Business Valuation & Negotiation Lessons from Shark Tank KaZAM Balance Bike Babys The Spatty Daddy BadAss Burgers Track Days Motorcycle Movie Pink Shutter PhotoBooths

Appearing in the Shark Tank will be Mary Beth Lugo pitching her product line of training bicycles called KaZAM training bikes.  KaZAM training bikes are designed for children between the ages of 3 and 6.  What is unique about KaZAM training bikes is that they do not have any pedals.  Yes, you read that correctly, KaZAM training bikes do NOT have any pedals.  But wait, it gets better, there are NO training wheels either on KaZAM training bikes.  So how are children supposed to learn how to ride a bicycle using KaZAM training bikes?  Watch the video to see example of children riding KaZAM training bikes.  Here you can see that there are no training wheels on these bicycles and there are no pedals on the bicycles as well.

Mary Beth Lugo demonstrated solid revenues for KaZAM training bikes.  The initial issue that popped up were the fact that the gross margins for a physical product maker weren’t high enough to not require significant capital to finance growth.  The more capital it takes to finance growth, the harder it is for the business to return the investor’s invested capital.  Also, Barbara Corcoran questioned whether Mary Beth Lugo of KaZAM training bikes had the emotional drive to push through all of the obstacles that arise when growing a business.  Mark Cuban issued  a challenge to Mary Beth Lugo, which was to convince Barbara Corcoran to join his offer.  Barbara Corcoran’s skepticism was answered by Mary Beth Lugo and she got Barbara to join Mark Cuban’s offer.  One important note is that Mary Beth Lugo did not counter offer Cuban and Corcoran forcefully, but they took her seriously because she was well prepared and well versed in her business valuation.  So we’ll take that as the lesson from the segment.  Lesson Learned if your Valuation Numbers are justified, you can often let them speak for themselves and forgo having to posture to get a fair deal.

Getting an update segment on Shark Tank will be Cheryl Rigdon, the founder of the Spatty and Spatty Daddy.  You may recall that she brought the Spatty and Spatty Daddy to the set of Shark Tank when the Spatty and the Spatty Daddy were just prototypes that weren’t in full production for sale.  As such, Cheryl Rigdon did not receive a deal for the Spatty and the Spatty Daddy from the Sharks.   Now that Cheryl Rigdon has managed to get Spatty and the Spatty Daddy into full production, expect to hear some exciting sales numbers for the business.  Fun fact about the Spatty and Spatty Daddy is that Cheryl Rigdon is from the Palmetto State, South Carolina.  It’s great to hear that Daymond John has been an important cog to helping Cheryl Rigdon grow Spatty Daddy by helping open doors to other companies.

Los Angeles based Baby’s Badass Burgers appeared in the Shark pitched by Erica Cohen & Lori Barbera.  Baby’s Badass Burgers is a food truck business that has a unique marketing pitch.  Erica Cohen & Lori Barbera have a simple and beautiful business model by offering a simple burger menu with attractive employees called burger babes in the catering trucks.  Baby’s Badass Burgers also offers to cater events.  Will the numbers, the business model and most importantly will the drive and determination of Erica Cohen & Lori Barbera for Baby’s Badass Burgers entice the Sharks to make an offer?  Also Erica Cohen & Lori Barbera are looking for franchisees across the United States for Baby’s Badass Burgers.  What we don’t know is if the push to franchise Baby’s Badass Burgers was a part of the pitch on Shark Tank, a result of the show or totally unrelated to the appearance.  Either way, for folks in the Los Angeles areas looking for eye candy with their burger, they are in luck, they can follow Baby’s Badass Burgers on twitter (@BabysBBs).  Well as the show unfolded it certainly did not seem like franchising was high on the radar for Erica Cohen & Lori Barbera in regards to expanding Baby’s Badass Burgers.  Well, that is no longer the case, as Baby’s Badass Burgers is aggressively looking to expand the business via franchising.  The Sharks did not want to invest in a brick and mortar version of Baby’s Badass Burgers, so Erica Cohen & Lori Barbera walked away without a deal.  No worries, Erica Cohen & Lori Barbera seem to be doing just fine with Baby’s Badass Burgers now that they are franchising.  Lesson Learned from this segment is that investors don’t like investing in unproven concepts. The sharks stated they would have been interested in investing in Baby’s Badass Burgers had it been a plan to grow by adding the proven concept of food trucks versus the brick and mortar restaurant.   Since Baby’s Badass Burgers is now franchising, it looks like Erica Cohen & Lori Barbera are heading in the direction of proven growth!

Tom Kanemoto & Lance Yabut are Los Angeles based entrepreneurs behind Pink Shutter Photobooths.  The duo appear on Shark Tank to pitch Pink Shutter Photobooths for an investment in their business.  The duo have Pink Shutter Photobooths operating in quite a few locations, including Las Vegas, San Francisco, Sacramento, San Diego and the majority of Southern California.  Beginning on May 9, 2013, the Dallas Forth Worth market will also be served by Pink Shutter Photobooths.  What is Pink Shutter Photobooths?  Well they are fun Photobooths that can be used at events like Weddings, Corporate Parties, Birthday Parties and any other celebrations.  Pink Shutter Photobooths offers a few package options to suit a customers needs.  Will the Sharks click into Pink Shutter Photobooths and make a deal?  Certainly the high valuation of $3,000,000 ($300,000 for 10%) was a turn off for the sharks.  However, Tom Kanemoto & Lance Yabut were realistic about their valuation, so they were open to wheeling and dealing for Pink Shutter Photobooths.  As such they entertained a salaried deal for 33% equity from Barbara Corcoran that allowed her to recoup her money as Tom Kanemoto & Lance Yabut took salaries.  The additional equity got Mark Cuban interested, and as such he came back in with the same offer, but without the salary.   Tom Kanemoto & Lance Yabut were faced with a dilemma, which deal to take.  They had a quick conference, and came back with a joint offer including Barbara Corcoran and Mark Cuban but for less equity (only 25%) and no salary.  The reduced equity chased away Mark Cuban and they ended taking Barbara Corcoran’s original offer.  Lesson Learned a bird in the hand is worth two in bush.  Or put this way, be careful to go too far past what you will be happy with, lest you end up settling for less than that by extending the time for renegotiations.

Brian Pitt, James LaVitola & Cliff Dorman are the trio behind Track Days, a motorcycle road racing movie.  Brian Pitt, James LaVitola & Cliff Dorman will appear on Shark Tank to secure some funding for their motorcycle road racing movie called Track Days.  Since Track Days is a movie about motorcycle road racing, here’s the preview trailer on YouTube.

While there have not been any big budget blockbuster films about motorcycle racing, if you are interested, you can find the Track Days motorcycle racing movie project on Kickstarter.  While Robert Herjavec is a noted car racer, let’s see what  he’ll have to say about motorcycle racing and most importantly, what he has to say about financing the production of a feature length film such as Track Days.  Deal or no deal, Track Days, a motorcycle racing movie is going to get some major exposure on Shark Tank, which should be a big benefit for Brian Pitt, James LaVitola & Cliff Dorman.  Track Days wasn’t well developed at the time of the pitch.  There was a story, but not a script.  Track Days did not get a deal from the Sharks.  Financing films is a risky business, but there is money to be made.  But, the project was just too early at the time of the pitch for any of the Sharks to be involved.  Lesson Learned, businesses in very early stages rarely receive investments, it’s best to pitch investors after a business concept has been proven

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.

Curious how much your business is worth, Just Elementary, Inc, Business Brokers can help you with Valuation Matters. We can also help you with Negotiation Techniques for your business when dealing with investors. Contact our Client Care Manager Sonia Chhabra at (888) 926-9193 or email cs@justelementary.com