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Shark Tank

23 Killer Business Lessons from Shark Tank

By Brad Aronson   |   Posted in: Entrepreneurship, Featured
Shark Tank

The show Shark Tank, where entrepreneurs pitch investors for capital, has some great business lessons . . .

1) If you get what you ask for, take it. Mark Cuban offered one entrepreneur exactly what he requested. The entrepreneur then asked for more and lost the deal. No one likes to do business with someone who gets what he requests and then asks for more; it’s a sign of what’s to come in the relationship.

2) Networks matter. The Shark Tank investors bring huge value in their networks. Daymond John got the sticker guys distribution in Best Buy as well as retail distribution for Nubrella. Lori Greiner is able to help the businesses she invests in get on QVC. When you’re looking for investors understand their networks and more importantly if they’re willing to leverage them for you. Ask about this before you sign a deal. Sometimes a deal with less lucrative financial terms is better if it brings the right network to the table.

3) Do your homework.  When Mark Cuban negotiates and tells you a deal is final, he means it. I’ve seen enough episodes to know this, so I cringe when an entrepreneur tries to negotiate further and loses a deal entirely. You won’t have the benefit of seeing most people you’ll negotiate with on TV in advance, but you can still do plenty of due diligence — like researching their past deals and talking to their business partners.

The most successful entrepreneurs also know enough about the Sharks to customize their pitch. They tell each one why he or she should personally be interested in the business.

4) Get an advisory board. Getting a Shark to invest in your company is one way to get partners with experience and a network, but not everyone can be on Shark Tank. Creating a strong advisory board can also increase your opportunities; for a small amount of equity you can build a great board. I’ve found that retired executives with extensive networks are often eager to get back in the game and make tremendous advisory board members.

5) Know your absolute bottom going into a negotiation. One entrepreneur was offered a deal and needed to think about it. By the time she decided to move forward, the Sharks had talked among themselves and reduced their offer. If she knew her absolute bottom going into the show, she could have made a decision on the spot and had a better deal.

Too many entrepreneurs are unsure of what they’d accept and their hesitancy gets them worse deals. Also, if you don’t know the lowest offer you’d accept, you could commit to something you’d regret later. Of course, there may be exceptions if unexpected elements come into play, which sometimes happens on Shark Tank.

6) Solve your own problems. The most successful founders built companies to solve problems they faced. They’re building for a market they understand and are passionate about. A couple examples are Travis Perry who developed ChordBuddy to help his daughter learn to play the guitar and Eric Corti who invented the Wine Balloon to better preserve wine after he and his wife opened a bottle.

Of course, the problem you’re solving has to address a sizable market. No Sharks wanted to invest in Ledge Pillow because they didn’t think the market was big enough.

7) Investors buy into people as much as ideas. The Sharks get most excited about a passionate, likeable entrepreneur. Be honest. If that’s not you, and you need investors, consider finding a partner who fills this role.

8) Do a deal that works for everyone. The Sharks often say they won’t invest in something because they don’t have the right background or connections to help the business. If you’re looking for investors, try to find those that can help you by serving as more than just a bank. In any deal, whether it’s related to VC or not, make sure both sides provide value. You’re probably going to do more deals in the future, and a one sided deal won’t be good for your reputation.

9) Listen. The Shark Tank investors offer great advice when they turn people down. If you’re told “no” don’t be so displeased that you can’t listen to the rationale. And, if they don’t tell you why, ask so you can leverage that advice moving forward. This is a chance for insight from experts.

10) Don’t respond to people you’re pitching with disdain or sarcasm – even if they say something nasty. The people who do, tend not to get deals. How you act in a pitch will shape what potential partners think it would be like to work with you. In fact, maybe they’re pushing you just to see how you’ll react under pressure.

11) If you can’t sell, learn to. This lesson is for everyone. Even if you’re in a large company, you need to sell your ideas and yourself to get ahead. In the case of investors, Sharks are looking for people who can sell. And, business valuations are significantly higher when someone has revenue. Do whatever you can to get sales prior to approaching investors. Mark Cuban stresses that selling is one of the most important skills for entrepreneurs in his great book, How to Win at the Sport of Business.

12) Prepare. I’ve seen entrepreneurs on the show who don’t know their financials or seem to freeze up in the middle of their pitch. When you’re going to a meeting or pitch, practice enough that you can talk about your business even in stressful circumstances and please know your financials. The most successful people are usually over prepared. This is something Barbara Corcoran mentions in her excellent book, Shark Tales: How I turned $1,000 into a Billion Dollar Business.

13) Demonstrate your commitment. Investors want to see that you’ve taken a risk – investing your money and time — showing that you believe in your business. Don’t ask for their money if you haven’t invested yours.

14) Patents are extremely valuable. A worthwhile investment if you have something unique.

15) Have options. You can almost always tell when someone believes they have no other options. Those entrepreneurs get a worse deal than they’d otherwise receive. Whether you’re selling a stake in your company or buying a car, you need alternatives to get the best deal. One alternative is knowing at what point you’ll say “no.”

16) Ask, “Are there any other offers on the table?” Some people have gotten much better offers when they ask this rather than responding to the offer that was given. Like anything, the more competition you can create for your business, the better deal you’ll get.

17) Don’t quibble over small numbers. I’ve seen deals get lost because someone is dickering over 1%. Don’t do it.

18) Ask for something valuable . . . besides money. Steve Gadlin and Mark Cuban were negotiating an investment in Steve’s business, I Want to Draw a Cat for You. When the financial terms were on the table, Steve asked Mark if he’d draw and sign every 1000th cat drawing. Mark said “yes.” It was easy for Mark to say “yes,” and it will add value to Steve’s business. Look for opportunities where the other side can provide additional value without any out of pocket expense.

19) The right partner offers more than financial terms. There are some great businesses that are giving up huge chunks of equity for a seemingly small amount of money. Kevin O’Leary bought into Talbott Tea at what seemed like a great valuation for him, but within a short period of time he had the business packaged up and sold to Jamba Juice. When you do a deal with a Shark you’re giving up more than you’d offer someone else, because they can exponentially grow your business faster.

20) Don’t tell potential investors they’re wrong. When you tell Sharks they’re wrong – especially in front of other people (like the national TV audience of Shark Tank) they will naturally stop listening to you. No one wants to be told they’re wrong in front of other people. Instead, say, “I think that . . .” or “What do you think about looking at it like. . . .” How you defend your position makes a difference.

21) If someone asks you to sell him something, ask, “Why do you want it?” Daymond John challenged an entrepreneur to sell him a pen. The guy did a good job, but I think he could have done better. Instead of jumping right into selling the pen, he could have asked Daymond what he was looking for in a pen and customized the pitch.

22) Find investors who are passionate about your business. The Sharks gravitate not only to the businesses they like but the ones that they’re passionate about. Kevin O’Leary invested in the tea company (loves tea); Daymond John in the trash can cover company (he said he had just lost his own garbage can cover); and Robert Herjavec in the guitar learning company (he has a lifelong dream to learn guitar). Those entrepreneurs were solving problems that the VCs personally experienced. Do research to find partners passionate about what you do. You’ll have a higher likelihood of making a deal.

23) More Sharks are better than one. Every investor will bring a different network and expertise to the table. Jewelry company M3 Girl Designs, founded by Maddie Bradshaw when she was 10, was offered $300K from Lori Greiner and Mark Cuban. Maddie said she’d take the deal if they’d let Robert Herjavec in as well. She got the same financial deal with one additional investor. See if you can increase the parties who have a stake in your business.

Interested in more Shark advice? See 10 great tips from Mark Cuban.

If you liked this post, you’ll also like, 11 Important Lessons from Teenage Entrepreneurs as well as the story of Jack Andraka, who as a 15-year-old created a pancreatic cancer test that is 100 times more sensitive and 26,000 times less expensive than current tests.

What do you think? What have you learned from Shark Tank?

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  • http://www.bradaronson.com/ Brad Aronson

    Thanks!

  • David Block

    I would love to hear stories about entrepreneurs who have low sales, but are able to convince the Shark to make a call nonetheless.

  • http://www.handalglobal.com Handal Morofsky

    Great list, Brad!

  • Kyle F

    I love shark tank. I’ve been trying to get on this show for 3 years now. I sent e-mails to ABC tv and I applied on http://www.sharktankzone.com . Does anybody have any advice/tips on how to better position your business to get on this show.

    • Brad Aronson

      Hi Kyle, Here is the official Shark Tank info about applying to the show: http://abc.go.com/casting . Good luck. Brad

  • http://facebook.com/profile.php?id=100000827169439 Bryce Weaver

    This is a great venue and opportunity to lend legs to the patents I’m already in pursuit of. If it weren’t for the multitude of positive comments from friends and colleagues up to this point, I may never have gotten this far.
    My favorite and most common compliment is, “I’d buy that!”
    Now I look forward to hearing from people I don’t know.

  • http://PatentLawNY.com Michael Feigin, Esq., NY, NJ Patent Attorney

    Very nice list – I think you covered everything.

    • http://www.bradaronson.com/about/ Brad Aronson

      Thanks Michael.

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  • D S

    Hey! how do I get on the show?! I have a patent that’s going to make a killing! I’m tired of talking to marketing companies.

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  • http://www.sharktankreport.com Tim

    Great article. There are lots of things that can learned from this show. Here’s how to be a good contestant:

    http://sharktankreport.com/?p=102

    • http://www.bradaronson.com/about/ Brad Aronson

      Thanks for the feedback. I enjoyed your article.

  • colleen

    I enjoyed reading the 23 killer business points. After watching episode after episode and becoming familiar with each of the different Shark’s style and way of doing business, you have hit the nail on the head with a lot of things to look out for or take into account. The only point that I wouldnt agree with entirely is point 21. The sales pitch came across as very dry and lifeless (as did the sales guy). He didnt come across as very likeable. If he had asked “Why did you want it?” or “What are you looking for in a pen?” I daresay Daymond would have responded that it was up to the salesguy to convince him to buy the pen (not Daymond to say why he wants it) and that if Daymond told him what he was looking for in a pen – well thats just doing the salesmens job for him. “What are you looking for in a pen?” “Nothing” – A good salesman should be able to get round pretty much anything the customer throws at them, even disinterest. Just my humble opinion. Great job on the article though :)

    • colleen

      One point I didnt make clear with my post – I fully agree that you need to know the demographic and background of the people you are selling to as so to customise your salespitch. Given that Daymond ask the salesguy to sell him the pen right after he made the statement about being the best salesman in the world, it didnt seem like Daymond was particularly interested in the pen – he just wanted to see how good the guy’s selling skills were …. after all, if you are the best salesman in the world, you dont really need the customer to give you tips about how to sell something to them.

      • http://www.bradaronson.com/about/ Brad Aronson

        Hi, Colleen. Thanks for the feedback on the post. When I was in sales, I always found that I had the highest potential of closing a deal when I knew why someone wanted our product or service. This is also something I heard in many sales training classes. There could be many reasons why someone wants what you’re selling, and if you know the reason, you can better customize the pitch. For example, I could want a pen because of the prestige of having a fancy pen, to give as a gift, or because I want something that feels great in my hand and writes well. Since Daymond started his business by selling his products, he might expect the entrepreneur to ask some questions and listen to the customer’s needs before starting to sell (which is taught in sales classes). Or, as you mentioned, perhaps since Daymond was testing the entrepreneur, that might not have been important. Good insight. Thank you for posting it.

  • http://www.rhodan.com.au Daniel Watson

    This one article has captured many of the key elements required when growing your business is a priority but lack of capital is holding you back. Often small businesses with good ideas are reluctant to seek investors for the fear of loosing control, or being held accountable by others, but often better controls and accountability arer exactly what is needed before their business can grow.

    • http://www.bradaronson.com/about/ Brad Aronson

      That can certainly be true. It depends on the situation. Thanks for the comment.

  • http://www.PredictREISoftware.com Jerry Powers

    I love Shark Tank! It is entertaining and educational. It is teaching me how to think like an investor so that when I launch my own business I will minimize or eliminate any weaknesses and threats. Business valuation is of utmost importance.

    • http://www.bradaronson.com/about/ Brad Aronson

      I think it is great learning and inspiration. Thanks for the comment.

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  • http://gnattorneys.com Russ

    Nice work – I used to be ashamed to admit I watched that show – its great theatre. But there are definitely great business lessons to be learned.

    • http://www.bradaronson.com/about/ Brad Aronson

      There’s certainly TV to be ashamed of, but I don’t think Shark Tank is one. Thanks for the comment.

  • http://www.webbmfg.com/ Steve

    My father-in-law gave me these simple rules to follow when I first started out 40 years ago. Never put a price on another man’s goods. (meaning let’s see what he will ask for it before you toss out a price. Once you have an order, leave. don’t wait for them to change their mind. If you have a great deal, take it. don’t try to make it better.

    • http://www.bradaronson.com/about/ Brad Aronson

      Great advice. Thank you for the post.

  • http://facebook.com/profile.php?id=787923840 John Avondolio

    This is very helpful. I love the advice that “if you get what you ask for, take it.” I had a boss at an advertising agency who insisted that we leave the room immediately after getting an approval for a project. He would instruct us to say “thanks for your business, we’ll be getting back to you with a contract to sign.” and then get out of the building. I think it was a little extreme. Perhaps he had some issues with clients changing their minds? Nevertheless, it was always fun hustling a creative team out of the building following a sale.

    • http://www.bradaronson.com/about/ Brad Aronson

      Thanks for sharing that example.

  • http://bambusaskateboards.com john

    hey brad
    Awesome brother, i feel even more inspired after reading your article. I knew you were insightful but wow. Thanks and I’ll be picking your brain, my friend

    • http://www.bradaronson.com/about/ Brad Aronson

      Thanks John. I look forward to the launch of your clothing line.

  • http://facebook.com/profile.php?id=556773053 Katy Friedland

    This second post is even more insightful than the first. I especially like #7- Not everyone is a charmer and it is important to be honest about your own skills and the skills of your partners so that you can best utilize everyone’s assets. By assets, I mean social skills- not physical attributes ;)

    • http://twitter.com/bradaronson bradaronson

      Ha. Although sometimes in sales physical attributes are important. When I first started my agency, I got a booth at a trade show that was attended by mostly men. I can tell you that even with quality content it was impossible for me to compete with all the models working the booths around me.

  • Tippi

    Good insights–I particularly like #18. Being able to think outside of the box and develop creative solutions is SUCH a huge asset–in business as well as everyday life. Can’t wait to hear more of your ideas. Keep them coming!

    • http://twitter.com/bradaronson bradaronson

      When negotiating deals, people do tend to focus primarily on the financial terms. It’s great to spend time in advance thinking about all the non-financial “asks” you can make that are creative and high-value for you (low cost for the other side). Gives you a chance to get more from a negotiation.

      Thanks for the post.

  • joe

    This is a check list that can be very useful in many different situations. It’s written in clear terms and is short and to the point.

  • Susie Krupnick

    I love that show, but you took it to the next level! Really valuable insights. I do wonder how Maddie Bradshaw from M3 Girl Designs was able to sell that much jewelry between the ages of 10 and 15 ???? Unless I heard it wrong, her sales were over 1 Million on 10 dollar items and they were doing the manufacturing themselves??? Pretty impressive if true, which it might be, since she was able to rope in a third investor.

    • http://twitter.com/bradaronson bradaronson

      Maddie and M3 is an awesome inspiration. I use her as an example all the time when I’m with kids. They don’t have to wait until they’re “grown up” to get started. Thanks for the post.

    • http://twitter.com/bradaronson bradaronson

      Patents can also have defensive value. A few companies I’m involved with have had lawsuits from patent trolls (companies that buy old patents with the hope they can find another company to sue for violating the patent). This is certainly a disturbing trend. Having the patent gives you some protection.

      Thanks for the reply, Rich.

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