard business earlier which was a big mistake on his part and he was the first to opt out. Kevin wanted to see another year or two of sales to see how the business would really perform and he was also out followed by Mark. Barbara saw a great application for real estate agents at open house events, but in the current form, the 125 pound signs would be too heavy for one person to manage. The partners then announced that they have another product they are working on suitable for that application. Because it wasn’t presented – she dropped out. Lori thought the invention was a great way for retailers to bring attention to their brick and mortar stores which are having a tough time so she offered the $225K for 30% of the business. Both Kevin and Mark then offered to join with Lori announcing that the new valuation ($750K) was realistic. The men said they would do the deal themselves if Lori didn’t want them and Robert jumped in with the guys and Barbara with Lori – both with the same offer. The partners had to decide on two or three Sharks as partners. Scott tried to beat the guys down to 25% and when they refused went with them citing three is better than two to Lori and Barbara’s dismay.

My entrepreneur ratings:

Idea: good; Competence: high; Knowledge of Market and Competition: good; Competitive Advantage: automating a manual process; Preparation / Planning: high; Chance of Success; good – especially with three Sharks as partners.

The partners came into the tank a little prematurely with sales too low to support their valuation and were very fortunate to have Lori save their bacon by making a bid. The other Sharks saw the opportunity at the new substantiated valuation and also jumped in.

Web Site:     velocitysigns.com

The web site is very well laid out, professionally designed and easy to navigate. The only negative is the small font size for links and product description. Like many others appearing on the show, they use up too much valuable home page real estate announcing it.

Pitch Two: Lord Nut Levington Peanuts - Asking $500K for 30%

Valuation: $1.6 million.

Sanjiv Patel from Dallas, introduced his a line of highly seasoned peanuts which available in six gourmet flavors that are intended to take the ‘bland’ out of this popular snack. The brand centers around the adventurous life of their fictional namesake, Lord Nut Levington. Lord Nut’s flavors include Rebel Mary (Spicy Bloody Mary), and Wingman (Hot Buffalo Sauce) to name but a few. He had invested 1.1 million dollars of his own money in the product development.

Sales: $700K or 300,000 cans of peanuts since April 2011.

Projection for this year is $350K in sales with no profit.

Kevin asked why he was worth a million six and Sanjiv replied that with the $500K from the Sharks and Kevin interrupted him to say that anyone could dress up peanuts. There was no brand recognition so far for Lord Nut Levington and he said they are on their way because they were in 600 stores and there have been re-orders. Kevin expressed his concern over keeping shelf space against a big player (like Planters) then Sanjiv made an eloquent recital about entrepreneurs creating brands leading to the Sharks bantering pro and con on the subject. In the end, the valuation was too high for Kevin and he opted out followed by Barbara, who was his champion on the argument, who didn’t feel he showed enough enthusiasm for the product. Lori can’t eat peanuts and couldn’t bid on a product she couldn’t sample to see if she liked it then Robert opted out because he didn’t see a clear plan on how the brand would be grown. That left Mark who wanted to hear about what he called sales velocity, or why they will be flying off the shelves and since he didn’t, he completed the retreat.

My entrepreneur ratings:

Idea: good; Competence: questionable – too many areas of strategy a question mark; Knowledge of Market and Competition: good; Competitive Advantage: seasonings; Preparation / Planning: questionable; Chance of Success; moderate.

Sanjiv may have created a great product and the brand was fun and distinct – but still unknown. The valuation, as we have often seen, was far too high and unsubstantiated by sales. After almost three years there was still no profit and he invested over one million of his own money to date, a situation which sets off alarm bells for most investors. His presentation did not convey the enthusiasm required so he may have been better to have someone with him who is good at expression

Web Site:     whoislordnut.com

The web site is clever and well designed but takes far too long to load. It meets the criteria for ease of use and includes all facets of social media.

Pitch Three: Happy Feet - Asking $375K for 15%

Valuation: $2.5 million.

Pat Yates developed Happy Feet slippers in 1995 with only a handful of styles available for purchase at mall kiosks. The e-commerce web site launched in 2001 to make Happy Feet available to those who couldn’t find them in their local mall. Over the next 12 years, the line expanded from basic colors to include licensed collegiate, NBA and NFL styles as well as an upscale line of animal slippers. The Sharks all tried a pair and thought they were super comfortable. Barbara commented on the high valuation this time assuming that the sales must be amazing. Currently available on-line retail and they sell wholesale.

Sales: $6.5 million.  (Past 3 years)      $2.65 million. (Past year / 2.2 million on-line) $660K profit.

Retail:  $24.99       Cost: $5.50   400% mark up.

Projection for this year is $350K in sales with no profit.

Mark wanted to know where the money went if they were doing 400% on margin and Pat said that shipping over the holidays ate up much of it. (Shipping should be included as a cost of goods if not paid extra by the customer and is not part of profit.) He explained the reason for not being in retail stores as the size of the product and the amount of shelf space used up – high square footage and low priced item vs. traditional footwear. Kevin always expresses concern about proprietary rights and said there was nothing stopping someone from copying the slippers and dropping the price by 30%. He pays for celebrity referral which has resulted in on-line success through their social media. Barbara thought the product and business had peaked and may start to decline and she dropped out. Robert thought he had done a great job growing the business but didn’t see how he could add value and also opted out. Mark thought he was the real deal but it wasn’t for him and he dropped out.

Kevin said he would never be interested in only 15% equity and made an offer of $375 as a loan with a $3.00 royalty on each sale until his investment is recouped then a $1.50 royalty in perpetuity along with 5% equity so he is a part-owner. Lori liked the deal and partnered with Kevin so they upped the percentage of equity to 6% (3% ea.) and added a covenant to formulate a retail strategy. Pat thought the royalties were too steep and countered with a 20% offering. Kevin, citing the extra time required to get a return on straight equity, countered back asking for 30% and Lori agreed to partner  on that offer so Pat could have the backing of two Sharks. Robert then jumped back in with the same offer of $375K for 30% equity. Pat countered back with a final of 25% and Robert agreed to it and while Lori was thinking he accepted Robert as a partner.

My entrepreneur ratings:

Idea: good; Competence: high; Knowledge of Market and Competition: good; Competitive Advantage: unique; Preparation / Planning: good; Chance of Success; high.

Pat came into the Tank with a well established business and solid sales. He knew his numbers and the valuation was reasonable resulting in multiple investor bids and he was able to counter from a strong position to get the deal that was right for him. It was never divulged why he needed the money which would have been my first question of an otherwise successful business asking for a capital investment.

Web Site:     buyhappyfeet.com

The web site is well designed and meets all web standards.

 

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SHARK TANK REVIEW – Episode 22

This review makes a great forum for a critique and learning experience valuable to all entrepreneurs. Learn what to do and what not to do from entrepreneurs making a pitch for money in the Shark Tank. The review complements my book, The Small Business Planner and there are also great free resources including fully formatted planning and marketing templates on the book’s web site. In addition, my regular Blog, along with the Video Series on my You Tube channel can be very helpful to budding and seasoned Entrepreneurs. Of primary interest to those making a pitch on the program is the Feasibility Study as described in the book. If completed in detail, this study will indicate if there is a viable market for the product or service and if the business can be profitable. An added feature to my reviews is a rating on the company’s web site – if available. The web site has become the number one marketing tool for most businesses today and my observations are based on a quick overview whether accepted web design and development standards are met. Remember – you have a very short period of time to hold the attention of a new visitor. Therefore, the web site deserves the appropriate investment and professionalism to be effective. Constructive comments are most welcome on any of these reviews.

Larry Wilson is author of the bestselling book, The Small Business Planner, and is the founder of Dynamic Performance Group, a strategic and marketing planning firm.

Season 5 – Episode 22. Original air date: April 4, 2014

Lori and Barbara both appeared in this episode which was missing regular Daymond. 

Pitch One: Kodiak Cakes - Asking $500K for 10%

Valuation: $5 million.

Cameron Smith and Joel Clark represented Kodiak Cakes which are made from 100% whole grain and all natural products. Just add water. Based on an old Utah family recipe, Kodiak Cakes Flapjack and Waffle Mix went from being sold in paper lunch sacks to neighbors out of a red wagon in 1982, to being sold in ski-town gift shops in 1995. The product is now being sold in over 7000 grocery stores nationwide including Target, Safeway, Meijer, and many more. There are different varieties of berry and all the Sharks enjoyed their samples.

Sales:  $1 million this year with Target alone and a margin of 45%.

Total projected sales for this year: $5 million.

Retail:  $1.65                Cost:  $3.02

Target is re-ordering to 1,600 stores and the partners need the money to expand their product lines. The Sharks questioned why they wouldn’t borrow money against their receivables or simply re-invest some of the profits without incurring debt and Joel said they are ready to explode the business. Kevin reminded them that they were buiilding a brand and if they get big enough they will appear on to one of the big player’s radar screens because there is nothing proprietary about the ingredients. He argued that they weren’t worth ten times their pre-tax profit with a high valuation of $5 million and also reminded them that they were trying to take market share away from the market leader, Aunt Jemima, which is priced at about half of their retail price. Robert wanted to know why someone would pay twice as much for their product and Joel could only confirm that they indeed do and Kodiak Cake’s sales are growing.

Lori thought the brand and packaging was reminiscent of the outdoors and Robert affirmed that people don’t know the brand yet where someone can relate to the ‘Kodiak guys‘. Kevin went back to the the need to build the risk of a takeover by one of the two large competitors into an investment which spawned an argument with Mark about competitive products and another when Robert learned that they wanted to use the investment on ‘slotting fees‘ which is a payment to a large retailer to guaranty shelf space. The partners got into an interesting argument with Kevin about return on investment and future company valuation. Joel said they would do $20 million in four years with a valuation of 1.5 times revenue, or $30 million. Kevin said that commodities don’t trade for ten times cash flow and Joel returned to promoting the brand value in future worth.

In the end, value is always determined by the amount of the check that an investor or purchaser is willing to write. In this case, Kevin said that their business is only worth $2 million which substantiates an offer for 25% equity instead of the 10% they asked for. (Remember they must get the $500K investment or leave empty handed.) But he also wanted to add a new risk premium because the business still needed to grow by another 30% to become attractive to offers by the big players and said he would need 50%. He also added that because he knew they wouldn’t accept it, he was out. Robert confirmed that he would like to be involved, but there would have to be a premium in it for him. To factor in the risk he offered the $500K for 35% and Barbara offered half ($250K) for 20% adding that they would need to get another Shark on board to complete her deal. Lori needs to love what she gets into and since pancakes were not on her list of favorites, she opted out.

This left Mark who felt they were faced with some macro challenges prompting him to drop out leaving only Robert’s offer on the table. Then Kevin jumped back into the fray joining with Barbara but their offer jumped to 25% each, or half of the business. Fifteen percent more than Robert offered but with the power of two Sharks as partners. The partners ended up declining both offers with a congratulations from Mark that they did the right thing.

My entrepreneur ratings:

Idea: good; Competence: high; Knowledge of Market and Competition: good; Competitive Advantage: health value and future branding; Preparation / Planning: high; Chance of Success; good – even without a Shark as partner.

The partners came into the tank with a successful business which had a positive growth trend and promising future. They really did not need the money but did bring some interesting dynamics to light, particularly with respect to company valuation. Did they make the right decision? An argument could be made here for yes and no. If the numbers they claim are correct, then they should do fine on their own and it is always best to grow a business that way.

Web Site:     kodiakcakes.com

The web site is excellent. Attractive, user friendly and optimized for searches.

Pitch Two: Monkey Mat - Asking $100K for 30%

Valuation: $333K.

Christie Barany and Courtney Turich designed the Monkey Mat, a clean portable floor where ever a person (especially with children) travels. The idea was spawned during an airport layover Christie had to suffer through with her children who were forced to play on a dirty floor. Monkey Mat protects the family from any questionably clean floor and is perfect for picnics, travel, beach, concerts, and sporting events, to name a few. The soft material is water repellent, has weighted corners, loops for stakes, is machine washable and includes a compact carrying pouch. The partners put on a fun, animated presentation then handed out samples.

Sales:  $60K   (First year mainly on-line and also through fifty separate retailers.)

Retail:  $39.99               Cost:  $13.14    (Made in China.)

The Sharks found all the costs outrageous from retail to manufacturing which they said was high due to the material which is a blend of nylon to maintain softness and toughness to house the four steel discs which cost fifty cents each. Kevin wondered out loud; “Why is anybody going to pay twenty or thirty when they can pay two bucks off a roll in any clothing store?” They tried to explain then Mark jumped in to help them out saying; “Convenience.” His wife would use it in an instant and he loved the product but hated the price. The Sharks agreed it should be closer to $9.99 retail and Christie said they would lose the quality and Robert confirmed that he liked the product as well but their problem was getting the price down in order to make it a mass produced affordable item. He was the first to opt out followed by Kevin. Barbara thought it was too small and repeated the cost problem before dropping out. Lori said with the right strategic partner they could get the price down and wanted to see how easily it went back in the travel bag. When Mark did it quickly and easily she got him to partner with her on an offer for 35% and they jumped at the deal. The other Sharks were still skeptical that they would not get a return on their investment.

My entrepreneur ratings:

Idea: good; Competence: high; Knowledge of Market and Competition: good; Competitive Advantage: unique; Preparation / Planning: questionable with high valuation but they got away with it; Chance of Success: good with Lori and Mark as partners.

The ladies had a good idea and presented it well. There were a few obvious problems with the operation at this stage of growth. These were: the costs (retail and cost to manufacture) which were about three times higher than the market would tolerate to make it successful; it is only a product and not an actual business; and the valuation was far too high for only $60K in sales. They surprisingly did get away with it and received an offer, likely because Lori liked them and their drive. It is interesting to note that the product now sells on their web site for $19.99 and that will have a dramatic positive affect on sales. If they also got the cost to manufacture down, and I’m sure with their Shark partners that they did, then bottom line profitability will also improve.

Web Site:     monkeymat.com

The web site is laid out nicely and professional in appearance. It is easy to find your way around and there is quick understanding of the product. The first graphic, as is often the case, utilizes too much valuable real estate bragging about the appearance on television instead of the benefits and ‘what’s in it for the customer’. The web site is not optimized for searches as it is missing appropriate meta tags and the title does not utilize key words. This is not an issue if you are referring most of your traffic to the site through ads or paid links and not dependent upon searches.

Pitch Three: Plated - Asking $500K for 4%

Valuation: $12.5 million..

Nick Toranto and Josh Hix were actually serious about their web based service business called Plated which delivers chef-designed recipes and fresh ingredients directly to a customer’s door so they can relax and enjoy the full cooking experience. They claim to have served tens of thousands of meals around the Northeastern U.S. since launching six months earlier and want to go nation wide. There is a minimum forty dollar minimum order (incl. shipping) for four people. They can maintain higher margins for handling food over stores and restaurants because there is little spoilage.

Sales:  $100K   (In the past month.)         Projection:  $2.5 million (the next 6 months).

Long-term projection: $1 million per month.

They started the business with just over $50K and have since obtained $3 million in investments at a post money valuation of $9 million. They both have business and tech backgrounds. Robert was the first to opt out citing that it is a service that he wouldn’t use – so couldn’t invest in. Kevin, who is big on proprietary property protection, said that anyone could go ahead and do the same thing, adding substantially to the risk factor. He figured he could do the whole operation himself for 3 million bucks – and since they wanted him to pay three times that figure to play with them – also dropped out. Nick countered that he would have difficulty finding two hard chargers like them to knock it out of the park.

Lori was having trouble with the concept as it appeared only to be for someone who likes to cook, but was too busy and she dropped out. Mark asked who they thought was their biggest competition and threat and they replied, “Take-out.” Barbara reminded them that take-out is a pretty big threat prompting her to follow the others. Mark said he wouldn’t be a customer, but didn’t need to be to have an interest and wanted to know how it could be a sustainable business. They got his interest when they mentioned their subscriber base of several thousand regular customers. He  made an offer of $500K for a $9 million dollar valuation – or about 5.5% and in addition he wants advisory shares. (A match to shares given any other adviser.) They wanted to talk about it and Mark couldn’t understand why because he was giving them the valuation they were after in their planning and also the advisory support requested. They came to their senses and took the deal.

My entrepreneur ratings:

Idea: good; Competence: high; Knowledge of Market and Competition: good; Competitive Advantage: unique; Preparation / Planning: high – they knew the numbers; Chance of Success: good especially with Mark as a partner.

Nick and Josh have developed a great web based business with established sales and growth numbers. They also knew business and technology which makes them great front men – something investors find mandatory so they can trust that the right direction for the company, and their money, will be taken. The valuation was very aggressive but they were lucky that it worked for Mark. It will be interesting to see if this one makes it through due diligence and he actually writes a check as there is considerable risk attached to this kind of venture as conveyed by Kevin.

 

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