If you’ve ever watched reality TV (and don’t say you haven’t because we all know it’s too easy to get sucked in by the drama and controversy), you may have noticed a specific formula…

First you find a cause – dating, small business, cooking or home improvement.  Next, you add a few unassuming characters – some very relatable but also few who are downright crazy, nasty or delusional.   And last but not least, you add just enough controversy, intrigue, shock and cutting remarks to keep the masses coming back for more each night.

In the end, are any of these contestants (or their small businesses in the case of Shark Tank) really any better off?  Probably not, but what you have done is create some compelling TV and sold a bucket load of ads to big brands like iSelect, Swisee, Safeway, NAB and Mitre 10.

The other night, I watched Channel Ten’s latest reality TV import, Shark Tank. The premise is pretty straightforward.

A few naive and nervous and numerically challenged small business owners lined up to pitch to a panel of cool, critical and cashed-up potential investors.

Some ideas got funded for relatively small amounts. Most ideas (and their creators) got ripped to shreds by the panel.

So, the show is essentially Survivor, The Apprentice and The Bachelor all rolled into one with Australian small business contestants, and a catchy brand that has the ominous word “shark” in it.

How could that possibly fail?

As I watched, I wondered, ‘Are any of these small businesses likely to breakeven or become profitable and cash flow positive?’

And, perhaps not suprisingly, the answer is “not likely”.

Why is that?  Because some of the ideas were pretty interesting.  The cricket cooler, the motorized skate board and the hamdog may actually have global potential, but to be viable in the long term, the owners really need to do their homework first and know their numbers.

Case in point – not one of the small business owners who pitched had done market research with their product (or prototype) and could quantify the size of their market. Without that vital information, how can they possibly estimate topline revenue, market penetration or the value of their business with any precision or clarity?

And without those last three things, it’s impossible to give a meaningful pitch or ask for the “right amount” of capital.  I’m sure you will agree, other than the guy who thought his hairbrained rental resume idea was worth $2.5million, most of the entrepreneurs vastly underestimated the amount of working capital that they needed.

Several contestants floundered when they got asked the big questions about breakeven, margins and cash flow.  Yes, the dreaded cash flow question pretty much stumped everyone.

Most were asking for arbitrary sums of money to commercialise their inventions without regard for how much it might really take to get their brand out there and win their first major customers.  One pair even thought it was clever to ask the investors to chip in $150,000 so they [the founders] could leave their secure day jobs and start working in the business full time.  Crazy right?  If you the owner don’t have skin in the game or work in the business full time, chances are you should still be writing your business plan, not pitching it on national TV in front of 5 sharks and a million viewers.

The cricket cooler duo were the most polished in terms of delivery and presentation. They recognized that patents and intellectual property were vital to their valuation and attractiveness to the sharks, but drastically underestimated the value of locking things down in India – the number one cricket market in the world.  And the sophisticated sharks knew that Australia is just a mere drop in the bucket, compared to the potential in a market like India.

Unlike the really trashy stuff – Bachelor, Idol, or Real Housewives of Melbourne – the show didn’t make me feel icky or shocked while watching the sharks tear the flesh off the bones and gnaw away at the contestant’s dreams.  I sort of expected that would be the main draw card and the whole premise of the show.  Why call the show shark tank if you don’t intend to set up a blood bath and feeding frenzy?

But as an entrepreneur, I did feel genuinely remorseful for each of the contestants.  The small businesses who got funded gave up decent chunks of equity for relatively small injections of capital – which may or may not be enough to get them to market and earn their first customers.  And the ones who didn’t walked away without any constructive advice or tangible instructions on how to go away and get their idea investor-ready.

Imagine you are playing an important game of tennis…

It’s the club final and you are the favourite to win. There is a big crowd watching and as the game progresses, everything seems to be going to plan. You’re playing well and you’re winning points. Victory can’t be far away. There is only one problem: there is no scoreboard, and the umpire is keeping the score to herself. So no one except the umpire knows what’s really going on.

Nevertheless, you plough on and, despite being in the dark about the score, you feel positive that eventually the umpire will declare you the winner. You are so confident that you can’t help but relax just a little. You start enjoying the party like atmosphere.

Then a shock! Out of the blue, the umpire declares that it is match-point … to your opponent! You can’t believe it. You go back to the baseline, determined, and set yourself up for this big point. But to no avail. It’s too late to get your mind back into gear and you hit the return wide. The game is over, the final is lost. If only you’d been able to track the score during the game. At least you would have been able to fight back a little bit earlier.

Every day, hundreds of businesses, big and small, operate as though they are playing a game of scoreboard-less tennis. Every month the owner runs on feelings for most of the month – no more than a guess about how well the business is travelling. A day or two after the month ended, you will look to the ‘umpire’ – your accountant – who will give you the ‘score’ – your figures. And most times, his perceptions will have proven inaccurate and it is far too late to do anything about it. When things changed in the business – when your ‘opponent’ started to get on top – you simply would not have seen it coming.

Your financials are to your business what the main scoreboard is at a sporting contest. Can you honestly say that you know where you are and where you are going?

Do you often look at your reports and wonder what they mean?

Do you waste money and time chasing new customers instead of fixing your business and making it profitable?

If you are ready to get serious about your business… it’s time for a little Financial Foreplay®.

It’s time you learned:

· Why cash, more than profit, is the key to success in business;

· How to find and unlock the hidden profit and cash that is trapped in your business;

· How to use the numbers in your financial statements to give you information that is useful for you – not just useful for your accountant. For instance, I’ll show you how to calculate a few simple but important ratios, to understand the results and to monitor them on an ongoing basis;

· How to stop making common business mistakes that are preventing you from being as successful as you deserve to be;

· Why too much inventory can strangle your business;

· How to manage debts owed to you and minimize the risk of default;

· How to charge the right price for your goods and services;

· How to decide whether an investment will be a good use of your company’s money or not;

· How to work out when, during each month, you ‘hit the front’ and start being profitable;

· How to set powerful and meaningful targets that will focus the attention of both yourself and your staff on making good decisions and taking positive actions ALL the time;

· A way to measure and track your financial success in a simple and meaningful way; and

· How to eliminate the unproductive habits that have been holding you back.

You will learn all this through the stories of my clients. Powerful stories about real business owners, just like you, with common financial problems. I’ll show you how these business owners found themselves in trouble, how they worked out what was wrong (with a little help from the financial numbers) and how they took action to turn things around.

Your executive summary can make or break your business plan

While only 2 pages in length, the executive summary is by far the most  important component of your business plan or proposal. It is designed to  summarize the key elements, capture attention and most importantly, showcase the  financial highlights.

So, if you only have 2 pages to convey a significant amount of information  and summarize the financial upside, how do you decide what to put in and what to  leave out? Which financial features are critical to emphasize?

Depending on the purpose of your document and the intended audience  (investment, sale, partnership, strategic alliance, joint venture etc.), you  will want to tailor your financial disclosure to suit their needs and  expectations. What would they want/need to see in order to make an informed  decision?

At a minimum, you need to clearly state what financial input is required from  them and what they will get in return – i.e. a share, debt instrument, license,  exclusive right etc. Next, highlight the expected net profit and cash flow over  2-3 years. Also, give a clear indication of return on investment (ROI) AND a  realistic, well defined exit strategy.

In an executive summary, it is important to be succinct and focused. It is  not the time to tell your life story, overpromise with unrealistic projections  or overwhelm with too much detail. You will only get one chance to make a good  first impression and capture the attention of the reader. In fact, many  sophisticated investors have told me they rarely read a business plan or  proposal in its entirety. They make their decision on the strength of the  executive summary and their assessment of the owner/manager (in terms of  character, knowledge, skills and tenacity).

Focus on “what’s in it for them”. Show them clearly how they can benefit and  when the result will be crystallized. Give them enough detail to understand the  industry, opportunity and unique solution you provide. And most importantly,  clearly summarize the key financial metrics of profitability, cash flow and  ROI.

In short, make it EASY for them to invest in YOU.

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