SHARK TANK’S MR. WONDERFUL (KEVIN O’LEARY) | VLOG 220
Aaron sits down with Kevin O’Leary for a Q&A and more. You’ll be surprised at Kevin’s reaction to Tiege Hanley! Be sure to also check out Kevin’s "Ask Mr. Wonderful" channel and his interview of Alpha M here: bit.ly/2O9fGRg
Q1 What is his single best piece of advice for an entrepreneur who's starting a business?
A1 Kevin says that just because you love the idea doesn't mean that the market wants it. Further, hundreds of thousands of people need to endorse the product. The only way to prove yourself right-or-wrong is to sell some of it, even if it's a prototype. Get feedback about what they DON’T like which is far more valuable than feedback about what they DO like. From there, improve the product incrementally.
Q2 How can entrepreneurs fund their ideas if they don't have deep pockets?
A2 Companies starting with a lot of cash because have been given capital or were successful raising capital are often unproductive with their use of it. They feel invincible because they have cash to burn, and they basically piss away money. Kevin finds that companies are more productive when they're starved for cash. They learn through mistakes and are inspired to find innovative approaches.
Q3 What has been your favorite company on Shark Tank?
A3 Kevin discusses Benjilock which is a padlock that uses a fingerprint and also won a CES Innovation Award. The guy was down-and-out when he came up with the fingerprint lock idea at his gym. Kevin also mentions the episode where a mother and father died leaving a 23 year old as the family matriarch. She and the other two siblings presented a cutting board that was invented by their dad. It's 'on fire' now with a deal in a major retail.
Q4 When do entrepreneurs know their business venture is not working? What are warning signs?
A4 Kevin says that time is the indicator. If you're unprofitable after 3-years, it's time to stop because you could be doing something else that could work. Life has limited productive years, so time is the most valuable asset.
KEVIN'S TAKE ON TIEGE
Kevin is very inquisitive about Tiege Hanley’s sales because the skin care market is the "most competitive space on Earth". When he views the sales, he is stunned. He comments that Tiege Hanley is a "real business" and wonders how they've been able to get “share from the giants”.
Aaron replies that the business is direct-to-consumer, and the audience has been with them all the way. To address the issue of churn, their focus has shifted to retention and to incrementally adding the ability to customize. Kevin says typically the cause of attrition for subscription businesses is selling too much product. He advises determining usage, possibly with AI, and adjusting accordingly. He also noted that Tiege Hanley needs to provide the option to swap-out products and tailor the box.
Aaron relays venture capital companies (VC) are approaching them. Kevin interjects that they will have to sell at least 33% to the VC which reduces each of the owner's percentage. He also adds that venture capital is great if you need it, which Tiege Hanley doesn't.
KELLEY’S QUESTION | REINVESTING CASH FLOW
Tiege Hanley's CEO, Kelley, asks Kevin about reinvesting cash flow before taking it out. Kevin says return OF capital is more important than return ON capital. He continues that capital should be returned in 5 - 7 years. He suggests cutting the growth in half and then de-risking their portfolios by paying themselves; otherwise, the cash drain will be perpetual, and the return never obtained.
Kelley asks if he could do both, and Kevin responds yes but if capital is tied-up in a liquid asset, 11% per year minimum needs to be made. Keep in mind that 6% - 7% can be made in the market, so significantly more needs to be made if capital is tied-up. This is a portfolio approach: how much capital, how long is the capital tied-up, and when is the capital returned. Investing in deals that never return cash will starve you to death.
Tiege Hanley needs to balance growth with profitability. For instance, if Kevin was a ⅓ partner, he advocates ⅓ of the capital going to the partners and ⅔ sustaining the business. He has seen bad "poo poo" happen, which you have no idea why or when. Bottom line, de-risk yourself by taking out a portion once the business is profitable on a cash flow basis.
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14 окт 2024
