Shark Tank: But you have to decide right now

February 6, 2019

On every episode of Shark Tank, there’s a moment that plays out like this:

Shark: Alright, I’ll do $100,000 for 12% (equity) of the company.

Entrepreneur: (visibly nervous) Oh. Alright. Would you be willing to do $100,000 at 8%?

Shark: (thinks about it for a second) I’ll do $100,000 at 10%. But you need to make a decision. Right. Now.

Have you ever wondered why the Sharks do this? Why is there this sudden sense of urgency and a dramatic time window tied to the deal?

I want to break this situation down, because in this negotiation strategy is an approach that your Accounts Receivable department can start using to speed up cash flow.

Let’s dive into the Shark Tank.

Shark wants 12%, Entrepreneur only wants to give up 8%

Makes sense. Both sides want to secure the best possible value.

By countering the offer, the Entrepreneur runs the risk of losing the Shark altogether. The move from 12% to 8% could quickly become a devastating zero percent. “For that reason, I’m out.”

The risk on the Shark’s side is if they stand firm on 12%, another Shark might swoop in and say, “Sure, I’ll do 8%,” and then they end up losing the deal.

But you have to decide right now

By putting a time limit on it, the Shark is reducing the risk of another Shark swooping in. They’ve decided it’s worth losing a little equity right now vs. dragging things out and potentially losing everything.

Does your business have a two percent?

Now, granted, the scenario is a little bit different, but when you sign a new customer — have you ever fully weighed out the value of them paying right now vs. paying later?

For example, what does it look like for your business to have the cash immediately on hand vs. waiting a month?

What is the financial impact if the customer is 30 days overdue? 90 days overdue? What’s the cost of chasing the receivable?

And what are all the other things you could focus on, ways to drive the business forward if payments came in faster. Or, honestly, it could be as simple as this: wouldn’t the job be more fun if you could eliminate the repetitive parts?

When you start weighing these things side-by-side, you may get to the same point that Mark Cuban or Lori Greiner reach on Shark Tank when they decide, “You know what, I’ll give up four percent, BUT I need the payment right now.”

So, what does this look like in practice?

  • It could be accepting credit card payments instead of check.
  • It could be offering a rebate in your invoice with a deal to pay in 24 hours.
  • It could even just be process related, starting to use steps like this to make everything run more efficiently.

Every organization is different, so there’s not really a one-size fits all solution.

Our approach at FinanceFuel is to first review a customer’s Accounts Receivable and provide a Report Card. We start making recommendations and build a strategy custom to your business. The goal is to move from invoices being 45 days or 90 days outstanding to your payments coming in closer to “right now.”

From there, you can then use our tools and software to put the FinanceFuel plans into motion. And the turnaround time for all of this is minimal.

But, to get this started, you have to email us. Right. Now.

(Or later this week is totally fine too)

Other insights from FinanceFuel

Five Tips for Sending an Invoice

Here’s Your Accounts Receivable Report Card

Rebates vs. Discounts: An Innovative Strategy for Accounts Receivable

FinanceFuel accelerates a business’ cash flow by speeding up Accounts Receivables. You can get started on your report card here. We remove the remedial processing and collection tasks so employees can focus on high-value work driving the business forward. You can learn more about FinanceFuel on our website or, if you’re interested in speaking directly with a member of our customer success team, send us a note (sales@financefuel.co) and we’ll get back to you right away. Thanks for reading the blog, we’ll have regular content up on Mondays, Wednesdays, and Fridays.

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