Wednesday, October 14, 2015

The CEO of Tower Paddle Board Created A Brand

tower paddle boards shark tank
As good as any new idea or product may be, no investor is willing to put down money until he/she has complete confidence in the entrepreneur behind it. Read this great article by Denise Lee Yohn of Forbes about how Stephan Aarstol, the CEO of Tower Paddle Board, is the exemplification of an entrepreneur worthy of getting an investment from the Sharks.

For many entrepreneurs, appearing on the TV show Shark Tank is ultimate win. But for Stephan Aarstol, founder and CEO of Tower Paddle Boards, being on the show was just a stepping stone in his quest to build a great brand.

Of course, Aarstol’s start-up paddle board company, Tower Paddle Boards, gained broad exposure from his Shark Tank segment and the deal he forged with billionaire Mark Cuban. Before he appeared on the show, company gross revenue for the first half of the year was a mere $100,000. Afterwards, annual revenues jumped to $1.7 million, and then $3.1 million, and hit approximately $5 million in 2014. Aarstol also credits Cuban with advising on bigger picture strategy and suggesting growth opportunities such as making custom boards.

But the foundation for Tower Paddle Board’s success was laid well before Aarstol’s Shark Tank appearance. The impetus behind its growth was Aarstol’s insight into innovation which he explained to me in an interview. He told me there are three types of innovation. The first is product innovation, which Aartsol describes as the riskiest and toughest. “A lot of times you innovate on a product and then there isn’t a market there,” he says. “There are a lot of unknowns, so that’s the innovation of big companies.”

Smaller companies that can’t afford to take such risks can innovate on distribution. He points to Netflix as an example, saying “Netflix took Blockbuster’s business model of giving people movies in their home, but instead of going to a store, they get them by mail and now they download them.” He says distribution innovation is much easier and, “In today’s world, that’s where the huge gains are being made.” Uber serves as another example of this kind of innovation.

Then there’s marketing innovation done by the likes of companies including Google and Facebook. “They never advertise. They have a product that’s so compelling, it creates a network marketing effect,” Aarstol explains. “Your customer experience becomes much more important. It’s got to be so over the top that customers will tell their friends.”

shark tank tower paddle boardsMarketing innovation has driven Tower Paddle Board’s success. While other paddle board companies were either selling through specialty retailers or direct through fancy websites and traditional advertising campaigns, Aarstol decided to “hack the system” and use search engine optimization and social media to grow his business. Simply by showing up first in search results and sparking word of mouth marketing, Tower has become a popular brand with a legion of customers and followers. In fact, his zero spend on advertising got the attention of the Shark Tank’s Kevin O’Leary aka Mr. Wonderful (whose deal offer Aarstol turned down in favor of Cuban’s.)

Aarstol’s intuition about his brand also extends well beyond what his Shark Tank success proved. He describes his company as “an online marketing agency that owns a surf brand” and a player in a constantly evolving field. So he says he is always trying to reinvent what they’re doing and ultimately he wants to build a brand that accommodates that flexibility. He holds Richard Branson’s Virgin group of companies as a model and is building his brand to embody the beach lifestyle in many different categories. Flip flops, sunglasses, bikes, surf boards, and other adventure sports are among the 25 companies he has planned for Tower. His goal, to roll out 2-3 companies each year, seems do-able given that they’re all based on the same business model and leverage Tower’s existing strong partnerships with Amazon and daily deals site Woot.

In addition to Aarstol’s insight into marketing innovation and far-sightedness of brand flexibility, Tower’s success rides on his foresight into the future of brand-building. He states, “Every brand is now a media brand,” and he says that energy drink Red Bull has demonstrated the power in creating the media for its target market. That’s why Tower has created its own magazine and amassed 25,000 subscribers. His plan is to launch every new company through the magazine and establish the disruptive nature of the brand through it. “We’re doing marketing backwards,” Aarstol explains. “We’re finding our audience, making them happy, and building a brand before we ever even try to sell them anything.”

These aren’t just claims from an eager entrepreneur. Tower Paddle Boards has been named among the fastest growing private companies in San Diego and top 10 innovative products of INC 500 companies and hailed as a spotlight customer for Amazon and PayPal.

Aarstol may have Shark Tank to thank for fanning the flames of his company’s growth, but his unique take on how to build a brand today ignited Tower’s initial spark and continues to fuel its fire.

Denise Lee Yohn is a brand-building expert, speaker and author of What Great Brands Do and the upcoming book, Extraordinary Experiences.

Thursday, October 1, 2015

Blog Shark Tank Rapid Interview: Spy Escape and Evasion

spy escape shark tank
In Season 5 of Shark Tank, former CIA officer, Jason Hanson pitched his Spy Escape and Evasion training business to the Sharks. After getting an investment from Daymond John and turning his business into a brand, Jason has been hard at work doing what he loves - making people safe and growing his business. Blog Shark Tank recently caught up with Jason and asked him a few questions about his Shark Tank experience and entrepreneurship. Here goes:

1) What is Spy Escape and Evasion all about?
My company teaches the average American spy secrets to keep them safer on a daily basis. This includes how to escape duct tape, rope, zip ties... how to pick locks... how to detect lies... how to determine if someone is following you... and much more.

2) What gave you the idea or inspiration to start your business?
I spent almost 7 years working for the CIA. I believe all of us want to make sure our family is protected and safe.

3) Do you think Spy Escape and Evasion would have the same success it has today had it not been featured on Shark Tank?
Shark Tank was a huge blessing. I think I would have had the same success but it would have taken me a lot longer to get there. Shark Tank made it happen quicker.

4) What did you do to prepare for your pitch once your business was accepted?
I watched every episode of Shark Tank, I read all of the books the Sharks had written and I practiced my pitch over 1,000 times.

5) How long was the actual pitch in the Shark Tank?
About 55 minutes.

6) How involved has Daymond been as an investor, and how often do you speak or meet with him?
daymond shark tankIn the beginning we spoke about once per week. Now that we’ve been together awhile we only talk when we need to. Daymond is down to earth and a great guy.

7) What are some of the sacrifices you have made as an entrepreneur?
I’ve probably forgot most of them because there were so many. Things ranging from lack of sleep to doing whatever it takes to get the job done.

8) As an entrepreneur, do you ever look back at the cross-roads of your business or career choices and have regrets, or do you only look forward?
I only look forward. I don’t have any regrets. I’m very happy with where I am at.

9) Who do you look up to, and what inspires you?
I look up to entrepreneurs who realize family comes first and who realize what a blessing they have been giving. Also those who realize it’s their duty to give back to others. What inspires me is to help keep others safe and to be the best at what I do.

10) What are 3 tips you have to aspiring entrepreneurs - people who know they want to create something big, but just haven't been able to do it yet?
- You have to realize not everyone is made to be an entrepreneur. If you can’t handle risk it’s not for you.
- Get up at 5am. Work to at least 5pm daily. If you aren’t willing to put in at least 12 hours a day you won’t make it and don’t want it badly enough.
- If you never quit, you’ll eventually make it.

Wednesday, September 30, 2015

In The Shark Tank, It's All About Valuation

By: David Bookbinder
Director of Valuation Services,
GBQ Consulting

Why do the entrepreneurs and the Sharks differ on valuation? 

The entrepreneurs are passionate about their business and believe their vision of the future will turn out exactly as presented. The Sharks, on the other hand, know from experience that a lot can go wrong and that most small businesses fail. Therefore, if the Sharks are going to write a big check to an entrepreneur, they will need to get a substantial rate of return on that investment to compensate them for taking the risk.

Let’s start with an example. You already know that when the entrepreneurs ask for their desired investment, they’ve placed a value on their company. For example, asking $100,000 for a 10% stake in the company implies a $1 million valuation ($100k/10% = $1M).

But if the Sharks feel that the business is really worth only half of that, they would counter with an offer of $100,000 for a 20% stake. ($100k investment /20% ownership = $500,000 valuation)

If the valuation isn't right for the Sharks, they will pass on the deal, but have you ever wondered how the Sharks determine their valuations?

Sharks are experienced investors and they arrive at their valuations very quickly. But don’t let their speed fool you into thinking that they are simply guessing or just being greedy. Although not apparent to the viewer, the Sharks are utilizing several methodologies in arriving at their valuations. Allow me to explain what’s behind their questions and how the Sharks arrive at their valuations.

It all starts with the Sharks asking questions about recent sales, but their real focus is on what the business is expected to achieve in the years to come.

This is because, at its essence, the value of a business is equal to the current value of what it is expected to earn in the future. In other words, valuation is less about “what have you done for me lately” and more about “what will you do for me tomorrow?”

So the Sharks will estimate the earning potential of the business for the next few years, and with a Shark-like required rate of return to compensate for risk, those estimated future earnings can be converted into a current value through a mathematical technique known as discounting. This is the premise of an Income-based valuation methodology known as a discounted cash flow analysis.

Without getting into the detail, the important considerations behind the math of a discounted cash flow analysis are: 1) the greater the risk of the investment, the higher the required rate of return to compensate for that risk; and 2) the higher the required rate of return that is applied to expected future earnings, the lower the present value of those future earnings.

Without even doing the math, you can understand why the Sharks will not pay a high price for an extremely risky investment.

But the Sharks will do the math, so they know what the risk-adjusted value of the next few years of estimated earnings are worth.

However, those next few years of earnings only tell a part of the story and represent but a portion of the total value of the business.

To get the rest of the story, the Sharks also need to determine the value of the earnings in the years that follow these near-term estimates.

Trying to estimate future earnings for another 10 or 20 years is an exercise that can tax even the best crystal ball, but the Sharks can shortcut the process by considering how long they intend to remain invested in the business, and at what price they might be able to sell their investment at that time.

To estimate the total value of the business, the present value of the exit price is added to the present value of the estimated near-term earnings.

All of this happens in mere minutes on television… but this is just one method for determining value.

The Sharks will also use a Market-based valuation method, which is based on metrics by which similar businesses have transacted. If you've ever bought a house, you already understand the principles of comparison and substitution that are inherent in a Market-based valuation method.

For example, when comparing the relative value of different houses, you can calculate the price per square foot to help make an informed decision about what you’re getting for the money. This is a type of valuation multiple.

Similarly, when companies are sold (or traded on a stock exchange) their valuation is often expressed as a multiple of sales or earnings. So when you hear the Sharks talk about “the multiple” when discussing the entrepreneur’s valuation, they are referring to the implied multiple of sales or earnings expressed in relation to the overall valuation.

For example, if the entrepreneur’s desired valuation is $1 million and the business generated $10,000 of sales last year, the price/sales multiple is equal to $1M/$10k, or 100 times last year’s sales. The Sharks will assess these valuation multiples on a forward-looking basis as well (i.e., as a multiple of next year’s estimated sales).

When you hear the Sharks complain that “the multiple is ridiculous,” you’ll know that the lower the financial performance metric (the denominator), the higher the implied multiple; and the Sharks are not keen on paying high multiples for performance that may never materialize.

Other factors that the Sharks might consider in their valuation include intangible assets, like the value of the brand, patents and people. They will also assess how a particular business might fit in with other businesses they already own (synergies) as well as the fact their affiliation alone will likely enhance the value of the business, although investors are generally not inclined to pay for what they bring to the table.

Having considered Income-based and Market-based valuation methods, the Sharks have a good idea of what the business is worth, but they aren't done yet.

Unlike an investment in stocks, an investment in the Shark Tank can’t be exited in a matter of seconds with a sell order. The lack of a ready market to sell the investment reduces the value of the investment, so the Sharks must also consider a discount for the lack of liquidity.

Lastly is the matter of who calls the shots. The Sharks want control and the entrepreneurs do not want to give it to them.

So the Sharks will also need to consider a discount for lack of control when taking a minority stake.

The Sharks now have their valuations – and let the negotiations begin!

So the next time you’re watching Shark Tank, you can impress your friends with your knowledge of valuation.

That's all I have to say on this subject, so for that reason... I’m out.


About the Author:

Dave Bookbinder is a Director of Valuation Services at GBQ Consulting where he helps his clients with the valuation of businesses, intellectual property, and complex financial instruments. More than a valuation expert, Dave lends his business experiences to help people with a variety of matters.

Tuesday, September 29, 2015

Kevin O'Leary - Shark Tank Secrets

kevin o'leary shark tank
What better way is there to kick off Season 7 of Shark Tank than with this Forbes interview with Kevin O'Leary. In the interview, Kevin shares some of his Shark Tank secrets - specifically, what type of entrepreneur makes him interested in investing his hard-earned money.

You can watch the interview and read the original article written by Steve Schaefer of Forbes here.

They may call him Mr. Wonderful, but in the Shark Tank boardroom Kevin O’Leary is often anything but friendly to the entrepreneurs pitching their ideas for hot-selling consumer products. O’Leary’s barbs, zingers and critiques have made him a reality TV star alongside colleagues Mark Cuban, Barbara Corcoran, Lori Greiner, Robert Herjavec and Daymond John.

It takes a lot to cut a deal with O’Leary, a tenacious negotiator and harsh critic of gimmicky contraptions, but in a recent interview with Forbes he shared the secrets to success and why viewers can expect him to bet on a lot of women founders in the news season premiering Friday night.

There are three keys to getting one of the sharks to buy in, O’Leary says, evident in virtually every case where a deal is reached with the inventors and entrepreneurs pitching their idea.

First, the basic elevator pitch. “In 100% of cases an entrepreneur can articulate their idea in 90 seconds or less,” he says.

Second, the team “can articulate why they’re the right people to execute the business plan.” Plenty of inventors might be able to come up with a great idea; far fewer have the wherewithal to see it through production, distribution and profitability.

Above all though, O’Leary says there’s a single most important trait Shark Tank success stories have in common.

“The one that really matters is the entrepreneurs know their numbers inside out,” he says, rattling off examples like break-even points, market share statistics and margin analysis. “In Corporate America, when you want to be a leader…above all, you need to know your numbers.”

That doesn’t mean O’Leary is infallible. While he holds the crown for the largest exit in Shark Tank’s history — the $14.5 million sale of smartphone photo collection app Groovebook to Shutterfly SFLY -5.71% last year — the product that has proven to be the best revenue generator completely stunned him.

Scrub Daddy is a sponge product funded by fellow shark Greiner. The selling point is that under cold water the sponge is hard and can be used to scrape food residue off a plate; under warm water it’s softer and can be used in more delicate applications.

“I thought it was a piece of crap,” says O’Leary. But after landing a deal to hit the shelves in Wal-Mart, Scrub Daddy is up to $50 million in revenue.

While he missed out on Scrub Daddy, O’Leary has more hits than misses with his Shark Tank investments, and after studying all of them through 2014 he found a surprising statistic.

“One hundred percent of my returns the last six years have come from companies run by women,” O’Leary says, across different sectors and geographies. “There’s an old adage that says ‘if you want to get something done give it to a busy mother,’” he adds, but he’s less interested in how it’s happening – he speculates speculating that women are more mindful of risk and better at time management, both crucial for the small companies in the Shark Tank pool — than about the outcome.

“I don’t care why. I care about the actual financial results. So this year on Shark Tank, I’m investing in a lot of women.”

Saturday, September 26, 2015

Welcome to Season 7 of Shark Tank

Welcome back to a brand new season of Shark Tank, the number one business reality show on TV!

The Sharks in Season 7 are Kevin O'Leary, Robert Herjavec, Barbara Corcoran, Daymond John, Mark Cuban, and Lori Greiner. Be sure to check out their bio pages to learn more about them!

After 6 seasons of Shark Tank, you can be certain that the pitches will get better and better and that there will be more record-shattering deals made in the Tank than ever before! Shark Tank continues to prove that the American Dream is alive and well, and that there are no limits to what you can achieve if you work hard to succeed.

Blog Shark Tank is a platform on which content about entrepreneurship, small business, and Shark Tank is shared and produced. We also aim to critique many of the entrepreneurs that pitch their businesses to the Sharks, and hope to provide fair and honest analysis on their performance in the Shark Tank. It is not easy to stand up and face the Sharks, let alone to walk out with a deal, and we applaud every entrepreneur that walks out unfazed with their head held high.

So join Blog Shark Tank this season and read our Shark Tank and business articles you will certainly find insightful and enjoyable. Connect and participate in our discussions on Twitter @BlogSharkTank and Google Plus +Blog Shark Tank, and share your thoughts with us and Shark Tank fans all over the world.

Wednesday, April 8, 2015

Lori Greiner's Secrets to Her Entrepreneurial Success

By: Sage Lazzaro, @SageLazzaro, @Observer

Read the original article here.

Are you always coming up with great ideas only to stumble upon them on shelves soon after? If yes, you might have the entrepreneurial spirit deep inside you, according to Lori Greiner.

The retail expert and fierce investor on ABC’s Shark Tank dished on her tips to entrepreneurial success this morning during a Q&A at Staples on 5th Ave.

Ms. Greiner—often referred to as “The Queen of QVC” because of her show’s successful six-year run on the shopping network—has launched over 400 products and holds 120 patents in the U.S. and internationally. She has an astounding 90 percent success rate in launching new ventures, and she knows a thing or two about creating multi-million dollar businesses. These are her best tips for entrepreneurs:

Evaluate Your Idea

Is it for a mass audience or a select few? Can it be made inexpensively? Is it unique?

It’s important to understand how your product compares to what’s already out there. Unique products that solve problems do best. If your idea is brand new, you can corner the market.

“If something has a hold on the market already, you’re not going to have an easy time,” Ms. Greiner said.

Do Your Own Market Research

When Ms. Greiner was creating her first product, an earring organizer that she eventually licensed to JCPenny, she showed a prototype to women on the street to gauge their interest and see if the idea was worth pursuing.

She stresses “pounding the pavement” to see if people would buy your product and how much they’d pay for it before investing a ton of cash into the business. And definitely do not do this over the Internet, she warns, or else your idea could easily spread like wildfire and get knocked off while you’re only in stage one.

“Everyone thinks they have the best idea and that everyone will buy it,” Ms. Greiner said. “I think you have to think of your business idea or product idea, ‘Is it something people need and want, something people truly need and want?'”
lori greiner packaging

Packaging, Packaging, Packaging

If your idea is a product with a future in retail, packaging is key. Consumers need to instantly gravitate to it, pick it up and be able to tell what it is and why they should buy it.

“My entrepreneurs know,” she said. “We go through a lot of packaging until it’s perfect.”

Don’t Overspend and Do All of the Hard Work Yourself

Ms. Greiner says to “stay lean and mean.”

Don’t rent out a fancy office. Don’t fill up a warehouse with inventory you can’t sell. And definitely don’t hire employees until you absolutely need them to keep up with business. Doing so will eat up your capital, and employees won’t be running as quickly as they should to get your business off the ground.

“No one will run your business like you do,” she said.

Hold On to That Equity In the Beginning

Desperate for cash, too many entrepreneurs make the mistake of giving up 40 percent of their business to their uncle for $10,000 a month in. Ms. Greiner’s advice is to hold out and figure out another way.

“You will regret it down the road,” she said.

It’s not worth it even for that small amount of cash you think you need, and be especially wary when borrowing from friends and family. They usually want their money back, and when you’re risking it all in a business venture, you can’t be sure it will survive.

Tuesday, March 24, 2015

Kevin O'Leary: 10 Secrets to Being The Best Boss You Can Be

Now, I know what you are thinking. Why is Kevin O'Leary giving advice on how to be a good boss?! There's no way he treats his employees with respect! Well, just because he is tough in the Tank doesn't mean he is a bad boss. Check out his latest LinkedIn Influencer article:

blog shark tank kevin o'leary boss
Over the years, I've worked for others and I've worked for myself. Through trial and error, I've figured out a few key character traits that helped hone my leadership skills. Directness, transparency, and decisiveness are three essential traits of a good boss. It’s also important to remember the rules outlined below.

1. Employees are not your friends. Even if you like them, even if you hired them because they are your friends, while they are working for you they are not your friends. They are your employees. The problem with socializing with your employees is that it makes it hard to be objective about their performance, and harder still to crack down on them if they’re under performing.

2. Maintain a clear line of command. In most of my endeavors, I've had a partner, and we've helmed our companies side by side. But I weigh in on issues that fall outside the realm of my command only when completely necessary. Employees always knew which problem to take to Michael Perik and which to take to me. Overlap of authority can get confusing, muck up productivity, and cause unnecessary delays, if not out-and-out grief.

3. Be accessible. You’re not building a fiefdom—you’re building a company. Don’t alienate, isolate, or separate yourself from your partners and top earners. Don’t put them on hold, don’t fail to return their calls, and don’t make them feel like they cannot approach you. I've seen this phenomenon firsthand. It’s toxic, and it’s usually the product of fear or the inability to cope during troubled times. If your first instinct is to bury your head, you are not a leader.

4. Delegate, delegate, delegate. You cannot—nor should you—do everything. CEO's who think that they should weight in on every single aspect of their company get too bogged down in the details, much to the detriment of the overall health of the company. If a ship’s captain is overseeing the catering, he’s going to hit an iceberg.

5. Don’t procrastinate. When an employee is problematic, you must act. Now. Do it right. Do it by the book. But do it.

6. Never pass the buck. Blame stops with you. It always stops with you. Even if you think you had nothing to do with the decision that got your company into trouble in the first place, you’re wrong. You likely had something to do with hiring the person who did screw up. Take immediate responsibility, do what you can to fix the problem, and then whack the knucklehead who couldn't keep pace. If your name is on the product, business, or marquee, that’s especially important.

7. You’re not their parent. Employees will only bring their drama to work if you let them. If you don’t want to be treated like a parent, don’t act like one. If employees are having squabbles, let them figure it out among themselves. I also try to steer clear of giving personal advice. My employees problems are their problems to solve. And it’s up to them not to bring those problems to work. By the way, if one of your employees is suffering from a genuine issue—addiction, depression, that kind of thing—don’t suggest they get help, insist upon it.

The 10 Secrets to Being the Best Boss You Can Be
8. Life’s not fair. Some people will simply make more money than others in the same job. Some people will work harder. Some will get higher sales. You will trust one over the other to get the job done. You will likely have favorites. That’s life. If someone complains about it, tell him or her to get over it.

9. The boss doesn't always make the most money. Find stars and pay them well. If you want to attract those stars, you’ll have to lure them with dollars. Remember that money’s the great motivator, and if it means you take a hit financially, take it. Talent will always bring in more money for the company, and that has got to be your number one priority always. Which leads me to…

10. The company comes first. This is the most important tenet. Have a singleness of purpose—the health and welfare of the company—keeps things clean and clear. Employees never question your priorities, nor do they have to guess at their goals.