Episode 62: Can your business swim with the sharks?

Strategic operations and data-driven decision-making using Business Intelligence for B2B Service Providers

Would you be ready to pitch your business on Shark Tank? As a small business owner, you might think, “I’m not trying to get on Shark Tank. I’m not pitching my business there.” But the questions they ask on the show are rudimentary questions that every business owner should be able to answer.

Listen to this episode as I share the essential questions you should be able to answer about your business to build a solid foundation.

Thanks for tuning in to another episode of Collab with Kiva.

See you next time!

Are you ready to take massive action in your business and harness the power of data in your decision-making? Let’s chat 👇🏽

Podcast Transcript:

Kiva Slade 0:01

Welcome to Collab with Kiva, where we let our inner nerd geek out on all the non sexy parts of your business. I'm talking data and operations. Neither as flashy or glamorous, but both are foundational to your business growth. I'm your host, Kiva Slade, your strategy and analytics guide here to break down what feels complicated, so it is understandable and executional. Let's dive in. Welcome to another episode of Collab with Kiva. I'm your host, Kiva Slade, and today I am excited to talk about one of my favorite television shows Shark Tank. And I know for some of you, you may have seen it. You come in with your business idea, and you are pitching it to the investors. Luminaries like a Mark Cuban, owner of the Dallas Mavericks, Kevin O'Leary, Daymond John from FUBU. You know, Laurie Griner, Barbara, Corcoran, I almost forgot her name, and others that they wind up having come on the show. The bottom line is though, when many of the business owners come in there, there feels almost like a feeding frenzy that takes place when questions are being loved and thrown and tossed out at these business owners. And based on their ask when they come in, I've gotten pretty good at determining if this person is or if this person is not going to receive funding, or an investment.

Kiva Slade 1:47

And I want to talk about that, though, because as small business owners, you might be thinking Kiva, I am not trying to get on Shark Tank. I'm not pitching my business there. However, the questions that they ask are really rudimentary questions that every business owner should be able to answer, whether you plan to pitch your business for startup capital, or you're just looking to actually grow a solid foundation business. So let's talk about some of those questions. Okay, how much does it cost to produce or acquire your customers? What's the average price? The would have your sales bid? What's your monthly sales? On average? How fast are you growing? How are your sales growing? What keeps competitors from taking your product? Or as Kevin would say, like, you're just going to be stumped like a roach. Because someone else is going to swoop in and be able to do what it is that you do. Do you have a patent on that technology? Because if you don't, obviously, roach squishing does happen. What are the barriers to entry? How do you acquire the customers that you have? How much money have you spent so far? What do you need the investment for? That's like a really important question. And I know that in a group that I'm in for a program, they send out great notices, and there's a lot of business grants that are out there. But they also want to know like, what do you need this investment for? What plans do you have for this money? So how much are you raising? For those that are looking for startup capital? What percentage of equity? Are you willing to give up in exchange? How did you come across your valuation? Do you have other investors? Have you ever seen those episodes where it seems like the deal is so about to happen, and then boom, crash, nothing, because it becomes evident that there are additional investors. And maybe the person who's doing the pitching, actually doesn't even own a majority of the company, because they have these other partners who've also invested money. So that means that those people have to get their money back before the sharks will see their money. And they're like, No, I don't want any parts of this. How did you come up with the idea for your company? Like, what are your skills?

Kiva Slade 4:14

If you've watched the show, you'll notice there are many times that the idea or like the business is okay. But the sharks are more so interested in the entrepreneur who is actually pitching the business based on their background, their ideas, their energy, whatever it is, there's normally something that's attractive to them, and they're willing to make an investment not so much in the product, but in that person. So, since this is an episode about, you guessed it, business intelligence, let's dive a little bit deeper into some of those questions. Okay. Because when you're looking at that, or you're feeling sorry, maybe as you're sitting on your couch watching, you're like, oh, wow, they don't have answers to these questions, this isn't going to end well. Ask yourself, how would it end for you? Would you be able to answer? What are your sales? And not just, Oh, my sales are $422,000. Okay. Where did those sales come from? Were they direct to consumer? Where are they on your website? And how did you get them? What platform is your largest traffic center? Are you investing in ADS? How much was your ad spend? What's your return on ad spend? You know, what was the return on any of those investments? And they'll want to know those additional details. So it's not enough to know that I sold X amount or my sales were such and such a number. What else is in that number? There's definitely some other things that are attached to will say that number that are necessary questions, and data points for you. Because technically, it kind of rolls up into the answer to that question of what are your sales? Which seems simple? It seems easy. Blah, blah, blah. Those are my sales. There's so much more that goes into that, though. So it's important to think through. Even in your own business, not only like, what are your sales, but where do those sales come from? Like, what your platforms are, any sort of promotions, what's your marketing doing? And things of that sort, because you'll want to not only have an understanding of where your sales are right now. Okay, but looking ahead, forecasting, okay? Where are you looking to possibly grow your sales, maybe your data shows you that you have a large contingent of customers who are located in New York City, Chicago, and Houston.

Kiva Slade 7:24

Part of your marketing plan now is that you are going to run ads in New York City, Chicago, in Houston to see if those markets where you've already had customer base, are actually fruitful. And you can possibly grow those to a new geography because you've been, I don't know, focused in Philly and D.C. I'm totally just pulling these cities out. So you've been focused on Philly and D.C., what you've noticed that you've had customers come from these other areas, and now you want to explore what would these new cities actually look like, in terms of your sales and your marketing. Maybe you have some new products that are coming out, some new service offerings that are coming out, that are ways that you can boost your sales. So they want to invest in businesses that have profits, okay, because they obviously want to get their money back. And you're not going to invest in something that has like very slim profit margins, or very small sales, because you have to obviously, if you've seen the show, they'll probably say, it's not been tested enough. You know, we don't really know that there are people who want this, whatever it is that you're selling. And speaking of profit margins, like those are super important in any business, it helps you determine how well your business is doing financially. And it provides like insight into areas where you're going to need to make change. How many of us are calculating though, our profit margin, which is the difference between your sales and cost of goods sold. So for example, if you have a profit margin of 30%, that means your business would sell $100,000 worth of product in spin 30,000 to produce that product. So that means you earn a profit margin of about $70,000 on each sale.

Kiva Slade 8:23

Okay, that actually also still applies to those that are service based businesses, okay, because you have cost of goods that are attached to delivering the service that you do provide. Okay, if you are utilizing QuickBooks and you have it set up and you work through with your accountant, you have a cogs which is cost of goods sold category, okay, you have where that's factoring in your p&l Profit and Loss sheet, what those cost of goods sold are. Okay, so you you want to look at that, in addition to how much it is that you sold, and do the math, so that you know what the profit margin is for your business? Because, again, you might not think you're ever going on Shark Tank, okay? And maybe Mark Cuban is not going to reach you on the street and say, Sally, I want to give you $2 million for your business. And you would probably be like, Yes, take it. But you wouldn't say that if you knew your sales and your profit margin, and knew that your business was really worth 5 million. Mark was getting a steal, and you were selling yourself short. But if you don't take the time to do the work in your business, to understand the data, okay, to understand what's really considered your business intelligence, then you would sell that business for $2 million and basically cry later over the spilled milk. Okay, so profit margins are totally important.

Kiva Slade 11:00

And another part of that comes, like overhead costs, which are your expenses associated to running your business, okay. Rent, utilities, office supplies...and many of us are now home based. But there's still our overhead expenses that you are incurring in your business, and being able to know what those are, and calculating those so that you can stay profitable. Okay, because overhead expenses, they're there. They stay there. They're always kind of factored in. But you want to be able to demonstrate that you have cash flow coming in, that you actually can cover those overhead expenses, even in those months where maybe your sales drop off some. So that's also something to factor in and consider when thinking about, you know, like, what are your sales? So another question that they always ask is like, Oh, why do you need the money? Okay, and this one always makes me chuckle because sometimes I just see people completely stumble over themselves. And if there are partners, it seems like both of them are like, we need it for this. We need it for this. And you're like, Did y'all talk before you came out here? Just say, Okay, it's important to know, like, if someone were to want to invest in your business, or partner with you, I've seen people looking for partners in strategic partnerships, where they're like, I'm able to do this, and I'm gonna bring in someone. Well, if there's any sort of revenue sharing, any sort of anything else of that that's going to take place, you need to understand like, what is that influx of money going to do for your business? Where would you spend it? What would you spend it on? Okay, is it going to be spent on marketing? Is it going to be spent on hiring? Is it going to be spent on your production of whatever it is that you do or you make? You need to have a plan for what the funding is going to be used for. And it should be a really good plan and a detailed plan, so that if an investor is looking, and they're like, Wow, okay, so these are their sales, and this is what they're going to do with this money, and I can see a path for how I'm going to recoup my investment. And that is super important. Because again, it helps to show the business owner, the investor, that you as a business owner, you know, your business, you know, exactly what is going on in your business, you have a pulse of it in you know, your numbers.

Kiva Slade 13:51

And as we continue to accumulate data and as there is more data available to us, trust me, that ostrich put your head in the sand, I'm not really focused on my numbers thing is not going to last even for those who are solopreneurs. You might think that, hey, I'm just business of one, I got this and it's going to be okay. You need to still know your numbers. You may go to the bank, and you want a loan from the bank. The bank wants to know what it is that you do. What are your sales? What are you gonna do with this money? These are not questions that are just specific to Shark Tank, or, again, some sort of angel investment, you know, investor coming along or something of that sort. If you want to go to the bank and COVID, PPP loans, ... they probably weren't as detailed as Shark Tank was, but you still had to answer questions even for that kind of money and you're going to need to do that in your business. So being an ostrich putting your head in the sand and not focusing on your numbers is so not the way to go forward. Okay, so another thing that is often asked is around your product, okay? Is it unique? Are you entering into a crowded market? The same can be applied to services. Okay? If you nowadays there's jokes that everyone is a coach, okay. What separates you from the rest of the coaches? And I'm just going to use that as the quick example. Okay, what separates you from the rest of the coaches, and this goes again, also ties back into who you are. Because a lot of times, we don't utilize some of that information as pretty much part of our, you know, kind of unique selling proposition, your background, your all that is you factors into what also makes your product service unique. Because no one else is you, no one else has had those same experiences, and that's something that needs to be factored in as well. You have to know what sets your business apart and that what sets it apart is how you basically can use as leverage to keep your business differentiated from your customers, from your competitors, excuse me. Okay, so that's something else.

Kiva Slade 16:31

What are your costs? We were talking about the profit margins, we talked about overhead, you know, what else is going into all of those numbers, I want you to really, really focus on those. And let's see here. I have tons of notes. So another thing around is how much debt do you have? Because that factors in as well, again, when you kind of have those partners, and all of a sudden, it's revealed that, oh, we have three other investors and they have, I don't know, 20, 40 60% of the company, that becomes a lot less attractive. Because you're now talking about, you have a lot of debt in this business. And, you know, you have these additional creditors, basically, who, depending on how much money they've invested, are going to get their piece of the pie before anyone else. The bank wants to know that as well. How much debt are you carrying? Because the bank wants its money from this loan. And if you have 10 other loans out there, and you're not so sure, on your sales, you possibly use some of your personal credit in order to acquire some of these things, then it's like, ah, denied, because they're not sure when they're gonna get their money back. So I keep focusing on those things, because it is so important to know, the numbers that factor into your business finances.

Kiva Slade 18:05

Let's talk about another one. They always ask about customer lifetime value. And that's, it's an important metric for businesses, because it helps you understand, like, how loyal are your customers, you know, how, if you, some of you, like if you're a Target shopper and Target were to run a customer lifetime value on you, they'd be like, Yes, I absolutely love this customer. Because that shows you like over the course of this relationship with this company, I win this case Target you have spent or will spend, we can predict, you're going to spend this amount of money, okay? And if you understand your customer lifetime value, you can basically create strategies that will increase customer loyalty and maximize profits. Okay. Amazon, for example, over the holiday break, you could tell A.L.E.X.A. say because if I say or she'll speak to me, you could tell her to say thank you for your driver and Amazon was going to tip that driver $5 or something like that. And you as the customer had already made your purchase. You use probably said thank you to the delivery person, if you were around when they came or you gave them stars in the app. That though, was one part of it. And here was this thing that you could do extra that actually didn't technically come out of your wallet, you could give a monetary tip to the driver. Okay, that increased customer loyalty because like, Wow, you guys are really taking care of these people. How wonderful that is. So understanding what that looks like. So you want to calculate it. It's like if you take you kind of sometimes give you multiply your average order value of over the length of time it takes to make what would be considered like an average order. So for example, if you go to Target and your average order size is $100. And typically you can spend that in 10 minutes in Target, okay, so then your customer lifetime value would be $100 times 10, or $1,000. Okay? Because within 10 minutes, we can guesstimate that you're going to spend on average $100. Okay, so that's one thing.

Kiva Slade 20:31

And you can obviously calculate your average order value, because that lets you know how much money each customer is spending on average. Depending on what your services are, what your products are, someone might spend, on average, $50. Maybe you have high end coaching programs, on average, a customer spends $5,000, you want to know what that looks like. You might have three different programs that you're offering. And one is, I don't know, $100. One is $1,000. And one is $10,000. Okay. And so when you look at those, you might say, hey, all three of these programs are doing great, and they're doing wonderful. However, when you start to dig deeper into those numbers and looking at like the average order value, and you might actually determine, hey, my $1,000 program is doing gangbusters, compared to the other two, maybe I need to look at something and see are all three of these programs as profitable as I thought they were. So, when you're looking at that average order value, it helps also give insight like into your overall health of your business, helps you make decisions about your pricing and your product offerings, because you're understanding how your customers are making their informed decisions and about their purchases. And that helps you make better informed decisions to increase sales and profitability. Okay, so you can calculate it. You gotta understand, though, some of your customer's purchase path. And it can get a little complicated, but really, it's it's not too too bad. But you know, you totally want to understand what that looks like for your products and or service offerings to understand what that looks like. Because you'll better understand your own numbers, when it comes to understanding how you can look at your sales, look at your marketing, and how to best move forward planning for the future based on the information and the data that you already have.

Kiva Slade 22:48

Okay, so um, another aspect is, obviously, we can talk more about what drives sales in your business, because it's one thing know your sales numbers. But again, we were talking about knowing what platforms are, where your sales come from. I see a lot of people who are talking about email marketing, because everyone's been so focused on social, social, social, social, social. But do you have a means in which to connect with those people off of social? That would be through your email list? So email lists can be a venue for you to drive sales. I saw an article recently that TikTok has surpassed Google and Facebook, in terms of ad spend, like where people are spending money for ads. Okay, TikTok may or may not be your place. Excuse me. And maybe it's still Google, and maybe it's still Facebook, whatever it is, though. TikTok has surpassed them in terms of where companies are spending money on ads. Okay. So understanding that in terms of is that a means or a place in which the drive sales for your business, has it been a place to drive sales for your business? You know, but I mean, also it goes into driving sales is like, your customer service. How good is your customer service? If you are a service based business, what is your onboarding process look like? How can people reach you? Are your customer satisfied? Do you find out and ask if they're satisfied? Same questions you can ask for products are people satisfied? Like we always get those prompts for reviews? What are those reviews? Like? Do you are you motivated moved? Are your customers motivated moved to actually give a review? What do you what systems do you have in place to collect that what it's called, like zero party data, because it's literally you asking them and then giving it to you. So you don't have to worry about privacy and all these other things. It's zero party data, you are getting it direct from the source. So what does that look like. Your product quality, your pricing, your marketing, campaigns, factors, all of these go into what your sales are. And they go into your revenue, and they impact your profit margins, as well as your, you know, customer lifetime values and average order values, and so much more. So you almost get to see like, why some contests? I don't know, if you call them contestants.

Kiva Slade 25:40

Some of the participants on Shark Tank almost looked like a deer in the headlights? Because there's just question after question that's just being fired at them. And if you don't come in with a solid understanding of these factors that go into your business, you will quickly be eaten alive by the sharks. Okay? You will, the same thing, though, would happen to you, at your local bank. If you're not able to answer the questions that would show how viable is your business, that they, the bank would want to take a risk and invest in your business via a loan, okay, or maybe it's a grant opportunity, there are pitch contests that are taking place in all kinds of entrepreneurial circles, People are looking for investments and investors are looking for businesses in which to invest. If you go to a pitch contest, again, you're not going to just sell your idea, your product, or service, you're not just selling yourself. They're gonna want to know the details. Okay. And 2023 is the year of knowing the details, know the details in your business, so that you make the most informed decisions that you can about the next steps based on the data that you have. Granted, economies shift, and things change. Hopefully, there's no more global pandemics, okay, that caused the radical shifts and changes. However, even in that, we've talked about this before, when things like the pandemic happen when economic downturns have happened, recessions, companies that are focused on their data, companies that knew their numbers and utilize that information during the downturn, were the ones to make the fastest recoveries and propel themselves forward on that upswing, because we all know what goes down eventually comes back up. Okay, so those companies, though, that were data prepared, they survived. They thrived, actually. And that's where you want to be. So even if you're not planning to go in front of the Shark Tank panel.

Kiva Slade 28:32

Alright, I want you to start making time in your business to focus on the key essentials. Yes, marketing is important. Yes, delivery, okay, of your product service is so definitely important. But also, where does business intelligence, where does the data part of that fall in to your To Do lists? Okay, are you focused on your operations? You focus on your marketing, you're focused on your team? Where is that focus on the data? And only you can answer that. So, as you think about that answer, if you have questions, feel free to let me know, you can reach out to me on my website, YouTube, Facebook, LinkedIn, and definitely ask those questions. I want to know what kind of questions that you do have, because I want to make sure that as we continue growing these businesses, that we're growing them in a way that makes sense. That's also supported by the data. So once again, do not answer Mark Cuban if he offers you 2 million until you know how much your business is worth. See you next time. Bye. Thanks for tuning in to another episode of Collab with Kiva. I'm wildly cheering you on as you go forth and execute data and operational efficiencies in your business. If you need additional support, connect with me via my website, the516collaborative.com. Your reviews on Apple are appreciated. See you next week.

Meet Kiva Slade - the Founder and CEO of The 516 Collaborative. With a unique background in high-power politics on Capitol Hill and sixteen years as a homeschooling mama, Kiva found her calling in the online business world as a trusted guide for entrepreneurs looking to build the business of their dreams.

Kiva's work began behind the scenes, orchestrating the back end of businesses and managing teams. But her inner data diva couldn't help but notice that small businesses needed help harnessing the power of data for growth. So she and her team set out to uncover and tidy up the data required to enable clients to grow their businesses confidently and easily.