Have you ever wondered if there was recipe for success for Shark Tank contestants? If so, Digital Exits, an Internet brokerage firm, produced a study which analyzed every single business pitch from Shark Tank seasons 1-5 was to find out who was getting a deal and why. From the average number of Shark offers to the top 10 business that attract Sharks and the sweet spot for investments, the study proposes “the perfect shark bait.”
[Related: 10 Yr. Old Gets $60,000 Investment on Shark Tank for BeeSweet Lemonade]
According to Digital Exits, to have the greatest chance at securing a deal with one of the sharks, a contestant must have a product based business in the food and beverage, household and kitchen, or sports and fitness category. And, the business should have $450,000 or more in gross sales. And when it comes to making the offer, you must remember that the sharks are hungry for equity, so they’re going to be very aggressive. If the business criteria noted above were met, an offer of $185,000 (or less) for 25% (or more) in equity would be very hard for them to turn down. With this in mind, Digital Experts compiled the following rules of thumb for contestants entering the tank:
- When it comes to getting an offer, product-based businesses are the more successful.
- Sharks prefer products in the food and beverage, household and kitchen, or sports and fitness categories.
- The entrepreneur MUST “know the numbers†such as sales, profit, and margins.
- Have a realistic valuation.
- Have solid sales numbers.
- The business must be highly scalable and have high profit margins.
- The business should be fairly established (rather than brand new or just at the idea phase).
- The sharks are likely going to want 20% — 25% or more in equity.
- The sharks have a sweet spot for anything that is proprietary and has the option to be licensed.
If the entrepreneur presents several of these qualities effectively, it’s likely they will leave the Shark Tank with a big catch. Check out the infographic below.