I don't watch a lot of TV, but every once in a while I need a break. So my wife and I will watch a show and our favorite used to be MasterChef. Sorry, Gordon Ramsay, but lately it's turned to Shark Tank.

Now this isn't anything new. I used to watch Shark Tank back in the day, but I took a long break because I just don't have time to sit down and binge on a bunch of TV shows. So very rarely do I have time to watch TV. And when I do, I want it to be uplifting or educational or build me in some way. Nothing's worse than watching a movie or a stupid show and then getting done and be like, Oh my gosh, I just wasted two hours of my life. So at least with Shark Tank during the 45 minutes I can apply these principles to my life. And I'm going to talk about that today.

But if you're not familiar with Shark Tank, here's the deal. I stream it on Hulu and essentially entrepreneurs, they walk into a room and they pitch their business to a panel of ultra successful investors. And these people are considered the sharks. People like Mark Cuban, Barbara Corcoran, and Kevin O'Leary. And they share their product, their story, and then their ask. And they say something like, I want $200,000 for 10% of my company. And then the sharks tear them apart. It's very entertaining.

Okay. So what fascinates me most and what I want to share with you today is the financial side of the show. Because if you pay attention, Shark Tank reveals exactly what separates real business owners from the rookies or the hobbyist. Okay. So in this episode, I'm going to share with you three things. Number one, the biggest financial mistakes I see on the show. Number two, why cashflow not revenue or valuation is what actually matters. And three, the one thing that guarantees you'll get destroyed by the sharks and hint, it's not your product. So by the end of this episode, you'll know how to avoid the common traps that kill deals in how to actually think like an investor, not just an entrepreneur.

So let's get into lesson. Number one, revenue is not wealth. So you'll hear it all the time. They'll come onto the show, the entrepreneurs and they'll pitch their product idea. So they're like, okay, I got a new solution. This is going to replace the hanger, for example. And it's like, Ooh, wow, that's kind of cool. How innovative. I like how it bends, folds, snaps, sparkles, whatever. But then the next question is, okay, tell us about your sales, your revenue. And then the entrepreneur usually surprises me because I think it's a dumb invention, for example. And they'll say, yeah, we've sold $1.2 million over the last year. And it's like, wow. And all the sharks applaud them and they smile and they're happy and they say, congratulations. Right.

But then the next question is, have you made any money off this product? And sometimes this turns off the sharks because if they've lost a lot of money, then the sharks will be like, what the heck, where are you off? Is it in your customer acquisition cost? Is your overhead too high? Are you spending too much money on inventory? And they'll try to reveal the problem. But if you don't have profit, that's okay, I guess, initially because if you're scaling and your gross margins improving and you're proving out the business model, then I think investors can be patient. But what I've noticed is that a lot of these entrepreneurs will come on the show and sure they want the exposure from being on TV, national television. They may want mentorship or coaching from one of the sharks because they're very successful entrepreneurs, but really what they need is cash because revenue doesn't pay the bills. Cashflow does. That's why I love cashflow so much. I talk about cashflow all the time on this podcast, probably so much that it drives you crazy. So I've seen businesses on Shark Tank sell like crazy, but they're still broke. Why? Because their costs are too high. Their pricing is off. They're bleeding cash on inventory or ad spend. Something's going on. And this is what I say over and over again when I'm watching these episodes. Cashflow is king. Cashflow is what keeps the lights on. Cash is what pays your team. Cash is what gives you options. And the sharks know this. That's why they drill down fast. What's your margin? How much cash is in the bank? What's your monthly burn rate? These are the questions that they're asking them. And there's a great lesson in this. So when it comes to your business, your product idea, whatever it is, the most important thing is cash. Now, of course you need to have sales, but in the process of doing sales, you have to figure out a way to manage cashflow because when you run out of cash, you're dead.

All right. Lesson number two, if you don't know your numbers, you're going to get absolutely destroyed. One of the most savage moments on the show was when Kevin O'Leary, AKA Mr. Wonderful said, if you don't know your numbers, I will destroy you. And I think he said, I'll crush you like the cockroach that you are, or whatever it is. And he really means it. There's nothing that sets off a shark faster than a founder who fumbles a question like, what's your cost per unit? What's your net profit? What's your customer acquisition cost? What's your lifetime value? What's your monthly revenue last three months? And the worst answer is, uh, I think it's around. Nope. Done. You're out. You're cut.

And I was watching this one episode with this poor lady. Oh my gosh. I felt so bad for her because she did such a great job with the pitch and she had a good product. But then when it came to her numbers, she was fumbling all around. Like, so what are your sales? And she's like, um, you know, and I can't remember the exact numbers. So I'll make up numbers. But she's like, uh, like 2 million. And they're like, what's your profit? And she's like, uh, like 1.2. And they're like, is that your gross profit or your operating profit? And she's like, uh, well, uh, um, growth knows operate. And she's like, I don't know. I'm not good at this. Like I rely on my accountant. And immediately like that set off the sharks. And then they asked her some other questions and she literally didn't know. They're like, okay, let us tell you the difference between gross profit and operating profit. They're like gross profit is revenue minus your cost of revenue. All the costs associated with fulfilling your product. That's gross profit and operating profit is your gross profit minus your overhead. So which one is it? And she was still like, so confused. She's like, uh, I don't know. I mean, basic stuff, right?

So that's why I do boosting your financial IQ. And that's why I have that free training at byfiq.com like this whole program over a hundred video lessons, because I don't want you to be in business faking it until you make it. Cause that does not work with finance. I can read right through people when they're saying a bunch of bullcrap and I'll be in a meeting with one of our operating companies and one of the business leaders will report on their numbers for the month. And I'm like, yeah, this person has no clue what they're talking about, which is fine. Like I don't expect people to be an expert with numbers. I just expect them to be honest and humble with what they know and what they don't know. So you can't fake your way through this. You can't just make up stuff because otherwise you're gonna look like an idiot. If you're saying operating profit, but it's really gross profit, the numbers are going to be way off. And if you don't know what working capital is or cashflow or lifetime value or customer acquisition costs, or you don't know when you're going to break even in your business, like these fundamental things, you have no right to being an entrepreneur. What if you're an entrepreneur then in finance isn't your thing? Well, you're going to have to partner up with somebody who knows the financial side of business because you can't just be the visionary. You can't just like come up with product designs and you can't just go out there and sell stuff if you don't know how the numbers work because you will run out of cash. So I think that's so critical.

All right. Lesson number three, which kind of ties into lesson number one is cashflow is greater than valuation. And so going back to the whole cashflow thing, I've seen another pattern where founders are asking sky high valuations. So for example, they'll say, we're asking for $500,000 for a 5% stake, which essentially means they're worth $10 million or they believe they're worth $10 million. Then the sharks dig in and discover number one, they have no cash, they're unprofitable and they're still working another job to pay rent. So valuation is fun on paper, but cashflow is what builds wealth. You can't eat valuation. You can't reinvest potential. You need margin, you need cash, you need runway. This is why real entrepreneurs, real investors focus on one thing first is the business throwing off enough cash to survive, grow and scale. Because if not, you don't have a deal. You have a liability.

And if you think about the definition of value as it relates to business, it comes down to intrinsic value and intrinsic value is measured by the present value. So what the dollars are worth in today's terms of all the future cash that the business is going to spit out over its remaining useful life. And when you add up all that cash into present dollars by discounting, right? That's when you come up with the value of the business. That's it. It's not based on revenue. It's not based on hype. It's not based on anything else. It's based on cashflow. I mean, think about that. If I was going to invest in a business and let's say I have $10 and I give you $10, well, I'm expecting that you're giving me back 15, 20, 30, 40, 50, whatever it is, depending on the risk level. So the riskier the venture, the more money I'm going to want back in return to compensate for the risk I'm taking on. But there's also a time factor because if I give you $10 and you give me 20 back, that's great. But not if you're paying me that back in 20 years, that's not great, right? Doubling my money in 20 years is a low return. So that's what you need to understand with finance.

And I see so many of these entrepreneurs who are well put together. They've spent a ton of time mastering their pitch. They make it on to national TV and then they fumble with their numbers. And I'm like, Oh my gosh, this just reinforces my passion for financial literacy. Like seriously, if you don't know your numbers, whether you're running a business, whether you're managing a business or whether you're starting a business, you're dead, you're dead in the water. You have to know your numbers. And it starts with understanding the income statement, the balance sheet and the statement of cash flows, and then how cash flows between all of those three statements. And then once you've mastered that, it's understanding, okay, what do I do? What behaviors do I actually pursue to influence the numbers? And that's where power comes from is being able to see financial reports, being able to see a KPI dashboard, and then knowing what to do to make those numbers go up or down.

So here's how to apply this in real life. If you're building a business or thinking about buying one or even freelancing on the side, number one, know your cash position at all times, how much is coming in, how much is going out and how much is left every month. Number two, memorize your core metrics, gross margin, net profit, customer acquisition cost, lifetime value, breakeven point, return on invested capital, just to name a few. And number three, don't chase hype, chase health. High revenue, no profit equals a broken, bad business. Lower revenue, strong margin, and cashflow—that equals freedom.

So Shark Tank is entertaining, no doubt, but it also reveals how real investors think. They don't get excited by logos or passion. They care about cash, profit, and clarity. And if you walk into a room and you don't know your numbers, they will destroy you not because they're mean, but because business is math.

So if you want to win, know your numbers. If you want freedom, focus on cashflow. And if you want to build wealth, build something that lasts, right? That's what I have for you.

I have a ton of free resources. It's all free at BYFIQ.com, which stands for boosting your financial IQ. So if you haven't gone there already, be sure to check out the website and check out all the resources that I have prepared for you.

I hope you have a great week. And until next time, take care of yourself. Cheers.