Value of Negotiation Leverage in Negotiating a Deal on Shark Tank

First into the Shark Tank were Keeley Tillotson & Erica Welsh from Oregon of Wild Squirrel.  Keeley & Erica were asking for $50,000 in exchange for 10% equity in their company.  You can find Wild Squirrel on Amazon.com.  This translates to an Asking Business Valuation of $500,000.  Wild Squirrel is a company that manufactures special Almond and Peanut butters.  At the time of taping, they were offered in five varieties which you can see on their website.  They started the company out of their college apartment.  As they are college students, they are each involved in the business part time.  Their part time involvement was an issue for Sharks, as Mark Cuban, Robert Herjavec, Daymond John and Kevin O’Leary were all OUT on Wild Squirrel.  That left Barbara Corcoran as the final Shark, and she made an offer for Wild Squirrel.  Barbara Corcoran’s offer was for  $50,000 for 40% Equity which translates to a Counter Offered Business Valuation of $125,000, which is 25% of what the Oregon duo were asking for for Wild Squirrel.   Keeley & Erica were forced to take the offer, as their counter offer of $50,000 for 35% equity was swiftly rejected by Barbara Corcoran.  They really had little leverage to counter offer Corcoran as they had no other bidders competing with Barbara Corcoran for Wild Squirrel.  Give Keeley & Erica credit for attempting to counter offer for better terms, as “You have to ask, to have a chance to receive”

Lesson Learned Here, when you don’t have Negotiation Leverage, carefully counter offer to leave the door open to accept the previous offer from the other party to ensure making a deal.

Second into the Shark Tank was Cab 20, a music band from El Segundo California.  They came into the Shark Tank asking for $200,000 in exchange for 20% equity, which translates to a $1,000,000 Business Valuation.

The Sharks loved the music, so much so, that Kevin O’Leary and Robert Herjavec both made offers on the business.  Though, they both made it clear that they were ‘taking a flier’ on the business, as they felt that musical acts are incredibly hit and miss.  To realize any return on their money, the Sharks would need Cab 20 to become a MAJOR hit.  In the end, Cab 20 counter offered and neither Robert Herjavec & Kevin O’Leary were interested in the counter offer.  Though, at the end of the day, we don’t think either Shark would have finalized a deal after Due Diligence.  Especially Kevin O’Leary who is All About the numbers.  Even though Robert Herjavec has invested in ChordBuddy/, another musically related product, we think that the odds are that he also would have ultimately passed on finalizing a deal during Due Diligence like he did with You Smell Soap.

Lesson Learned Here, is if the investors are just taking a flier on your business, then quickly move to finalize the deal otherwise you might end up wasting a lot of time with a ‘pending deal’ that will materialize.

Third into the Shark Tank werw Adam DiSilvestro & Frank Scozzafava of Mix Bikini, which has it’s product launch May 12, 2012, the day after the original airing of the episode.

Adam DiSilvestro & Frank Scozzafava were asking for $50,000 in exchange for 5% equity in the business, which he later reduced to $50,000 for 10% equity.  Now this sounds like 5%, and not a lot, but the kicker here is that he REDUCED his Valuation in HALF.  At 5% equity, the Valuation is $1,000,000, and at 10% equity it is $500,000.  As you can see, clearly HALF of his original asking price.  Since Adam DiSilvestro & Frank Scozzafava had not established any real sales history, all of the Sharks were unhappy with the Valuation.  Also, Frank Scozzafava was either nervous, unprepared or both, which also discouraged the Sharks’ interest in investing in the business.  A lot Shark Tank fans were blasting Frank Scozzafava on Twitter as Rude, Unprepared, unprofessional etc., and saying that they would be ALL out on a deal for Mix Bikini.  However, Barbara Corcoran liked the product and respect the fellow New Yorkers Chutzpah.  A little bit of Chutzpah goes a long way, especially in New York and in business, so Barbara Corcoran clearly felt like she had a person to invest in that she could reach.  With that of course, Barbara Corcoran made an offer for $50,000 for 25% equity which translates to a $200,000 Business Valuation.  Given that the business model for Mix Bikini was up in the air, and there weren’t sales, Adam DiSilvestro & Frank Scozzafava had no leverage to bargain and counter offer, so they wisely accepted Barbara Corcoran’s offer.  Unlike with Keeley Tillotson & Erica Welsh of Wild Squirrel who at least tried to counter offer, Adam DiSilvestro & Frank Scozzafava quickly accepted Barbara Corcoran’s offer.  A wise move, since they were unlikely to get any more.

Lesson Learned Here, When you don’t have Negotiation Leverage and You need the Guidance, Take the Best Offer that you can get.

Last up into the Shark Tank was Billy Blanks Jr. of Dance With Me asking for $100,000 in exchange for 20% equity in the business ($500,000 Valuation).  You can find Billy Blanks Jr’s Dance With Me on Amazon.  Dance With Me is a fitness DVD company that centers around fun dance videos.  The key to the business is that there is a big branding play with the connection to the Tae Bo fitness program of Billy Blanks Jr’s father.  Protecting the branding is why Billy Blanks Jr’s denied Daymond John’s offer of $100,000 for 50% equity.  Daymond John wanted to sell Dance With Me through Daymond John’s connection with Zumba.  Billy Blanks Jr. felt that this potential connection with Zumba would dilute his brand so he rejected the offer from Daymond John.  We’re sure that some deals are resuscitated after the entrepreneur leaves the set, but this was the first that saw it happen as Daymond John chased Billy Blanks Jr’s and Sharon Catherine to convince them that getting distribution through Zumba would be a Good thing for Dance With Me.  Billy Blanks Jr’s and Sharon Catherine accepted Daymond John’s offer of $100,000 for 50% equity in Dance With Me.

Lesson Learned Here is that if you get an offer for Mass Distribution of your product Take It!

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