photo by egarc2

I had a chance to catch the 2nd half of an episode of Shark Tank over the weekend (I saw the last half of Episode 7 if you’re looking it up).

If you’re not familiar with the show, it’s a 1/2 hour reality show where aspiring entrepreneurs pitch their idea or business to a group of self-made multi-millionaires who have made their money by wheeling and dealing, creating, buying and selling businesses (the Sharks).

The business owners have an opportunity to raise money and make a deal on the show – either as an investment or a buyout.  They’ll pitch their idea and then ask for an amount of money in exchange for a portion of the business.

The Sharks are all legitimate business gurus, and they’ve got big personalities and egos to go along with it.  They don’t seem to like each other very much and there’s a lot of back and forth that has little to do with the business ideas – hard to tell if it’s staged much, but it does make for good TV.

Here’s a couple of the ideas that were discussed in the episode I saw:

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  photo by Robert S. Donovan 

As a business owner, when you first start out you create some sort of vision of success.  A vision that’s compelling enough to get you to take the big leap, leave your job, take the risk…whatever it might be.

That vision usually has a money component – ultimately you want long term financial independence (what ever that might be for you), and you also want to make good money along the way (be well compensated for your efforts above and beyond the hours you spend). 

Most business owners would like a certain amount of freedom and flexibility relative to their time – you know you’re going to work a lot of hours, but if you can have some say as to when those hours might be, that would be great.

Finally – as a business owner you’d like to be doing something you believe has a larger purpose or is at least interesting…and you’d like to carve out some time to hang out in a hammock by the ocean every now and then!

Unfortunately for most business owners their vision of success gets lost somewhere along the way.  That’s why I found it really refreshing to hear some friends of mine talk about the business success they had achieved in the last couple of years.

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I’ve talked to several business owners in the last few weeks that are struggling because they can’t get a line of credit from their bank (or their line of credit’s been cut off).  Their wallet is empty and it’s causing all sorts of problems in terms of making payroll, investing in future growth and getting a good night’s sleep.

Unfortunately it’s not just anecdotal data – information from the SBA shows that lending is falling sharply.  How sharply?  There’s 30% fewer loans now than 2008 and 55% fewer than were backed in 2007.  That’s a big drop-off!

However there is some good news – in June the SBA announced upped the ante on their stimulus lending program, America’’s Recovery Capital Loan program (ARC).

These have been slow to take off, but I have started to hear people talking about them.  Could you benefit from an SBA ARC loan?  Read on…

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I’ve always been fascinated by the concept of Sunk Costs – it’s one of those discussions that intellectually most people understand – as long as it applies to someone else!  However when it comes to your situation, things aren’t always so clear.

Just so we’re on the same page, sunk costs are essentially old investments (time or money) that are now irrecoverable.  Logically they should have no bearing on any decisions going forward (they’re sunk costs that you can’t get back) however there is a very real psychological component that tends to impact decisions.

How often have you heard someone say something like:  “I can’t let Susie go, I’ve invested all of that time and money into training her”.   It’s not a rational statement, the only thing that matters is whether or not the business owner believes Susie is going to deliver more value than her future salary.  If the answer is no, then she should ‘let her light shine brighter elsewhere!’ as one of my old bosses used to say.

How do you catch yourself from getting caught up in the Sunk Cost trap?

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