I recently received a question from a Shark Tank fan Re: how to find potential private investors in her growing business.
Question from Shark Tank viewer……
I’m so glad I found this blog! Rather insightful reads, and I thank you for taking the time to write it. As a web only retailer, I’ve been considering seeking out a private investor, but don’t really know how to go about it. Your blog has given me insight as to how “sharks” think, which is great information.
I started my business eight years ago, and it’s growing quickly every year. This past year it went through the roof for me, so I know it’s time to expand. I’ve considered going on this show, but the thought does make me nervous. How does one find a private investor that is not quite so intimidating?
Keep writing this blog, I will follow it. I love your intelligent analysis of the show, and I’m watching all the episodes.
Insomniac Web Retailer
Answer from Tim S. McEneny……
I looked at your website and was impressed with your product offerings. I wouldn’t waste your time trying to get on Shark Tank. You would be perceived as someone who runs a “nice little business” that isn’t easily scalable. They would say things like “you’ll eventually have to compete with Amazon and Walmart”.
That said, seems like you’ve done a great job growing your business. I’m not an expert in online retailing, but I would offer you two thoughts. Most entrepreneurs under-price their products and services. You may have some opportunities to increase prices in certain categories without adversely effecting demand. Second, continually prune your product line to get rid of the dogs. Both of these will save you money and put more cash into your pocket.
As far as funding goes, first get a line of credit with a local bank or credit union. This will improve cash flow as you expand. Since you have an 8 year history, this should be do-able. They view this as temporary financing and will give you a line of X% of your Accounts Receivable or sales. You can then draw against the line on an as-needed basis.
As far as permanent financing, go to a bank (probably the same one) that can give you a loan that is SBA-backed. The bank makes the loan but the SBA guarantees it. This loan typically must be repaid in 5-7 years. They will want to put a lien on your assets to make sure they get repaid so don’t bite-off too much.
Good luck with your business. If you have any other questions, let me know.
PS There are Angel investors, but you’ll waste a lot of time trying to sell them on the idea of investing in your company.