Leverage is Key to Winning Negotiations Shark Tank

Having the leverage in a business negotiation is fleeting, and needs to be leveraged before it is lost.  That was a key lesson in this episode.

First up in the show was Ivory Tennelle from Irvine, California.  Ivory Tennelle is the creator of the the Swilt.   The Swilt is a combination Hoodie Sweatshirt with a fold up blanket portion.  When the blanket is folded up, it looks like a baggy sweatshirt.  With the blanket unfolded, Mark Cuban pointed out that it resembled a monk’s robe.  Tennelle had only sold a 100 units as of the taping, which left the sharks searching for another reason to believe in the product.  Unfortunately, none of the Sharks believed that the product was viable, so they were all rather quickly out.  Lori Greiner, of QVC fame, compared the product to the Snuggie, which she claimed  has it’s best days in the rearview mirror.  Here’s hoping the publicity from being on a episode help’s Tennelle out.  According to Swilt’s twitter feed, there were orders received after the show aired.

Second up on the show was Shelly Ehler of the Show No.  Show No is a towel with a slit in that performs like a poncho.  The Show No towels are handy for use in water situations, like the beach, pool parties, water parks, etc. where kids need to dry themselves and easily be able to change without somebody having to help hold the towel.  A product that makes life easier will get attention from the Sharks, and this is the case with Shelly Ehler’s Show No towel.  Shelly asks for $50,000 for 25% ($200,000 Valuation) for Show No Towels.  Shelly Ehler has established sales with water parks local to Southern California, which helps the sharks believe that there is a market for the Show No towels.  Daymond John comes in with the first offer for $50,000 for 50% ($100,000 Valuation).  Lori Greiner quickly follows with a competing offer that she sells by pitching her own life story prior to naming her offer of $50,000 for 25% ($200,000 Valuation).  Lori Greiner also claims to write a check on the spot that Shelly Ehler can have right then and there.  One bone we have to pick with this is that the Lori Greiner’s check has to come with some due diligence to make sure that Shelly Ehler‘s Show No towels business is actually as claimed by Ehler.  Mark Cuban joins the fray and offers $75,000 for 25% ($300,000 Valuation).  Mark Cuban’s $300,000 valuation is more than Shelly Ehler came in asking for for Show No towels.  How did this happen?  Multiple bidders always create leverage for the seller.   Daymond John countered his own offer, raising it to $75,000 for 20% ($375,000 valuation).  Lori Greiner counters her own offer at $75,000 for 25% ($300,000 Valuation).  Shelly Ehler was fortunate that when she left the room to consult her husband the sharks didn’t conspire to combine forces or lower their offers for Show No Towels.  It was a risky move to leave the room that other business presenters have been burned on.  Fortunately for Shelly Ehler’s sake, the sharks took a liking to her, and that helped them not try to squeeze her with lower offers unlike what happened on the previous segment.   Ehler came back in the room and chose to take Lori Greiner’s offer for her Show No towels.  Ehler could have tried to leverage the sharks against each other, but chose not push her luck.  One thing we must point out, it is highly unlikely that the check Grenier gave to Ehler was a check she deposit that same day after leaving the set.  Obviously, Greiner would want to draft an actual contract specifying the terms of the contract.  So Greiner basically bought herself some time to do due diligence to make sure the investment was going to make sense for her.

Third up in the Shark Tank was Kelly Chaney of Puppy Cake.  She was asking for $50,000 for 25% equity stake ($200,000 Valuation).  You can find Puppy Cake in Retail Stores, on the Puppy Cake Website and on Amazon.  Puppy Cake is a specially formulated cake mix for canines.  At the time of taping Kelly Chaney had been selling Puppy Cake for four years, and accumulated about $80,000 in sales.  This averages out to about $20,000 per year.  Mark Cuban hones in on this question, and ask Kelly Chaney why she hasn’t sold more of Puppy Cake.  Chaney says that she is not much a salesperson, and with that the sharks confirm their belief that Chaney doesn’t have the same drive that Shelly Ehler showed them.  That is a key a factor for the sharks, they are investing not only in a business concept, but also into the business person.  The Sharks need the product to viable, and they need to the business person be a ‘run through walls, break through all barriers’ go getters.  In the past we’ve seen the sharks invest in people who they believed to be 100% fully committed to their business.  This was a case of two strikes against Kelly Chaney and Puppy Cake.  Strike one, they didn’t love the product, and strike two, they did not feel that Chaney was going to be the go getter that would take care of the investment they made into the company. Fortunately, in a follow up interview with Kelly Chaney you can read that Kelly Chaney struck a distribution deal with Uncle Jimmy’s Brand Products for Puppy Cake shortly after taping the segment.  And that she’s been growing Puppy Cake sales by leaps and bounds since then taping by being a quick study and developing her sales skills.  It’s great to see someone truly grow from the experience and develop that Go Getter mentality.

To order Puppy Cake for your pet, you can find it in Retail Stores, the Puppy Cake Website and on Amazon

Last up in the Shark Tank was Eric Corti of Wine Balloon, which has now been renamed Air Cork and can be found on Amazon.com    Eric Corti’s (Air Cork) Wine Balloon is a clever product that reduces air contact with an opened bottle of wine, helping preserve a wine bottle for future use.  Eric Corti asked for $40,000 for 30% equity ($133,333.33 Valuation).  The first offer for (Air Cork) Wine Balloon came from Kevin O’Leary, which was at the terms for Eric Corti was asking for, except it involved a commitment to license the product to existing companies, as opposed to manufacturing it and selling it themselves.  Lori Greiner jumps in to make an all cash offer to the buy 100% of (Air Cork) Wine Balloon from Eric Corti for $500,000.  Mark Cuban jumps with Grenier and combine to make a $600,000 offer to buy all of (Air Cork) Wine Balloon from Eric Corti.  Cuban though makes it a “Take it now, or the offer is off the table” offer.  After Corti attempts to get Cuban and Grenier to offer a royalty, Cuban claims to be out.  Since Corti prefers to be bought out, he ignores Kevin O’Leary’s offer, which weakens his negotiating position, as he has made it clear he is only interested in one offer.  This is a mistake that ends up costing Eric Corti $200,000 for (Air Cork) Wine Balloon, as Cuban and Greiner cleverly reduce their offer by $200,000 as soon as they understand that they have no real competition for (Air Cork) Wine Balloon.  Lesson Learned: Always Keep Multiple Bidders in contention until a final deal is made, even if you prefer one of the offers over the others.   Also, you never know, the offer you prefer may not work out, so make sure you keep all of your options open.

Side Note: according to the Wine Balloon Blog, Eric Corti is still in control of (Air Cork) Wine Balloon.  Seems like a deal wasn’t finalized, which likely happens often, since there is due diligence to be done by both sides before a contract would be finalized.

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