GarmaGuard is a company and a spray from a police detective husband and a nurse wife from Milltown, NJ, that aims to prevent germs from clothes from spreading to others by killing them where they are.
The demo was relatively humorous as the concept of collecting germs and viruses was demonstrated with velcro ping-pong balls on a black jumper. The entrepreneurs explain that their spray is intented to be applied as the clothes are worn and that the spray will even take away smoke smells. When guest shark Blake Mycoskie sprays it into his shoe, he attests that the spray seems to work.
The entrepreneurs claim that GarmaGuard is "lab tested" but they can't make any claims as to how effective it is because it has not yet been tested or approved by the FDA. Obviously, because this episode was filmed during the COVID pandemic, the sharks are curious about the efficacy of GarmaGuard against COVID. The entrepreneurs seem pretty confident it would work but, again, state that without approvals, they can't make any claims. They think they might be able to get those approvals in six months to a year.
GarmaGuard has been in business for eighteen months and has generated $476,000 in sales. One can costs $1.85 to manufacture and retails for $12.99. It sounds as if all of their sales are online, either direct to consumer or via other marketplaces like Amazon.
Despite the relatively good sales numbers and stating that he understood why GarmaGuard couldn't make any claims about COVID, Kevin says he's out. Mark compliments the smell but says he gets calls about products like GarmaGuard "every day" and thinks that the entrepreneurs should focus on their marketing. Also out.
Daymond says that he thinks the product and the sales numbers are good enough that the entrepreneurs might just think about going it alone without an outside investor. He even thinks that they could scale it up to $1,000,000 or $2,000,000 all by themselves. And with that, another shark leaves the deal.
Like Mark, Lori also compliments the smell and says that she thinks a lot of people would love the idea. She even says that she would be a customer but, then, says that it's too early for her and that she's out.
Last is the newest guest shark to the tank, Blake. He asks for some clarity to the sales numbers and is told that, by the end of the year, GarmaGuard should see $500,000 in sales with margins of 20% and a profit of $100,000. The entrepreneurs then say that they have 14,000 customers, have a sales conversion rate of 6.6% and that 30% of their customers have returned to make a second purchase. All of which are strong numbers!
Unfortunately, it all makes a case for Blake backing up Daymond's idea that the entrepreneurs should grind on without an outside investor. And, with that, the entrepreneurs leave the tank. But the sharks aren't finished talking about it yet. Lori says that she always re-invested her money into her business and that was how she grew. Blake agrees and says that he thinks sometimes over value outside investment instead of seeing what they can build on their own, stating that he believes that these entrepreneurs will do just fine.
Your Stats Shark's wife asked why the sharks would decline to invest in a company that otherwise has strong fundamentals. And the only answer he could come up with was "scale."
A company that earns $100,000 on $500,000 in sales has outstanding margins and great fundamentals. But, with a partner, it rapidly doesn't look so good.
For a married couple living in New Jersey, a side hustle of $100,000 is the difference between living in a nice house and living like Tony Soprano. But what if they cut in Blake Mycoskie for 20%? Suddenly, they're now getting $80,000, Blake is getting 20%, and it'll take at least four more years for him to see the company earn his money back. A year after that before he sees any profit.
Five years doesn't sound bad but if you're a millionaire, you also have a million places to put that money that might earn it back even faster.
But, he's a shark. So he wants his money back faster. Say he asks for 50% of the company. Now what had been a nice little side business earning them good money is earning them a lot less for the same amount of work (and probably more once the Shark Tank bump takes effect). Will this motivate the entrepreneur to continue working hard? And is that $50,000 now coming in, even if it's paid back in two years, worth it if the business eventually goes away due to fatigue, burn out, or just a general loss of interest?
However, if a business looks like it's poised to explode, bring on new employees, grow sales, and is the metaphorical "bigger pie" and all the shark needs to do is pour gas on it to spur this, then that could explain why a shark might invest the same amount of money for a 20% equity stake in a business with similar sales. It just comes down to the growth the shark might see in the immediate future of the business.
- With sales of $500,000 and a profit of $1,000,000, these entrepreneurs actually have margins of 20% unlike so many other entrepreneurs who don't factor in other expenses. Obviously, calculating business profits can sometimes get complicated but it's nice to hear one for once that's exactly what the entrepreneurs say it is.