ABC unleashed a hit business series sharing the ranks with such greats as The Apprentice; Shark Tank pairs 5 independent, multi-millionaire investors with novice business entrepreneurs who have to sell their business opportunity. Most have okay to better than okay ideas, but lack in the overall understanding of, not how business works, but how to create great wealth. I’m starting to think this isn’t so much a show about business, but more about money; cash is king.
Don’t get me wrong; this is reality TV, so of course some of the entrepreneurial opportunities are laughed right out of the room. A sticky pad for sticky pads?? An implanted bluetooth headset that requires you to charge your head at the end of each day??
Some of the ideas are really quite genius; Shakespeare turned into music, a foldable guitar, and a seatbelt sensor that won’t turn on your car unless your seatbelt is locked. I’m often amazed by the ideas that people come up with, the amount of personal money already invested and their overall lack of what to do next. The Sharks lay it out pretty clearly, either they are out (meaning your idea has too many financial risks, you haven’t done your due diligence homework or your idea is flat out insane) or they take your deal or they counter your deal in their minds, with a better deal. Remember, Sharks don’t want to be in the guitar manufacturing business; they want to make money!
Robert Herjavec, who sold his first company for $100 million and Daymon John, founder of FUBU clothing line, often counter the entrepreneurs with more aggressive offers, many times requesting control ownership of the company or 51%. As Barbara Corcoran, who has a five billion (that's with a B) dollar business, pointed out on last’s night episode, remember the difference between 50% and 51% is a partner where decisions are made together and someone who will call all the shots without you. Kevin O’Leary, who sold his business of educational software for 3.7 billion (that's with a B) dollars, explains that entrepreneurs with product patens should sell the rights to the product and negotiate royalty fees for long-term wealth. Kevin Harrington, the king of infomercials, often times agrees.
Royalties is where long-term, sustainable, hassle and risk free wealth stems from. The owner of LifeBelt should have sold the rights to his paten for between a quarter of a million to half a million dollars with a 2-3% royalty fees for each unit sold. What does that mean? That means, if Robert bought the rights, he would cut a check to Mr. LifeBelt for $500,000 and Robert is free to do what he wants with the product, but for each unit sold, he owes Mr. LifeBelt 2% of the sale price. Robert feels there is a market for this type of product but doesn’t want to be in the car accessory business, he wants to license the paten to car manufactures who will add the accessory stock to most models. In the licensing deal, Robert negotiates a royalty deal with the car manufacture for 6%. For each unit installed, Robert gets paid 6% of the unit sale price and turns around and sends a check to Mr. LifeBelt for 2%. Mr. LifeBelt doesn’t have to do a thing get the 2% check.
Okay, so 2% doesn’t sound like a lot, if each unit sells for $30.00, Mr. LifeBelt only gets 60 cents. Robert sells license to use the product to a car manufacture who installs the product in 2500 cars per week, earning Mr. LifeBelt $1500 a week, $78,000 a year, $2,340,000 in 30 years. I’m sure there are ways you can earn more money faster, but Mr. LifeBelt doesn’t have to do anything for his $78,000 income per year. He can sit at home watching HGTV all day, sleep until 3pm and walk the dogs. He doesn’t have to lift a finger and he’s making a decent yearly salary.
What happens if Robert tries to sell LifeBelt to car companies and no one bites? Mr. LifeBelt was already paid a half a million dollars for his idea; he’s been paid even if the product is flops, plus he’s not out any more cash, time or effort. Robert has all the hassle and all the risk. Mr. LifeBelt has his half a million dollars already in the bank! If Robert is successful, then Mr. LifeBelt makes more!
Royalty fees are with you until the day you die. Imagine the possibilities. Why don’t more of the entrepreneurs take these kinds of deals? Do you really want to be manufacturing seatbelt sensors in your basement for the next 30 years hoping to sell enough to make $2 million or do you wan to sit back, relax and let the cash roll in?
http://beta.abc.go.com/shows/shark-tank/index
Monday, August 24, 2009
Tuesday, August 18, 2009
Ms. Minto goes to Wegmans
The grocery store is an American institution. Only in America will you find such massive food venues that yield everything from fresh and organic vegetables to birdseed to Scotch tape. Most other cultures shop for groceries by visiting specialty shops such as butchers, cheese makers and wine shoppes, but not Americans! We shop for groceries just we shop for, well, everything else – one stop, multi-level, eye popping, mega malls. Growing up in small town America, I certainly wasn’t privy to high-class, mega supermarkets. I grew up grocery shopping with my grandmother, at our local ACME that honestly smelled like sour milk.In 2005, Hunt Valley became the first Maryland home to the newest mega mall grocery store – Wegmans. This grocery store chain puts new meaning to the term supermarket. 
In 1930, just fourteen short years after John Wegman opened a fruit and vegetable company in upstate New York, he opened his first supermarket; 20,000 square-foot shopping floor plus an in-house cafeteria that sat 300. Wegmans’ belief that valued and cared for employees do their jobs better earned them the #2 spot on Fortune’s list of best 100 companies to work for in 2006; it’s ninth consecutive year listed. This is not your average grocery store or your average business model for that matter. Everything about a Wegmans shop is bigger, brighter and better than the shop around the corner. I suppose that is why American’s are willing to drive miles to their nearest not so neighborhood Wegmans.
Maybe it’s the allure of it’s 60-foot olive bar, the smell of fresh baking pizza in the café, or the ability to pick up a ready-to-serve Wegmans meal on your way home from work, pop it in the oven and consider dinner served that has millions of American consumers hooked on the Wegmans drug. For me, it’s the smaller two-tiered carts, the in-store flower shop, the do-it-yourself produce labeling and the hot chocolate complete with attachable cart cup holder that pulls at my grocery shopping heartstrings. I’m not, by any means, someone who gets a thrill out of grocery shopping; in fact, I would fathom this is my least favorite activity. Yet there is something about Wegmans, even with the crowds, the hoards of consumers looking for a bargain, screaming children and miles of walking, that makes grocery shopping a little bit better for me. They have a huge international foods section; not that international foods really appeal to my western taste buds, but they do sell Brazilin soda in 2-liter bottles.
If you’re a cheese buff, you must travel to your nearest Wegmans just to experience such a cheese masterpiece. If you can think of a type, style or country of origin for a cheese, chances are they have it. Maybe organics is more your thing; you’ll be wandering down the aisles like a mouse trapped in a maze picking up items such as organic chips, juice, powerbars. Still not convinced? How about your neighborhood butcher shop, fishmonger, Chinese buffet, bakery, sub shop, and café all without having to get caught in the rain?
At Wegmans, people rule, but not the ones your thinking of; the employees. A throw back to 1900’s America, where taking care of your workers builds loyalty, hard work and commitment, a belief and tradition since lost. If only more American companies valued their employees, the contribution they make just by showing up on time. Wegmans is doing something right where great customer service starts with how an employee feels about their job; how they are treated at works translates to the level of service received by the customer. Companies well known for horrible customer service should take a lesson from Wegmans. During my visit today, I discovered Wegmans going against their grain and introducing self-checkouts. This concept is certain not new to the grocery store industry, but innovative to a company who prides it’s brand on outstanding customer service.
In 1930, just fourteen short years after John Wegman opened a fruit and vegetable company in upstate New York, he opened his first supermarket; 20,000 square-foot shopping floor plus an in-house cafeteria that sat 300. Wegmans’ belief that valued and cared for employees do their jobs better earned them the #2 spot on Fortune’s list of best 100 companies to work for in 2006; it’s ninth consecutive year listed. This is not your average grocery store or your average business model for that matter. Everything about a Wegmans shop is bigger, brighter and better than the shop around the corner. I suppose that is why American’s are willing to drive miles to their nearest not so neighborhood Wegmans.Maybe it’s the allure of it’s 60-foot olive bar, the smell of fresh baking pizza in the café, or the ability to pick up a ready-to-serve Wegmans meal on your way home from work, pop it in the oven and consider dinner served that has millions of American consumers hooked on the Wegmans drug. For me, it’s the smaller two-tiered carts, the in-store flower shop, the do-it-yourself produce labeling and the hot chocolate complete with attachable cart cup holder that pulls at my grocery shopping heartstrings. I’m not, by any means, someone who gets a thrill out of grocery shopping; in fact, I would fathom this is my least favorite activity. Yet there is something about Wegmans, even with the crowds, the hoards of consumers looking for a bargain, screaming children and miles of walking, that makes grocery shopping a little bit better for me. They have a huge international foods section; not that international foods really appeal to my western taste buds, but they do sell Brazilin soda in 2-liter bottles.
If you’re a cheese buff, you must travel to your nearest Wegmans just to experience such a cheese masterpiece. If you can think of a type, style or country of origin for a cheese, chances are they have it. Maybe organics is more your thing; you’ll be wandering down the aisles like a mouse trapped in a maze picking up items such as organic chips, juice, powerbars. Still not convinced? How about your neighborhood butcher shop, fishmonger, Chinese buffet, bakery, sub shop, and café all without having to get caught in the rain?At Wegmans, people rule, but not the ones your thinking of; the employees. A throw back to 1900’s America, where taking care of your workers builds loyalty, hard work and commitment, a belief and tradition since lost. If only more American companies valued their employees, the contribution they make just by showing up on time. Wegmans is doing something right where great customer service starts with how an employee feels about their job; how they are treated at works translates to the level of service received by the customer. Companies well known for horrible customer service should take a lesson from Wegmans. During my visit today, I discovered Wegmans going against their grain and introducing self-checkouts. This concept is certain not new to the grocery store industry, but innovative to a company who prides it’s brand on outstanding customer service.
With two-tier carts, self produce labeling and now self-checkouts, I’ll go grocery shopping all the time with no complaints, but only if we make the drive to Wegmans.
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