Advice from the 'Shark Tank': How to Swim with the Big Fish
Kevin Harrington has seen a lot of crazy ideas in his two seasons on ABC's hit show "Shark Tank," in which entrepreneurs compete for big bucks from investors (aka "sharks"). But, it's his real-life role as chairman and founder of TVGoods, Inc., his long career as a pioneer in infomercials and his previous life as a business broker that has made him an expert on how a company can go from struggling startup to soaring success story.
In 1984, Kevin produced one of the industry's first 30 minute infomercials. Since then, he has been involved with more than 500 product launches that resulted in sales of more than $4 billion worldwide. Twenty of his product launches reached individual sales of more than $100 million each.
He is currently in negotiations to appear on the third season of "Shark Tank." TVGoods, Inc., has also just acquired ownership of the coveted domain name, AsSeenonTV.com, a move that is likely to help secure the company's role in TV and retail sales for years to come.
[Read an interview with the winner of one of Harrington's "Shark Tank" investments]
In an exclusive interview with BusinessNewsDaily, Harrington offers five crucial pieces of startup advice to entrepreneurs hoping to launch the next big thing.
Have enough cash
Harrington said that underestimating the initial cost of doing business is a common misstep.
"Not understanding how much capital it's really going to take or how quickly they'll get to point of profitability or breaking even is a problem," Harrington said. "A lot of people think they're going to start a business and spend $50,000 to open doors, so they raise $50,000. They don't realize it's going to take 90 or 120 days or six months to be cash flow positive."
Harrington said small business owners need to be prepared to have a cushion of cash on hand until the business can gain its footing and start being profitable.
"It takes time to build customer base and they need to raise enough money to cover their losses in the first few months," Harrington said.
Understand your business
Too often, Harrington said, people get into businesses without really understanding what the day-to-day operations will be like. He suggests you do your research before jumping into any business.
"Think about what it's like to actually run the business," he told BusinessNewsDaily. "Interview people that are in the business, get mentoring, make friends with people who do the same thing. If you're going to open a pizza parlor, go talk to 10 guys in pizza parlor business."
Harrington suggests joining local business clubs, chambers of commerce, and entrepreneur organizations. (Harrington is a founder of the Entrepreneur's Organization, or EO, formally known as the Young Entrepreneurs’ Organization). He also suggested getting help from the Small Business Administration.
"Entrepreneurs tend to like to mentor and help others," Harrington said. "It's a pretty friendly situation, generally."
Have a big marketing budget
Everyone falls ways short on marketing, Harrington said. He said that 20 to 30 percent of a businesses' initial budget should be allocated to marketing and advertising.
And be sure you plan a big launch.
"You need a huge launch event for new business and you have to have plenty of money in the marketing and advertising budget," he said.
Know your stuff
Before heading out to find investors, be prepared to give them your best sell.
"Have your pitch down," Harrington said. "Have a presentation that is concise and to the point."
Harrington said investors will have a few key requirements before investing in any company.
"They'll want to see the track record of people involved and a way to get their money back in timely fashion," he said. "What any investor is ultimately concerned about is making a return on his investment. What am I going to get back and how much of a risk am I taking?"
Remember: It's just business
The biggest mistake those seeking investors make is not understanding that the investor isn't necessarily as excited about business as they might be, Harrington said.
"Investors don't get emotional about the deal as you do," Harrington said.
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