Article Side

Online Article Directory!

Hello Guest! Login or Register to submit articles!

Wealth and Cash Flow Lessons from Shark Tank

By Keith Wheelan Subscribe to RSS | August 4th 2012 | Views:

Will Your Investment Decisions Help You Sink or Swim? 

At the end of a busy week I look forward to winding down by watching…five human sharks attack unsuspecting start-up entrepreneurs.  Alright, that’s a bit overstated.  For those of you who haven’t yet seen it, “Shark Tank” is a reality show where early stage entrepreneurs seek funding from five successful and very wealthy business owners.

The business ideas are varied (everything from Talbott Teas to “Rent-a-Grandma”) and the pitches are often entertaining. But if you watch closely you’ll notice a common thread in how the sharks assess the feasibility – and value – of a business.  It involves the relationship between wealth and cash flow, and that same relationship applies to your personal investment decisions.

Each pitch starts with the entrepreneur’s proposal to the sharks, usually a request for an amount of money (say, $100,000) in exchange for an ownership stake in the business (20%, for example).  This in turn leads to the “information gathering” phase of the process, a 5-on-1 grilling by the sharks.

When evaluating an investment, think like a shark! 

Yes, ask the “wealth” question (Will the asset grow in value?)

but also ask the “sales” question (Will it generate cash flow?)

 What’s the first question they typically ask?  It’s “How much have you done in sales?”  There’s a good reason for this.  As experienced serial entrepreneurs, the sharks know that sales volume is an indicator of whether the business concept is viable (are enough people buying the product?)  But it also determines how quickly they can recoup their investment.  Higher annual sales means faster payback – followed by steady positive cash flow.  So the cash flow question comes first because it’s the shark’s most important consideration.

Separate but related to the first question is: What is the value of the business?  The answer to this is also important, but for a different reason.  A pitch from a recent episode illustrates the point.

 Sink under the weight of the asset or swim in the income stream?

The owner of a clothing business requested $500,000  from the sharks in exchange for a 15% ownership stake. What was unique about the clothing was its “technology enabled” pockets for cell phones, iPods and other electronic devices.  The garment design was protected by a patent.

Annual sales?  $5 million this year and an anticipated $12 million next year.   That got the sharks’ full and undivided attention.  That is, until the owner clarified that his offer was only for the asset value associated with the patent and not for the retail sales of the clothing.

After recovering from the blow, the sharks countered with offers that included part-ownership of what they called “the real business” – the retail sales.  They wanted a piece of the cash flow, not just the asset.  But the owner wouldn’t budge. So he walked away empty handed.  Game over.

The lesson?  When evaluating an investment, think like a shark!  Yes, ask the “wealth” question (Will the asset grow in value?) but also ask the “sales” question (Will it generate cash flow?)

Keith Wheelan - About Author:
Keith Whelan is Cash Flow Navigator’s founder, resident financial expert, and author of the “Wealth is Good, Cash Flow is Better” e-booklet. He is a graduate of Columbia University Business School, teaches at Rutgers University, and has over 30 years experience in the banking and financial services industry. Keith, his wife Cindy, and their two sons live in New Jersey.

Share on Facebook Tweet It Stumbleupon this post This post is delicious !

Article Source:

Related Investing Articles Subscribe to RSS

Same day loans no credit check - fight with the devils of financial crisis
Published by Sam Hopkins on December 3rd 2011 | Finance
Same day loans no credit check provide instant funds to an individual without looking into their pas...
Regain your financial standing through credit counseling Houston
Published by James on March 31st 2012 | Finance
There are lots of people who fall into a debt for different reasons. Usually after falling into a de...
Do you need assistance with financial debt that has been around for decades?
Published by Deby Suportie on February 16th 2012 | Finance
Debts can often be difficult to manage especially when it has been around for quite a while already....
Have a safe and secured financial life
Published by Pramod Kumar Singh on May 23rd 2012 | Finance
Know about the different financial investment options and invest in various financial products to ha...
Is financial planning the career for you?
Published by Advisor India on July 31st 2012 | Investing
Financial planner, personal financial consultant, financial advisor - the name may be many, but the ...
Right Process of financial Planning and need of getting a Financial Planner Sydney
Published by Avena Sowell on December 8th 2011 | Finance
Process of financial planning involves high level of knowledge and skills as financial markets keep ...
Major reforms in UK financial regulation: Draft Bill and White paper produced
Published by Becky on March 15th 2012 | Finance
The most significant modification in a decade to the UK’s financial regulatory architecture began ...
Loans for Unemployed: a financial contribution to jobless!
Published by Jim Kerry on June 5th 2012 | Finance
Cash loans for unemployed help the disappointed jobless people for pulling out of this financial cri...
Independent financial adviser – Propel your earnings
Published by John Kendal on March 31st 2012 | Finance
A financial adviser covers very important issues like wealth management and advises the clients in g...
Bradley Associates Welt Aktuelle News: Spanien sucht die nächste PM financial info vor
Published by John Bradley on November 30th 2011 | Investing
Spaniens chef-in-waiting internationale Druck widerstehen werden detaillierte wirtschaftliche pläne...
Could buying a motor from Used Car Dealers Blackpool make financial sense for you?
Published by Mary Porter on June 19th 2012 | Finance
Most drivers know that when buying a car, getting a brand new vehicle is often unnecessary and that ...
Bad Credit Secured Loan: Huge financial support in spite of bad credit
Published by Ian Foster on February 2nd 2012 | Finance
Bad credit secured loan has introduce by the economics establishment to continue the people whose cr...
Loans for UK People: an easy financial solution
Published by Simuels Jack on June 11th 2012 | Finance
Loans for UK people are very helpful in times of need for monetary assistance. According to one’s ...
Digital options growing fast as the foremost financial strategy
Published by Alvin Cook on April 12th 2012 | Investing
Digital options making it possible for investors to fulfill their requirements of right strategy...
Good financial planning can give you a good future
Published by Pramod Kumar Singh on May 23rd 2012 | Finance
Start planning your finances today to have a safe and secure present as well as a bright future that...
Another financial storm to hit the Britain
Published by Look Right on January 25th 2012 | Finance
Another recession is approaching the UK economy, as a newly constituted finance watchdog has reveale...
Great hope for the people with poor financial status
Published by Alice Johnsonn on January 3rd 2012 | Finance
Personal loans no credit check are the best way to access fast cash without undergoing any credit ch...
Short Term Loans: Fills the gap during financial crisis
Published by Annisa Nelson on June 5th 2012 | Finance
A short term loan manages your sudden expenses and pays out short term monetary urgencies....
Plan sensibly for your future with best financial planners
Published by Dkfinancialplanning on December 15th 2011 | Finance
Financial planning is about helping you achieve your short, medium and long term goals, through prop...
The one-stop shop for your financial health - Ameriprise financial advisors
Published by Advisor India on July 27th 2012 | Investing
Mumbai, India boasts of having the two largest Indian stock markets stationed in its heart. It is al...