You might know the Scrub Daddy out of your sink – or from its enthusiastic pitch by Aaron Krause on the truth present Shark Tank in 2014. With over $670 million in whole gross sales in 10 years, the Scrub Daddy made waves – and financial institution – after its tv debut.
Scrub Daddy’s merchandise are discovered at your native Costco, grocery store and different massive field shops. It’s thought-about one of many prime 5 Shark Tank offers within the present’s historical past, and boasts partnerships with Unilever and different main producers and retailers – together with a viral TikTok account with over 4 million followers.
Entrepreneurs ought to take be aware. Not solely is Scrub Daddy’s success a case examine in how the correct investor and a little bit of publicity could make all of the distinction, however Krause’s Shark Tank pitch is the proper template for securing a enterprise mortgage with a lender.
Get to the purpose rapidly
Krause’s total pitch and product demo is about two minutes lengthy – sufficient time for him to introduce the product and show its qualities in a fast and direct approach. Everything of the pitch feels extra like an infomercial than a dry enterprise presentation.
Within the pitch, Krause made the case for his firm’s success and hones in on Scrub Daddy’s most unusual and salable points. That is the results of Krause growing his pitch at commerce reveals and stay demos at shops, after which perfecting it for stay showings on QVC.
Whilst you don’t should do a full product demo in entrance of your potential lenders, protecting your pitch quick and candy will let your viewers know you worth their time, and that your small business doesn’t want 20 minutes of rambling to justify a mortgage. The identical goes for in the event you’re submitting a written doc with an govt abstract and enterprise overview in lieu of a gathering – hold it transient, spotlight your strengths and get to the primary level.
Know your small business inside and outside
Krause is not any stranger to the trade Scrub Daddy belongs to. He first bought the thought for the sponge whereas he was cleansing his palms on a job website and located that the polymer foam was particularly helpful for eradicating cussed dust and grease.
Earlier than pitching Scrub Daddy, Krause based and later bought a automotive buffing pad firm to 3M – which, coincidentally, rejected Krause’s hand scrubber concept.
Krause’s expertise within the manufacturing and logistics trade gave him a transparent concept of the place Scrub Daddy goes and the place it must go. He bought his proof-of-concept down on a small scale – Krause instructed the Sharks that demand for Scrub Daddy on QVC and different gross sales channels was slowly ramping up, signaling it was time to scale up the enterprise.
Krause’s expertise as an inventor additionally lends him an edge. He instructed the Sharks that he had patents on his invention and domains able to go, signaling that he was severe about his enterprise.
Lastly, Krause knew how his product sells. His 30 years of expertise pitching merchandise at commerce reveals and in retail shops helps him decide that demos and finish caps are the important thing strategy to make clients excited by Scrub Daddy, and instructed him which elements of the pitch work.
As a startup enterprise proprietor, once you pitch your small business concept to the financial institution or one other stakeholder, it’s key to know your small business and viewers. Have proof that your concept works earlier than planning on enlargement. Even having a aspect gig and understanding the money circulate and demand will help your case.
Proving to your lender that you’ve a stable marketing strategy and that your concept is worthwhile means a safer funding – and a greater likelihood at getting your mortgage authorized.
Know precisely why you want the capital and the way it’ll flip into worth
A typical pitfall on Shark Tank – and for would-be debtors pitching their concepts to lenders – is just not having a transparent concept of what they’re going to do with the cash. Merely pouring capital right into a enterprise received’t robotically translate into extra gross sales, which is why having a transparent concept of the place the cash goes and the way it’ll translate into income is vital.
Krause was conscious of this reality when he’s pitching to the Sharks. Krause requested $100,000 in funding in alternate for 10 p.c fairness with a purpose to begin an unbiased manufacturing facility, permitting the corporate to make Scrub Daddy 24/7 as a substitute of counting on one other manufacturing facility’s schedule.
Whereas it’s not essentially the most glamorous motive to pitch to Shark Tank, Krause knew the funding will permit him to ramp up manufacturing and fulfill the rising demand he’s been seeing via retail and QVC, in addition to the large-scale push he’s planning as he introduces Scrub Daddy throughout the nation – resulting in Scrub Daddy being supplied in 47 nations and hundreds of retail areas by 2024.
Be ready for the exhausting questions
While you’re pitching your startup, lenders and buyers are going to need to guarantee they’ll be paid again. When your pitch is completed, be able to be grilled about your small business mannequin, your buyer base and different particulars – and be ready to defend your solutions.
Krause confronted this after giving his pitch. He emphasised that he has 3,000 shops lined up for gross sales when Mark Cuban questioned the viability of Scrub Daddy’s gross sales mannequin. Krause was capable of clarify the necessity for manufacturing capability when Kevin O’Leary requested why Scrub Daddy wants its personal facility, mentioning his 18 years of expertise in manufacturing and logistics.
Krause was additionally capable of instantly reply questions on how a lot it prices to make a Scrub Daddy, how a lot he was promoting it on wholesale and different key enterprise particulars – no notes wanted.
Krause ready himself for these exhausting questions by soliciting assist. In response to a Reddit AMA held in 2015, Krause constructed out a flowchart with potential questions from the Sharks, serious about his responses beforehand. He additionally had his lead engineer grill him on each side of the product and the pitch.
Be a champion for your small business
Whilst you might need passionate workers, buyers and stakeholders at your aspect, the one who in the end cares most about your small business concept and its success is you. Whilst you shouldn’t anticipate a simple time when pitching your concept to lenders, it is best to believe in your enterprise and be ready to advocate for it.
Krause’s enthusiasm for Scrub Daddy got here throughout not solely in his pitch, but in addition negotiating with the Sharks. He actually believed in his concept and that it will achieve success with the correct investor – which is why he instantly turned down O’Leary’s preliminary provide of $100,000 for 50 p.c fairness. This opened the ground to raised presents down the road and allowed Krause to retain majority possession of his firm.
Krause additionally advocated for the thought of Scrub Daddy itself. When O’Leary in contrast the sponge to a Brillo pad, Krause pushed again, claiming that Scrub Daddy is a high-end product that customers will discover is definitely worth the value.
Goal for the partnership that can give you the perfect worth
Krause, when he walked onto the set of Shark Tank, was wanting not just for an investor who can provide him the capital to increase, however “a strategic companion who can open [Scrub Daddy] into retail shops.”
Whereas Krause acquired a number of presents from the Sharks, together with a $150,000 funding for 25 p.c fairness from Daymond John and a $100,000 funding from O’Leary with a per-unit compensation plan, Krause finally partnered with investor Lori Greiner, incomes a $200,000 funding for 20 p.c fairness.
Krause was good to carry out for Greiner’s provide. Whereas O’Leary and John had aggressive presents, neither had the expertise and mentorship Greiner needed to provide.
Referred to as the “Queen of QVC,” Greiner earned her fortune inventing, patenting, promoting and advertising and marketing family items – which is true up Scrub Daddy’s alley. Greiner and Krause offered Scrub Daddy on QVC the day after the episode was filmed, promoting over 7,000 items in seven minutes.
Greiner additionally netted Krause distribution offers with Mattress, Tub and Past, Dwelling Depot, Walmart and different retailers, serving to Krause make $18 million in gross sales a 12 months and a half after the episode aired and hundreds of thousands extra within the following years.
Partnering with the correct lender is essential to creating positive your small business succeeds. Whereas your lender will not be reducing offers to assist market your small business, you’ll want to be sure that the mortgage’s phrases are manageable to observe, the compensation plan works along with your money circulate and that you simply’re getting the perfect deal in your borrowing prices.
Know your subsequent steps
Krause and Greiner didn’t waste time in getting Scrub Daddy nationwide. Even earlier than making the deal on Shark Tank, Krause already had shops ready to promote Scrub Daddy. He additionally had extra merchandise in thoughts, together with variants of the Scrub Daddy, sponge holders for sinks and extra.
This helps set Krause up for fulfillment with the capital and connections Grier presents. After the preliminary wave of consideration from the Shark Tank episode, Krause expanded his manufacturing amenities, upping manufacturing and increasing into different merchandise equivalent to mops, wands, soaps and scouring paste.
Realizing the place to go along with your small business as you develop and repay your mortgage will set you up for fulfillment sooner or later. It may well show you how to perceive the way you’ll scale, when your enlargement requires extra employees and assets and the way to sustainably increase your small business mannequin over time, whereas capitalizing on the concrete property you’ve gotten available.
The underside line
Whilst you may not end up standing in entrance of Mark Cuban or Kevin O’Leary once you apply for a enterprise mortgage, Aaron Krause’s bombastic Shark Tank pitch for Scrub Daddy generally is a useful information in crafting your small business pitch.
By understanding your small business and shopper base, having a transparent concept of the way you’ll make good on the mortgage and pay it again and by advocating for your small business concept, you may make your mortgage proposal a profitable one – and be properly in your strategy to funding your subsequent enterprise.
