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Shark Tank is a popular show that puts entrepreneurs in the unenviable position of going in front of five investors, fondly called “sharks,” to attempt to raise money to keep their companies alive. It is not easy for the entrepreneurs. The sharks ask a lot of probing questions to assess whether they can get a good return on their investment if they give the entrepreneur the funds he or she is seeking. If you listen carefully to the sharks’ questions, you can learn a lot about how company value is determined … the value of all companies, not just start-ups.

Recent episodes uncovered some common mistakes that many business owners make related to product positioning, pricing, and valuing their companies. Take these steps to avoid their pitfalls:

Value marketing and use it from the start.

Inventing a new product that fills a known market or customer need is most likely an easy win. Customers are just waiting to get their hands on it. But inventing a new product for a relatively unknown market or customer is much more challenging. Owners often overlook the time and expense needed to educate the marketplace to generate awareness and drive demand for their product. You may have the best product in terms of quality and functionality, but if customers don’t know they need it, the sales won’t materialize.

Bring in the sales and then perfect the product.

It is tempting for owners to want to perfect their product BEFORE they take it to market. Many businesses get stuck at the product development stage and run out of money. Owners have to remember that cash is the lifeblood of the business and without sales, there will be no cash. Product development should be iterative. You have to ship a “version one” at some point, or there won’t be a version two. Version one needs to be good quality, but it doesn’t have to encompass every bell and whistle, or there will be no room for shipping a “new and improved” product at a future date.

Actual cash flow trumps emotional value.

Owners tend to place more value on their business than buyers or investors will. After all, they have spent most of their time, money, and effort on starting and growing their “baby.” How could others NOT value what they have built? Shark Tank reminds us that, regardless of the investment made to get a business off the ground, there must be profit and positive cash flow in order for buyers or investors to get a return on their investment. Financial projections are nice, but having signed contracts and orders in hand go a long way toward legitimizing the business and reducing the risk. Tangible results are what owners need to demonstrate value.

The Tank provides lessons not only for start-up entrepreneurs but for seasoned business owners as well who need to be reminded what drives real company value! After all, someday all owners will have to pass the torch to others, either internally or externally, or face liquidation to fund the rest of their lives. To ensure continuity and receive what they deserve for their companies, they will have to prove the business value to their successors.