6 “Shark Tank” Questions Every Business Owner Should Be Able To Answer
By Richard Weinberger, PhD, CPA, CEO of the Association of Accredited Small Business Consultants and author of “Propel Your Small Business to Success: Accelerated Actions to Maximize Profit“
If you had to stand before the shark investors in ABC’s “Shark Tank,” would you get stumped by their questions?
Small business owners need to have diverse knowledge in many different areas of their company, in addition to having the necessary proficient experience and technical skills required to perform the core functions of business. While you don’t have to be an expert in every aspect of business, you still need to know enough to review and analyze key areas of your company. This helps you identify both inefficiencies and opportunities for more profitability.
Here are six questions you should be able to answer about your own business:
Shark Question #1: Who’s your competition, and what makes you better?
To answer this question well, you need to do a critical self-evaluation of the business using a SWOT analysis. This enables the owner to readily name the strengths, weaknesses, opportunities, and threats (SWOT) that exist in the business. With this knowledge, small business owners can easily compare their businesses with the competition.
Shark Question #2: What were your total revenues for the last quarter and last 12 months, including profit margins?
To get these “numbers,” do a review of total revenue and expenses, review by product or service line, and a profit-margin analysis – all of which can all be obtained from your company’s income statement. By properly analyzing the data using dollar and percentage income statements, the owner can view the company’s financial “guts” – revenues and expenses – and spot anomalies that need immediate attention.
Shark Question #3: How much cash are you “burning through” monthly, and how will you use my investment?
Shark investors want to know how their money will be used, and how much cash is going to be “burned” each month before they can expect an ROI. Prepare a cash-flow budget to answer these questions. If you can tell a shark you not only know these answers, but also prepared a budget variance report so you could determine actual vs. predicted results, it shows you’re on top of the financial game.
Shark Question #4: How much equity and debt is there in your business?
Sharks need to know how much “skin in the game” you have in your business. In other words, how much of the business is financed with equity (owner’s money) or debt (borrowed money). If a business is not doing well and the owner stands to lose very little money, the owner can easily “walk away” from the business. Conduct a review and trend analysis of assets, liabilities, and relevant ratios, which will reveal dollar amounts and percentages for each category.
Shark Question #5: How do you market your product/service, and what changes do you foresee?
Marketing plans that worked during the early life cycle of your business might have to change during later stages based on a number of variables, such as the economy, your competition, and new products or services. Craft a solid business and strategic plan. This will enable you to operate day to day with a clear direction for the future. No shark wants to invest in a company that has no definite marketing plan–no marketing, no business!
Shark Question #6: How does your product get from origin to destination?
You may find many vendors for supplies, inventory, transportation, and outsourcing, but the key to an efficient distribution channel is to know the best sources for necessary products and services, and how to make the entire distribution channel most efficient in terms of processes, time, and cost. Perform a thorough review of your company’s supply chain management (SCM) system. This can improve operations, lower costs, and reduce wasted time and effort.
Want to know your small business IQ? Take a free quiz here.
Richard L. Weinberger, PhD, CPA, has over 30 years’ experience as a financial and management consultant for small businesses. An esteemed thought leader and speaker, he is CEO of the Association of Accredited Small Business Consultants. His new book, “Propel Your Small Business to Success: Accelerated Actions to Maximize Profit“, gives small business owners a step-by-step method for reviewing and analyzing every aspect of their company in order to increase profitability. Learn more at www.aampapproach.com.
This is an article contributed to Young Upstarts and published or republished here with permission. All rights of this work belong to the authors named in the article above.