Business Valuation & Negotiation Lessons from Shark Tank Fiber Fix Elephant Chat Fishing Ammo TMR Merchant Processing Ten Thirty One Productions

Appearing first in the Shark Tank was FiberFix.  The entrepreneurs behind FiberFix are Spencer Quinn & Eric Child  from Utah.  FiberFix is an innovating single use tape that can be used to fix or patch holes or other damage in items like PVC pipes, broken handles, and many more.  The FiberFix tape has to moistened by full immersion in water, and then applied directly to the item in need of patching or repair.  Reaction from viewers on twitter were strongly tilted towards favorable for the product, as it demonstrates as easy to use with the powerfully attractive combination of being very handy around the house.  FiberFix demonstrated really well to the Sharks, who immediately saw the market potential for the business.  With that offers came to the table.  However, working capital became a big issue for Spencer Quinn and Eric Child.  Aside from additional financing for inventory production, it was clear that they wanted a lot of capital financing for infomercial production and airing.  This led to the duo losing an offer from Robert Herjavec, as Herjavec felt that getting wide brick and mortar retail distribution first was more important than tying up capital in producing and airing infomercials.  Mark Cuban alluded to the business valuation being wildly underestimated by Quinn & Child, but the discussion with the sharks about sales projections and EBITDA projections did not make the final edit of the segment, so we can’t really discern how or why there was disagreement on the valuation.  One takeaway as a Lesson Learned from this segment is that financing is readily available for inventory production IF there is demonstrated demand for the product.

Also Appearing on Shark Tank was Elephant Chat.  Elephant Chat is the creation of Amanda Adams and Jason Adams.  Elephant Chat is a stuffed elephant toy that is kept in a glass case.  When one party wants to open a dialogue for an uncomfortable conversation, they can remove the glass cover.  When the other party sees this, they know that a conversation will happen soon.  This is notice to prepare for the conversation by clearing the mind and being ready to open the dialogue in a receptive manner.  Will the Sharks believe in Elephant Chat?  By the way, the name Elephant Chat comes from the saying that there is an ‘Elephant in the Room.’  This saying is used to convey that an obvious topic of conversation is not being discussed.  The product was too expensive at the time of taping the episode for retail.  The sharks all got big laughs from the segment, and Elephant Chat caught a lot of grief from Shark Fans on Twitter, but there is a Major Lesson Learned from this Segment: Focus on the best market niche for your business, product or service.   This was advice from Mark Cuban right before he confirmed that the company was not a fit for his investment portfolio.  Cuban said to charge more the product and market it to therapists, and not direct to consumers.  A much smaller market than general retail, but perhaps, the only way to carve a niche for Elephant Chat.  This advice applies to every business. So, a big thank you to Mark Cuban for salvaging the segment for the viewers with a sage bit of business advice.

Getting an update segment on Shark Tank are Jeff Stafford and Dusty Holloway who initially appeared to pitch their fishing related product called ShellBobbers. The company is named Fishing Ammo. Jeff Stafford and Dusty Holloway got the inspiration to create Fishing Ammo and ShellBobbers while Duck Hunting. ShellBobbers are bobbers used at the end of fishing poles. Despite having small sales, their limited retail testing had shown that there was strong demand, which was also supported by interest from Ace Hardware in the product.Jeff Stafford and Dusty Holloway had interest from Lori Greiner and Mark Cuban for ShellBobbers. Greiner hesitated and Mark Cuban offered $80,000 for 33% equity. This was quickly accepted. Now we get to see just how much appearing on Shark Tank and working with Mark Cuban has helped the duo grow Fishing Ammo.

Los Angeles based Ten Thirty One Productions pitches it’s entertainment company that specializes in the Horror Genre.  The proprietor behind it is Melissa H. Carbone who is a former executive with Clear Channel Communications.  The company has been in business since 2009.  Sales for the company’s Halloween scare event that lasts 17 days were $1.8 MM with an EBITDA of $600,000.  Kevin O’Leary made a great point that a $600,000 EBITDA paired with a $20 MM valuation means that the EBITDA multiplier was WAY too high.  Lesson from this segment is Counteroffering math.  Daymond John offered a $5 MM Valuation ($2 MM for 40% equity).  Melissa Carbone countered at $2 MM for 20% which is $10 MM valuation.  This is not 20% more than Daymond John’s original offer, it was DOUBLE.  You can’t add and subtract percentages to compare offers, you have to use the raw numbers.  In this case, $10 MM is DOUBLE $5 MM.  So while Cuban gets ‘kudos’ for stealing the deal from Daymond John, he actually stole it by paying DOUBLE.  Not the quite the ‘steal’ that it was made out to be in segment edit.   Lesson Learned, when comparing offers and counteroffers, don’t compare percentages by adding or subtracting them.  Use the raw numbers.

Want to read recaps of previous Shark Tank episodes? Click here to see the entire collection episode recaps, all of them with business lessons you can take away from each pitch.

For More information on how Just Elementary, Inc, Business Brokers can help you with Valuation Matters & Negotiation Techniques for your business contact our Client Care Manager Sonia Chhabra at (888) 926-9193 or email cs@justelementary.com