Better Life: The Deals on the Floor

By: Kilav Salthius, Financial Advisor.
KilavSalthius@gmail.com


As Kevin Tibbs and Tim Barklage walked down the hall with their “Better Life” t-shirts, I have to admit I rolled my eyes with disbelief and sureness that their pitch would be a lame one. The first impression I got as a viewer was one of no creativity or originality. “Better Life” could perhaps be a decent motto, but not a company name. However, as soon as Kevin, the formulation chemist, opened his mouth and started presenting, all my skepticism quickly vanished. Kevin's presentation was delivered very well and he gave off a certain aura of genuineness and ingenuity.

Kevin and Tim, being fathers of young children the same age, were concerned when they realized that their kids dropped toys on the floor and then eventually those toys found their way into their kids' mouths. Floors are dirty; and the sad truth that Kevin and Tim discovered was that clean floors are dirty as well. The common household leading cleaning brands may look and smell to us as if they do the job, but the truth is that they do not. First of all, they give off a stench of chemicals and bleach which is dangerous to inhale, unhealthy to even touch, and could be fatal if digested. Additionally, as Kevin and Tim demonstrated in their head-to-head-test of their Whatever Cleaner versus a top brand cleaner, even with all the chemicals, the leading brands do not clean so well. After rubbing raw chicken on a surface and getting a reading in his meter of 8,840 (scoring an extremely dirty surface, as 200 represents the threshold of dirty), Tim sprayed the first counter with a National Leading Brand which lowered the score to 433 – still high on the unclean scale. However, when they sprayed the other tile with their solution, the 8,840 number decreased to 44. Incredible! Yet even as Kevin O'Leary cried out in amazement to the other Kevin standing before him, “Stop the madness!”, the madness continued as Kevin displayed that unlike regular solutions which have warnings that the users should wash their hands after using, his product was so safe that he could spray it in his mouth and swallow it! And he proceeded to do just that.

One could imagine the effort that went into formulating such a product. After all, when creating such a thing there is a whole matrix of factors which often play off each other with a sort of opportunity cost. For example: in order to get the product to work well, what often has to be given up is that it needs strong chemicals. In order not to use such strong chemicals, one could imagine that it would have to be very expensive. Yet somehow, Kevin and Tim managed to create a product that is not only extremely effective, but is also very reasonably priced and completely safe.

As a team, Tim and Kevin have done quite well. In its four years of existence, Better Life has managed to have very little debt and has done 2.1 million in sales in the last 12 months alone. Their products sell from $5.99-$6.99 a piece, and are already in stores such as Whole Foods and Crate and Barrel.

Now that they had finished their fantastic (excuse the pun) presentation, it was the Sharks' turn to either accept their offer of $400,000 for 7% or perhaps suggest a different offer. However, as Kevin and Tim explained, with a financially sound company, they were looking more for a strategic partner than a financial partner.

Daymond John was the first to blurt out: “Do you really think any of us want to get out of bed for 7%?” And it turns out that his opinion was shared by Lori as she demonstrated by her first offer: $400,000 for 17%! Lori argued that although she would be taking a big chunk of their equity, she would take them on the fast track to be millionaires. After all, she gave herself the title “The Queen of Lightning Speed” and was quick to boast her direct door arrangement she has with Bed Bath and Beyond as well as QVC. She slyly stuck in the fact of what she recently accomplished with Scrub Daddy – reaching $13 million in sales in just eight months!

Kevin immediately pointed out Lori's greed and made what he felt was, in contrast, a great offer: A loan of $400,000 for 3 years with 10% interest and only 5% equity. This would be a sort of win-win situation. Kevin would be a small holder of the company, but at the same time would make back a decent interest rate on his money which he felt would be very secure. Better Life would be able to keep its equity and only have to pay a small price for it.

J.P. was next to speak up valuing the company at even less than Lori, suggesting that he and Lori together offer the $400,000 for 20%. The reason J.P. argued that this would be worth it was because of the combined experience and connections that he and Lori could bring to the table which the other Sharks could not.

After Kevin shouted out that they were both greedy pigs, Daymond made his own offer of a whopping $500,000 for 20%.

Tim and Kevin definitely did not look too pleased with any of these three offers because as they said: 1. $400k or $500k for their company would be valuing it at much less than it is worth. (In fact even less than their current sales). This got a nod of approval from Mark Cuban. 2. Kevin O'Leary's offer was more of a banker's approach, while what they were really looking for was more of a strategic partner – a position Lori or J.P. would be perfect for.

However, it was for this exact reason that Daymond said that Better Life would have to be willing to give up more equity, because they came to Shark Tank looking for someone who is going to do more than invest, but actually work as a strategic partner.

J.P. and Lori exchanged a few whispers and revised their offer: $400,000 for 17%, which still did not sit well with the Better Life team who were still waiting to hear what Mark had to offer.

Finally, Mark made his offer of $800,000 for 20% if Lori would come in to help bring it to QVC. However, Lori responded that she felt $800,000 was too high and that she could work a lot faster by herself. Mark said that if Lori wouldn't partner with him on this one, then he is out.

Kevin was listening to the back and forth and came to the realization that Better Life was not really looking for a loan, so he offered $400,000 for 17% but with a twist: After Better Life pays back – which could be at any schedule they want – Kevin would give up 10%, leaving Better Life only relinquishing 7% of their company, which is what they originally wanted. Lori immediately jumped in and said she would offer the same deal.

Daymond then came in together with J.P. offering $500,000 for 20%, which Kevin and Tim still did not like, as they were thinking something more along the lines of $500,000 for 10%.

Lori wrapped everything together challenging them to make a decision and not to have an “Oh-no moment...oh no what did I just do, oh no what did I just lose?" It was a pretty lame line when she said it. Is it just me or has she been taking Kevin pills lately and trying to be a Shark with a stronger bite? Perhaps all that bickering with Barbara in previous episodes got to her?!

Kevin and Tim ended up accepted Lori's offer, which in my opinion was a great move. They will be able to pay back the $400,000 and will only be giving up 7% of their company – which they were willing to do – to get a strategic partner who will be able to make their product the new cleaning standard and a recognized brand in retail stores, all at a lightning speed.
Jeff HopkinsComment