Getting Dropped in the TankSubscribe
I'm a big fan of the ABC show "Shark Tank". I love the tough negotiating, the Sharks' banter (especially Kevin's), and I think that some of the products are actually very cool. I was catching up on this week's episode yesterday and was captivated by the negotiating going on between the Sharks and entrepreneurs Rick and Melissa Hinnant. The Hinnant's had started a successful lace sock business that had done $800,000 worth of sales in 2012 and $1,250,000 in sales in the past year. The Hinnant's had huge profit margins and made more than $300,000 in profit on the $1,250,000 in sales. They also had not spent a dime on advertising, all of their marketing was through word of mouth and social media.
They came in asking for $175,000 for a 10% equity stake in their sock business. Robert Herjavec (the worst Shark by far) offered them exactly what they asked for and forced the Hinnant's to make a decision right away. He argued that it wasn't fair to him for them to shop around while he offered them exactly the deal they were seeking. It really bothers me when the Sharks use this as a negotiating tactic. To me the offer is just the start and if someone meets your ask that means the market environment has changed and it's smart to keep shopping around to see the best offer the market will bear. In some cases the Sharks retract their offer, and the entrepreneur gets a worse deal. The Hinnant's however held firm and refused to accept Robert's offer and ended up deciding between offers from Mark Cuban and Barbara Corcoran. Surprisingly they shunned Mark's offer and decided to go into business with Barbara.
I thought that the Hinnant's negotiated brilliantly: they had a plan going into the Tank and stuck to it even when faced with a compelling offer. Future entrepreneurs on the show could stand to learn from them. Being on Shark Tank provides tremendous marketing and exposure. Simply appearing on the show is enough to jumpstart sales. In light of the free advertising the entrepreneurs receive it isn't the worst thing to not get a deal, so why not hold out for a better offer from another investor even if you get offered your ask? I know that if I went on the show that's how I'd play it. What do you guys think?