Sweet Ballz was a big hit on the Shark Tank season premier; so big in fact that their website crashed and was down all week! When you connect with 7 million viewers, you better be prepared for server crushing traffic. They apologized to their “fans” on their Facebook Page yesterday:
We would like to apologize to all the awesome people who visited our website and Facebook page since we were featured on Shark Tank. Sweet Ballz Cake Balls will be available to order starting the middle of next week on our new and approved website. We will be giving a discount on all orders for 1 week and giving away some Sweet Ballz cake balls and t-shirts to some lucky fans. Life just got a little sweeter for us so we want to make it sweeter for you. Thank you for your patience and get ready for some amazing Sweet Ballz starting next week!
What if they didn’t get a deal? What would Sweet Ballz financing options be?
Shark Tank is a voyeur’s dream: witness unscripted entrepreneurs promoting their business opportunity to angel investors. It’s a great way to learn do’s & don’ts when pitching your business, but chances of appearing on the show are very slim. If you’re a determined entrepreneur, focus your energies on learning about other financing options.
Sweet Ballz Financing Spotlight
This week, we will showcase Sweet Ballz. What if Sweet Ballz didn’t land a spot on Shark Tank? What other options would they have? Let’s first look at some factors that can impact how “financeable” they are:
• Mass Appeal – It’s a product that appeals to the masses, so there are many chain stores (as opposed to specialty stores) that might want to carry the product beyond 7/11.
• Replicate-able – Using their proprietary recipe, the product can be replicated. That means they can use bakeries (also known as co-packers) all over the country to fill orders and streamline the process.
• Healthy Margins – It costs $.86 to produce Sweet Ballz and they’re selling them for $1.99 – 2.49 – that’s over 100% mark up.
• PO – They have a confirmed purchase order from 7/11, a credit worthy buyer.
First, it’s important to understand ALL the ramifications of having an equity partner like the Sharks. When business is growing and you urgently need cash, landing an equity deal seems like a dream come true. You get the cash you need to grow AND the expertise of your equity partners. Businesses don’t always realize the potential downsides of an equity partnership:
• You’re no longer the sole decision maker. Equity partners can actively influence decisions that impact your business.
• If you lose your biggest account and don’t need your equity partners’ cash anymore, you’re still contractually obligated. Plus your equity partners are now nervous about their investment and even more involved.
• Conversely, you get a huge new order and have to raise more equity. Your current partners may not provide more cash and may increase their equity.
If you look at Sweet Ballz financing options, you’d see they would be a prime candidate for a financing tool called purchase order financing. This type of financing looks at the quality of the contract instead of the company’s finances.
For instance, you just received your first big order. Everyone is celebrating until you realize that your supplier will need upfront payment to fulfill an order that large. You don’t have the cash. With purchase order financing, your supplier is paid to produce your goods. Once the vendor receives the goods and pays your invoice, the financing company distributes proceeds back to you. If PO financing seems like a fit for your company, here are some other factors you’ll want to consider:
• Unlike an equity partner, after you get the cash you have no requirement to listen to the financier.
• If you get another big purchase order, the loan basis can be adjusted much quicker than you can raise more equity.
• If you lose a big order, you can easily scale back your loan since you no longer need the financing.
If Sweet Ballz financing didn’t involve the Sharks, their website may not have crashed this week, but they wouldn’t have millions of new fans and customers. They did have big vendor relationships though and could have found other ways to raise capital. Your business may not be featured on the Shark Tank, but the show can motivate you to find creative ways to finance your dream business.
Dan Casey, founder and CEO of purchaseorderfinancing.com, believes every business has a story to tell. He’s been listening and helping small businesses grow exponentially since 2002 using a creative combination of finance tools. He’s been featured in publications including Entrepreneur Magazine, Entrepreneur Online, Small Business Trends Online, The Washington Post, Crain’s Chicago Business & American Express Open Forum.
Visit www.purchaseorderfinancing.com and be sure to mention Shark Tank Blog to get a free subscription to Fast Company or Entrepreneur magazine.*
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