Top Financial Management Lessons Learned From 'Shark Tank'

Shark Tank Australia is a reality show that makes the entrepreneur in you sit up and take notice. The much-appreciated TV series will be back this year after a hiatus of five years to bring a barrage of brilliant pitches to the forefront. The contestants comprise aspiring and existing entrepreneurs who present their ideas to wealthy investors for funding in exchange for equity.

While the show has been created for entertainment purposes, it is a lesson for budding entrepreneurs in Gold Coast to perfect their funding pitch and understand business management from the financial point of view. Here are the top financial management lessons from Shark Tank that budding and seasoned entrepreneurs must utilise. This knowledge is crucial for improving financial wisdom and business acumen to take a business to the next level.

1. Stay On Top of Your Business Financial Information

Business owners are not merely bosses. They are the controllers and organisers of their entities who should know their venture inside-out. The first few questions posed by the Sharks in the TV show are based on the profit margins, cost of goods sold, customer acquisition expense, overheads, sales volume, cash flow, etc.

Thus, entrepreneurs should have accurate information about all these aspects of the business. When they are aware of the expenses, assets, liabilities and profits, they know how much they can afford to spend and invest. It gives them an insight into the financial health of the business. Thus, business owners must keep track of the financial parameters to know where they are headed and how to improve their situation.

2. Evaluate the Product Demand Before Seeking Funding

Whether you have an original business idea or have purchased a business for sale Gold Coast, you need to assess the demand for your products in the market. It requires research that covers the target audience, industry trends and competitors. The product should be able to solve a problem or heal a pain point of the consumers and must be steady enough to sail through turbulent waters.

Investors will show interest in the business only when they find it distinctive and valuable to the customers. It will not get the desired funding if it is an ordinary product with no special features. Also, it is wise to test the idea with a focus group of the target audience to showcase results to moneylenders and increase your idea’s credibility.

3. Sales Figures Do Not Demonstrate Profitability

Many new entrepreneurs consider sales to be their success parameter. However, sales do not define revenue because the business might spend much more on manufacturing, packaging, distributing and marketing the products. Thus, instead of highlighting the sales volumes, entrepreneurs must provide information about profit metrics.

These include net profit margin, operating costs, gross profit margin, profit per customer and financial projections. These figures are more vital than sales because they give an insight into the financial health of the business. Investors want to know all these metrics to understand the viability of the business idea.

4. Prepare for Negotiation When Asking for Funds

Many entrepreneurs participating in Shark Tank are not fully prepared for the negotiations. The first rule is to know the maximum equity share you are willing to offer and determine the minimum funding amount you need. You must be certain when you must walk away from the deal to avoid regretting it later.

Do not give in to unreasonable demands made by investors because you do not want to lose control of your business. Consider the offer carefully but do not take too long to make them change it. Prepare strong arguments to get concessions from the investors and avoid falling for a deal that looks good superficially but does not offer much in return. Practising different negotiation scenarios before going for the pitch can help increase the presenter’s confidence and conviction levels.

5. Financial Planning Is A Necessity for Every Business

It does not matter if you are contemplating buying a business for sale in Gold Coast or are toying with the idea of launching a new venture. You need to plan your finances and make them a part of the business plan to ensure the working capital is used efficiently to achieve the goals.

The investors need the financial plan to understand the utilisation of their funding and the progress of the business in the future. It is also vital for envisaging the financial hurdles through risk assessment and finding ways of steering clear of them. It is useful for boosting cash flow and reducing unnecessary expenses.

6. Gather Information About the Investors

When pitching a business idea, knowing the investor’s background is vital. It is better to choose a financier working in the same industry and with a track record of funding and mentoring similar small businesses in Queensland. It can help customise the pitch to match the requirements and tastes of the investors.

It is essential to know how a moneylender can prove helpful for the business by assisting the entrepreneur with distribution and marketing ideas. They can help find new opportunities and markets and connect you with industry people who can improve the supply chain. The presenter can also connect emotionally with the investor with the help of the information and get the best deal for their recently acquired businesses for sale in Gold Coast.

7. Set Realistic Financial Goals for Your Business

New entrepreneurs are optimistic and enthusiastic about making it big. However, it should not translate into unrealistic business goals or financial projections. Investors straightaway reject a proposition that appears impractical and unworkable. The financial goals should be SMART (specific, measurable, attainable, realistic and time-bound) like business goals.

The business owner should prepare quarterly and annual budgets to ensure business capital is not wasted. Also, they should be ready to make changes to the goals whenever required to accommodate unexpected losses and unprecedented profits. In addition, they must focus on building cash reserves to be prepared for the rainy day.

Wrapping Up

Budding entrepreneurs can learn a lot from the experiences of the individuals pitching on Shark Tank and the responses of the investors. Absorbing the underlying financial strategies and the techniques behind the funding decisions can help entrepreneurs manage their finances in a better way.