Have you ever dreamed of being on Shark Tank? Be honest, do you feel just a little jealous when you watch a startup founder get several hundred thousand dollars from a Shark—imagining how much easier your business could be if you had that kind of capital, and that kind of experienced investor in your corner? Well, those dreams will have to remain mere flights of fancy since venture capitalists don’t invest in professional service businesses—creative practices are simply not scalable enough. But what if there were a Shark Tank for creative entrepreneurs? What if you did have your 15 minutes in the tank, how would you present your company, and would you be ready to answer all their scrutinizing questions?
Are you ready to take the struggle out of finding new clients?
Being a creative entrepreneur is quite different from other forms of entrepreneurship. When startup founders pitch VCs their companies must have the potential for huge returns on the investor’s capital. Even the most lucrative creatives aren’t going to offer those kinds of returns. So even if you ever did get a shot in the tank, you’d quickly hear a rapid succession of “I’m Out’s.”
Aside from missing out on an infusion of capital for your creative business, not being an investable company means you also lose out on the valuable, albeit potentially painful experience, of having your business evaluated by experienced and successful investors. Startup founders will tell you that even when they don’t get an investment from a Shark, the experience of being questioned and examined provides valuable insights about their businesses.
Since creative entrepreneurs never get access to this kind of business intelligence, over the next few episodes of 5 Minutes on Creative Entrepreneurship I’m going to translate some of the typical questions startup founders face in the tank, into concepts that apply to creative entrepreneurs. After all, even if you aren’t running a business that would be attractive to an investor, your business is still important to one investor—you. And so you should want to run it as effectively and profitably as possible.
To kick this series off, let’s consider the entire concept of investment in general. This is so important because you do invest so much of your time and effort in running your creative practice. Venture capital investors enjoy the benefit of objectivity when they consider investing in a company. At the end of the day they simply want to get their money back with a 5x, 10x or 100x return. This basic goal enables them to remain critical and objective as they evaluate a startup.
Creative entrepreneurs could use a dose of this kind of objectivity. As creatives we get so caught up in our enjoyment of the creative process—that we pay little to no attention to the reality that we are engaging in business. Our appetite for creative opportunities regularly overrides our profit motives.
But every investor understands the nature of risk when it comes to business investment. They ask questions about production costs, margins, overhead, runway, leverage, inventory, and marketing because they know that the answers determine the potential success, and degree of risk involved in every investment they make.
We likewise need to evaluate these basic business realities as we invest in our own business. And remember, even if you aren’t investing cash into your business—if you’re bootstrapping it, you’re still paying a high opportunity cost when you choose to start your own creative business. After all, you could be working for someone else, drawing a dependable paycheck—but you forgo this when you strike out on your own.
When we engage in the creative service business, as the sole investor in our startup, we take all the risk. It would behoove us to think a little more like a Shark when it comes to testing our business assumptions, and evaluating our business model.
And so over the next few weeks we’ll consider some of the questions Sharks ask investors, and translate them for the creative service business, so that we can fix our flaws, increase our margins, and ensure we get a good return on our investment.
And so until next week: don’t let the business of creativity overwhelm your creative business.