I have a confession…I am an avid fan of the show Shark Tank. I love that it is the perfect mix of entertainment and education. As an entrepreneur, I can relate to the stories of passion and sacrifice. But, more valuable in my opinion are the business lessons I take away each week after watching the show.
The entertainment industry is a business and requires a level of business savvy to truly be successful. So I’ve decided to share some of the knowledge I’ve gained watching the show.
Are you seeking funding to record your song, go on tour or film your movie? Whether you go to a bank, an investor, or use crowd-sourced funding, there are several considerations you need to think about first.
- What’s in it for them? If someone decides to invest their hard-earned money into your endeavor they usually aren’t doing it just because they like you. Usually, they want something in return. A bank will want their money paid back with interest in a certain amount of time. An investor wants a return on their investment (usually owning a percentage of the company (equity) and in turn receiving a percentage of the profits.) Even the individuals who support your campaign on a crowd-sourced funding website want to receive some type of perk for their contribution to your idea. You need to be able to answer the question “What’s in it for them?” and be able to deliver.
- Know your numbers. I can’t begin to tell you how many entrepreneurs on the show have fumbled the ball on this one. As the business owner, you need to know and understand your business’ finances. While it is common practice to have a business manager and/or accountant, you need to know this information for yourself. (Even if it’s only to keep your accountant or business manager honest. I don’t know how many stories I’ve read about artists and actors losing millions because their accountant was embezzling money.) Here are the numbers you need to track, know and review on a regular basis:
a. Total Sales – How much money did you make total?
b. Unit Prices – What is the cost of individual supplies or services that you use to produce your product? (For example how much do you pay for an hour of studio time or a reel of film?)
c. Retail Prices – How much will a retail store charge for your CD or DVD? How much do you sell them for at shows or on your website?
d. Wholesale Prices-How much does a distributor pay for your product?
e. Cost to Produce – How much does it cost you to produce your film or record your album?
f. Expenses-What is the total amount of your business’ expenses?
g. Debts – Does your business have any debts? If so, how much?
A bank or investor may also ask about personal income/expenses. They are usually trying to determine if you are or will drain the business’ finances to cover living expenses.
- Proven systems/processes add value. Systems and processes aren’t just for fast food and manufacturing companies. Believe it or not, entertainers use them too although they may be less obvious. For example, a major recording artists’ rider. The rider tells the concert producer what the artist needs for every show from the food they eat to the instruments and backline equipment needed and how they should be set-up on the stage. For systems and processes to enhance and increase the value of your business they should:
a. Be repeatable. Duplicatable processes make the business scalable. (In other words, the business can grow with increases in demand rather than become overwhelmed.)
b. Be researched and tested more than once.
c. Produce the same or similar results every time.
You are less likely to get someone to invest in a business that’s being run haphazardly – it’s less likely they’ll get a return on their investment. What systems or processes can you create for your business to increase its value?
- Know exactly how much you need and specifically what you need it for. How will you use the money if you were to receive it? This seems to be another question that trips up quite a few entrepreneurs. After watching Shark Tank for a couple of years now, it appears that the investors are more likely to invest when the money is going directly toward something that will generate more revenues. For example, if your social media profiles are being blown up with requests for you to perform or screen your film overseas and you need additional financing to cover the cost of your tour (where of course you will be charging admission and selling merchandise). Really consider what you need to grow and do your homework to find out how much it will cost; you want your request to be as accurate as possible. Get quotes so you have documentation to back up your request.
- You are committed, passionate, and willing to work hard. In point #1 I said that investors won’t usually give you money just because they like you. That’s true; however, it helps when they do. I have seen several episodes when the sharks did not invest because they felt the entrepreneur would drain them resulting in a poor working relationship. Your presentation, written or verbal, should reflect your passion, commitment to the business, and willingness to work hard to be successful. When you can convince the investor of your work ethic and commitment, it reassures them that they will get a return on their investment. It all goes back to #1 – What’s in it for them?
Kim Fennell “supports the success” of entrepreneurs, small business owners and creative professionals as principal of Entertainment Business Support and founder of Biz Savvy Artist. Since 2003, she has provided administrative support, event support, and project management to clients in a variety of industries. Visit www.entertainmentbizsupport.com or e-mail kfennell@entertainmentbizsupport.com.