Watching “Shark Tank” can sometimes be confusing, especially with all the fancy words they use. When Legacy Shave was on the show, Mike, the guy who created a special shaving brush, needed some money to grow his business. Lori said she’d help, but her offer might have sounded a bit tricky. Don’t worry, Here’s a simple explanation of what happened between Mike and Lori during their talk, so everyone can understand, even if you’re not a money expert!
Simplifying the Concepts
- Equity: Represents ownership in a company. If you own 10% equity, you own 10% of the company.
- Royalty: A payment made to an inventor or owner for each sale of an item, calculated as a percentage of the revenue per sale.
- Buyout: Purchasing full ownership of a company, including all its assets.
The Initial Pitch
Mike introduced Legacy Shave with a request for $300,000 in exchange for 10% of his company. This means he valued his entire company at $3 million and was offering a slice of it to the sharks for their investment.
Imagine you’re starting a lemonade stand and need $30 to buy supplies. Your friend offers to give you the $30, but in return, they want a 10% share of your stand. This means they own a small part of your business and will get 10% of the earnings from your lemonade sales. This is similar to what happened on “Shark Tank” when the entrepreneur from Legacy Shave asked for $300,000 in exchange for 10% of his company.
Lori’s Turn to Offer
Lori thinks Mike’s idea is good, but she has a different plan. Instead of just buying a piece of Mike’s company, she wants to buy the whole company! Here’s how she does it:
- Complete Buyout: Lori offers Mike $1 million to take over his company completely. It’s like offering to buy someone’s entire lemonade stand instead of just a share of it.
- Royalty Deal: In addition to the buyout, She says even after she buys his company, she’ll still give Mike 3% of the money from every shaving brush sold in the future. It’s like saying, “I’ll buy your lemonade stand, but I’ll also give you some money every time I sell a cup of lemonade.” This ensures that Mike still benefits financially from his invention, even though he no longer owns the company.
Read more: Legacy Shave Net Worth 2024
Mike’s Smart Move
Unsatisfied with giving up his entire company, Mike makes a counteroffer. Mike asks to retain 5% equity in his company. This is his way of keeping a small part of his business, which could be valuable if the company grows significantly under Lori’s leadership.
As Mike proposes to keep 5% ownership in his company, he also suggests lowering the buyout price. This leads Lori to modify her offer accordingly in her final adjustment.
Lori’s Final Adjustment
After considering Mike’s suggestion, Lori adjusts her offer. She agrees to let Mike retain 5% ownership in the company while still purchasing a portion of it. However, she revises the buyout price from $1 million to $700,000. This adjustment highlights Lori’s valuation of Mike’s 5% ownership stake and demonstrates her willingness to negotiate to find a mutually beneficial agreement.
Why This Matters
This deal between Mike and Lori shows how they each try to get what they want while still making the other person happy. Mike made something innovative and wants to keep some ownership so he can still be a part of it. Lori wants to invest in a way that’s safe but also gives her the chance to make a lot of money. It’s like they’re both trying to find a balance where everyone wins.
It’s a bit like trading cards—sometimes, you trade a whole bunch for one rare card and other times, you might keep a few cards back just in case they become valuable later.
Understanding these deals doesn’t require expertise in business or finance; it’s similar to everyday decisions about investing and earning returns, whether you’re running a lemonade stand, writing a hit song, or selling a Christmas tree lot. Each type of deal has its own set of benefits and risks, tailored to the situation and the people involved. As you continue your journey in entrepreneurship or even just explore your interests, remember to approach every opportunity with a keen eye for negotiation and a willingness to learn. Who knows? You might just find yourself striking the next big deal!
