Shark Tank & Investing

This is the last of three blog posts regarding things I learned from Kevin O’Leary’s presentation at a recent industry conference. The first post dealt with creating a successful pitch. The second post discussed attributes of a successful manager. In this post I will share some intriguing information about Shark Tank and also Kevin’s investment philosophy.

Shark Tank Tidbits

1. The number one cost for a new business on Shark Tank, and one of his most important metrics, is the cost of customer acquisition. If a company doesn’t know that figure, they have no business being in business. And he has found that many companies’ acquisition cost is greater than the lifetime expected revenue.

Marketing can be a tricky business. Some marketing takes time to build brand and awareness. You don’t want to pull the plug too soon. But at what point do you recognize that the strategy isn’t working…that the cost to acquire a customer is too great? I struggle with this myself. If you have any insight, please share below in the comments.

2. Kevin said that the most successful business owners, based on his experience, are women. And he plans to do more business with them in the future. He said he is not being sexist, rather he believes women have superior time management and time allocation skills…crucial for the success of a business.

Kevin’s Golden Rules of Investing

Given Kevin’s many investments in small companies, you may think he has a preference for high risk and high return investments. Nothing could be further from the truth. He is passionate about his philosophy, which was taught to him when he was a child by his mother.

Note: These are Kevin’s opinions and are not to be construed as investment advice, the Holy Grail, a stock tip or any wild extrapolation. It is one person’s personal rules for investing. Agree or disagree as you wish.

– Don’t own more than 5% in any one position

– Never own more than 20% in one sector

– Never own a position that doesn’t return capital (He said historically dividends make up majority of return) He acknowledges this strategy causes him to miss out on many great high growth companies, but doesn’t care

– Own at least 35% of fixed income (includes real estate)

– Preservation is more important than performance

– Keep 10% in cash at all times because “poo poo happens”

Final Thoughts

Kevin O’Leary is the Simon Cowell of The Shark Tank. My 14 year old daughter loves him – it’s his honesty and directness. His presentation was one of the best I have ever seen. He has a great sense of humor and reality flows through his blood. He tells things like they are. Not to be disrespectful, rather to be respectful. Telling someone what they want to hear may help them feel better at the time, but it may do more harm than good in the long run. Being real with someone – that is respect!