Multichannel party supplies and experiences retailer The Party People took on Channel 10’s The Shark Tank this week – here’s how it unfolded for co-founder Dean Salakas.
Earlier this week, Dean Salakas, co-founder of the successful online and offline business The Party People, took his pitch to Channel Ten’s Shark Tank, seeking $400,000 in capital from the ‘sharks’ to roll out more stores around the country. Before his appearance on the show, where the panel ripped apart Salakas’ valuation, The Party People was turning over $4 million in annual revenues with approximately a 10% profit. So why take on Shark Tank?
“A year earlier I was in the USA visiting a friend and I was watching Shark Tank [The US version],” says Salakas. “I thought it was the best show ever! There is no TV out there for entrepreneurs and this show nails it. I saw a commercial on Ten saying they were casting, so I went straight onto the website and signed up.”
Initially, Salakas, who shares ownership of The Party People with his brother, signed up for the show as a bit of a lark, knowing he was likely to be torn to shreds and with low expectations of landing a deal. His pitch to the investors was for $400,000 in exchange for five percent of the business, valuing it at $8 million. Based on current profits, that is a 20-time multiple, and the ‘sharks’ let fly at Salakas on the optimistic valuation, with one panelist describing it as “absurd”.
“After watching the American version, entrepreneurs that walk in with valuations like mine get torn to shreds,” says Salakas. “I knew the only way to survive was to be exceptionally well prepared. As it turns out they were not that bad, in fact they were really nice and we had a great debate on my valuation.”
Four out of five panelists showed no interest, particularly given the minimal stake on offer in relation to the sum, but Janine Allis, the much admired founder of Boost Juice, was willing to be involved, as long as there was a better offer. Salakas came to 10 percent, with Allis declaring she could see the business being worth around $2 million, but Salakas refused to better the offer and walked away.
“I just didn’t think my family business could be given away when the potential is so much greater,” he says. “I had a choice when Janine made me the offer. Take it and give up 40 percent or back myself to take the business where it can go without giving away nearly half the company. I took the latter. There was an added incentive for me to go with Janine as I had planned from the start to try to target her, given she was the shark with the most ideal background for me and I really respect what she is doing at Zoo Retail. I would have been thrilled to work with such an amazing business person like Janine, but not at 40 percent.”
Though he exited the show without an investor, there have been a lot of positives since for Salakas and The Party People. Interest in the business catapulted immediately as a result of being on the show, bringing the website to a snails pace even though Salakas’ IT team said they were prepared. Following his appearance on the show, Salakas has had a number of approaches from investors and financiers interested in backing the business. Most importantly, the work involved in preparing the pitch documents for Shark Tank forced Salakas and his accountant to scrutinise the business and the opportunities from every angle, in order to be able to field the interrogation of the panel.
“I’ve gone to another level of understanding of my business,” he says. “We’re better for the whole process. We looked for every weakness we could find in our business and made sure we either fixed it or had a plan for it that we could explain to the sharks.
“I think I came away much less bruised than most who don’t get a deal. The sharks all had positive things to say – the main issue was the valuation and my value was higher than theirs. For me the experience was positive even though I didn’t get a deal.”
Did you watch Dean Salakas in action? Did he make the right call? Check out the footage here and have your say in the comments below.