Game Face Shark Tank Value
How entrepreneurs and the Sharks value a business likely takes into account present value, future value, the value of companies similar to it and risk. How Is a Business Valued on 'Shark Tank. The name of the game in Shark Tank is valuations, and if you watch the show enough you’ll realize that’s all it really is about. Sure there are some great, hype-y stories, but in the end these venture capitalist gurus want to talk numbers. And if the valuation isn’t right, it doesn’t matter how. Jun 07, 2019 Shark Tank The Game is still one of the worst board games that I have ever played as it is a broken mess that is just kind of dull. I have a hard time recommending Shark Tank The Game. I honestly can only recommend the game if you can find it for really cheap and you are a big fan of bidding games and Shark Tank. 25 Best and Most Outrageous Shark Tank Products From the Show 2016 NFL Game Day Face - licensed by the National Football League Easy to Apply Peel-Away Removal Water-Based Application FDA Approved Materials Trim-to-Fit Size Made in the USA See Application Instructions GameFace Masks - This could be great for RS game days!
ENTERPRENEURS: Doug Marshall
PITCH: The Gameface Company
ASKING FOR: $450k for a 25% stake
BEST PART OF THE PITCH: Doug says his patented product has revolutionized the face-painting and costume mask industry. His product actually peels off as opposed to washing off. The mask is all water-based, so it's very safe for kids. Doug has been in business for five years with $102k in sales last year. He brought his kids in to show off his product, but they are asked to leave the tank once the sharks start questioning the evaluation of the company.
DO THE SHARKS BITE? Daymond goes out immediately once he learns that Doug wants $100k a year for his salary for the next three years. Robert follows his lead. Kevin offers to give Doug the $450k, but $300k of it will be a loan. He'll need a 25-cent royalty on every mask sold until the investment is paid off. Lori will give him $450k for a 40% stake, but she wants Mark to go in with her. Mark offers Doug a million bucks for the entire company which includes a salary of $80k a year for Doug for the next five years. Lori can still be his partner.
THE RESULT: Doug makes a counteroffer of $450k for a 35% stake including the annual $80k salary. Lori and Mark want a 10% royalty until they get their money back. Robert says it's time for Mark and Lori to put on their game face, as they all have a deal.
Visit http://www.thegamefacecompany.com____________________
ENTERPRENEUR: Brant Myers & Dan Grimm
PITCH: Arkeg
ASKING FOR: $100k for a 33% stake
BEST PART OF THE PITCH: Brant and Dan used to love to drink beer and play video games back when they were in college. That's why they created an arcade game with a beer tap on its side. It's the ultimate drinking game! The product sells for $4,000 retail and they've made 20 sales. Daymond pours himself some beer while Lori and Kevin try some wine. Root beer is also an option for the tap.
DO THE SHARKS BITE? Mark believes these guys are going to need a drink after they try to sell this thing. He's out immediately. Lori can't get into the Arkeg game either. Robert and Daymond also flee quickly. As much as Kevin likes the wine that's been served to him, he can't invest either. It's game over for Brant & Dan. On the bright side, they still own 100 percent of their business.
LEARN MORE: Visit http://www.drinkngame.com
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ENTERPRENEURS: Dan Rothweil
PITCH: Dura-Tent
ASKING FOR: $50k for a 30% stake
BEST PART OF THE PITCH: Dan shows a video clip of flies feasting on refuse. These same flies then feast on foods that are put out during picnics leaving harmful reside behind. Dan has created a tabletop food screen that serves as a full enclosure for food being served outdoors. It has a door that fastens with Velcro. He's sold close to 40,000 units to date for various prices depending on the size. Dan has patents on these tents.
DO THE SHARKS BITE? Robert doesn't buy into the concept of putting food into a tent. He's out. Mark thinks this is a great product, he just can't add value to it. He's out. Kevin believes Dan is going to sell a bunch of fly tents. He offers $50k and wants $2 for each small tent sold and $2.50 each time he sells one of the big ones. Lori considers partnering with Kevin, but she isn't sure there's a huge demand for this product, so she then decides to go out. Daymond follows her lead.
THE RESULT: Dan doesn't feel Kevin's offer will help take the product to the next level. Mr. Wonderful is appalled by the fact that Dan doesn't want his money, so he decides to pull his offer completely. There will be no deal, but Kevin does offer to buy one of the tents at full retail price.
LEARN MORE: Visit http://www.duratent.com
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UPDATE: Wild Squirrel Nut Butter
College students Erika Welsh & Keeley Tillotson made a deal with Barbara for their Wild Squirrel Nut Butter during Season 3. The ladies opted to put their college careers on hold to work on the business fulltime. They've sold over $350k in peanut butter in less than a year and have projected sales of $1.2 million in the next 12 months. That's a lot of bread for their peanut butter!
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ENTERPRENEUR: Megan Gage
PITCH: Hot Tot Children's Hair Care
ASKING FOR: $50k for a 15% stake
BEST PART OF THE PITCH: Megan says her company produces professional hair care products for children without the use of harsh chemicals. She does a demonstration with her toddler son to show how it all works. Megan has been in business for 15 months with about $20k in sales. Lori thinks the packaging of the product needs to show that it's for children. Megan is resistant to that idea because of all the other similar, less-safe products out there with cutesy characters on their design.
DO THE SHARKS BITE? Kevin doesn't believe people will care about this product. He doesn't know if this is a real business or not, so he's out. Lori feels work still needs to be done before she can invest. She's out. Mark likes the product. He offers her $75k for 40% of the company. Robert thinks Mark's offer is better than any he could make, so he's out. Daymond knows Paul Mitchell, but doesn't think that his one contact is better than Mark's offer. He's out, too.
The underlying theme of the 'Shark Tank' TV series is for either the Sharks (the investors) or the entrepreneurs (pitching their business) to convince the other side to accept their valuation of the business and negotiate a deal based on it. The entrepreneurs tend to come in with high valuations, while the Sharks counter with lower valuations.
How the entrepreneurs and the Sharks value the businesses presented on the show will likely vary, but a good valuation of a company takes into account certain factors such as present value, future value, the value of companies similar to it and risk.
Current Market Valuation
Using the present value method to determine a company's current market valuation is based on comparing the entrepreneur's business to similar publicly traded companies and sectors or industry average financial ratios. Every sector and industry has financial metrics that are easy to find. A market capitalization value is derived based on the shares outstanding and the stock price. Common financial metrics such as price-earnings (P/E), price-sales (P/S), earnings per share (EPS), sales and income growth rate can be useful in determining a reasonable valuation.
For example, if an entrepreneur is pitching a clothing brand with $1 million in annual sales with $100,000 in profits, the entrepreneur may apply the metrics of the specialty retail apparel sector by using data to determine that the sector has an average P/E of 20.17 as of October 2018.
At 20.17x earnings, this would value the business at $2.017 million. Based on this valuation, the entrepreneur can justify the deal for a 10% stake in the business for a $200,000 investment from the Sharks. This would be based on current valuation.
Future Market Valuation
The entrepreneur may forecast 100% annual earnings growth for the next three years, which is not hard to do with small numbers. This is based on estimates that include $400,000 in net income in year three at 14.75x forward earnings, putting the future valuation at $5.9 million.
Based on the future valuation, the entrepreneur could offer the deal at a 3.3% stake for $200,000 initially. After being laughed at by the Sharks, the entrepreneur could apply a generous discount – cash now is worth more than cash later – and could increase the proposed stake to 6.6% for the $200,000.
Peer-Based Valuation
The Sharks could counter that offer using a P/S ratio with a real-life example like The Gap (GPS), assuming a P/S ratio at the time of 0.65. Applying the same ratio to the $1 million in annual sales would place a current valuation on the small business at $650,000. The Sharks can then apply a three- to five-year sector annual EPS growth rate of 11.94% to derive a year-three income of $135,820.
From there, the Shark may then apply the forward P/E for The Gap of 9.36 as of October 2018 to derive a $1.271 million future valuation. Based on this valuation, a $200,000 investment would roughly equate to a 15% stake in the business.
Game Face Shark Tank Value Chart
The Sharks may remind the entrepreneur that they can't apply the same valuation metrics based on how publicly traded companies are valued. There are massive distinctions between a small business and a public corporation. The Gap is an established retailer with thousands of stores worldwide, while the small business may only have a few locations. While the growth rate is justifiably higher for the small business, the risk is much larger due to the risk of failure and liquidity risk in terms of an exit strategy. Shares in publicly traded companies can be liquidated in the stock market in seconds, which is impossible with stakes in a private small business.
Adjusting Valuation Based on Risk
The lack of liquidity creates more risk for the Sharks to bear, which entails applying risk-adjusted discounting to make the reward worth the risk. Based on this factor, the Sharks have much more wiggle room to base their offers on a risk-adjusted discounted valuation.
For example, applying a 50% risk-adjusted discount would bring the stake up to 30% for the $200,000 investment. Sharks can also apply the intangibles that they bring to the table to allow for an even larger discount, perhaps bringing up the stake to 50% for the $200,000 investment.
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The Game Face Shark Tank
To counter blowback from the entrepreneurs about giving up too large of a stake in their business, the Sharks make the argument that their leadership, contacts, reputation, and guidance contribute towards building a bigger pie to carve up between them. It would be better to own 50% of a $10 million company compared to 80% of a $1 million company.