You may know the Scrub Daddy from your sink – or from its enthusiastic pitch by Aaron Krause on the reality show Shark Tank in 2014. With over $670 million in total sales in 10 years, the Scrub Daddy made waves – and bank – after its television debut.
Scrub Daddy’s products are found at your local Costco, supermarket and other big box stores. It’s considered one of the top five Shark Tank deals in the show’s history, and boasts partnerships with Unilever and other major manufacturers and retailers – along with a viral TikTok account with over 4 million followers.
Entrepreneurs should take note. Not only is Scrub Daddy’s success a case study in how the right investor and a bit of publicity can make all the difference, but Krause’s Shark Tank pitch is the perfect template for securing a business loan with a lender.
Get to the point quickly
Krause’s entire pitch and product demo is about two minutes long – enough time for him to introduce the product and demonstrate its qualities in a quick and direct way. The entirety of the pitch feels more like an infomercial than a dry business presentation.
In the pitch, Krause made the case for his company’s success and hones in on Scrub Daddy’s most unique and salable aspects. This is the result of Krause developing his pitch at trade shows and live demos at stores, and then perfecting it for live showings on QVC.
While you don’t have to do a full product demo in front of your potential lenders, keeping your pitch short and sweet will let your audience know you value their time, and that your business doesn’t need 20 minutes of rambling to justify a loan. The same goes for if you’re submitting a written document with an executive summary and business overview in lieu of a meeting – keep it brief, highlight your strengths and get to the main point.
Know your business inside and out
Krause is no stranger to the industry Scrub Daddy belongs to. He first got the idea for the sponge while he was cleaning his hands on a job site and found that the polymer foam was especially useful for removing stubborn dirt and grease.
Before pitching Scrub Daddy, Krause founded and later sold a car buffing pad company to 3M – which, coincidentally, rejected Krause’s hand scrubber idea.
Krause’s experience in the manufacturing and logistics industry gave him a clear idea of where Scrub Daddy is going and where it needs to go. He got his proof-of-concept down on a small scale – Krause told the Sharks that demand for Scrub Daddy on QVC and other sales channels was slowly ramping up, signaling it was time to scale up the business.
Krause’s experience as an inventor also lends him an edge. He told the Sharks that he had patents on his invention and domain names ready to go, signaling that he was serious about his business.
Finally, Krause knew how his product sells. His 30 years of experience pitching products at trade shows and in retail stores helps him determine that demos and end caps are the key way to make customers interested in Scrub Daddy, and told him which parts of the pitch work.
As a startup business owner, when you pitch your business idea to the bank or another stakeholder, it’s key to know your business and audience. Have proof that your idea works before planning on expansion. Even having a side gig and knowing the cash flow and demand can help your case.
Proving to your lender that you have a solid business plan and that your idea is profitable means a safer investment – and a better chance at getting your loan approved.
Know exactly why you need the capital and how it’ll turn into value
A common pitfall on Shark Tank – and for would-be borrowers pitching their ideas to lenders – is not having a clear idea of what they’re going to do with the money. Simply pouring capital into a business won’t automatically translate into more sales, which is why having a clear idea of where the money is going and how it’ll translate into revenue is key.
Krause was aware of this fact when he’s pitching to the Sharks. Krause requested $100,000 in investment in exchange for 10 percent equity in order to start an independent manufacturing facility, allowing the company to make Scrub Daddy 24/7 instead of relying on another factory’s schedule.
While it’s not the most glamorous reason to pitch to Shark Tank, Krause knew the investment will allow him to ramp up production and fulfill the increasing demand he’s been seeing through retail and QVC, as well as the large-scale push he’s planning as he introduces Scrub Daddy across the country – leading to Scrub Daddy being offered in 47 countries and thousands of retail locations by 2024.
Be prepared for the hard questions
When you’re pitching your startup, lenders and investors are going to want to ensure they’ll be paid back. When your pitch is done, be ready to be grilled about your business model, your customer base and other details – and be prepared to defend your answers.
Krause faced this after giving his pitch. He emphasized that he has 3,000 stores lined up for sales when Mark Cuban questioned the viability of Scrub Daddy’s sales model. Krause was able to explain the need for manufacturing capacity when Kevin O’Leary asked why Scrub Daddy needs its own facility, mentioning his 18 years of experience in manufacturing and logistics.
Krause was also able to immediately answer questions about how much it costs to make a Scrub Daddy, how much he was selling it on wholesale and other key business details – no notes needed.
Krause prepared himself for these hard questions by soliciting help. According to a Reddit AMA held in 2015, Krause built out a flowchart with potential questions from the Sharks, thinking about his responses beforehand. He also had his lead engineer grill him on every aspect of the product and the pitch.
Be a champion for your business
While you might have passionate employees, investors and stakeholders at your side, the person who ultimately cares most about your business idea and its success is you. While you shouldn’t expect an easy time when pitching your idea to lenders, you should have confidence in your enterprise and be prepared to advocate for it.
Krause’s enthusiasm for Scrub Daddy came across not only in his pitch, but also negotiating with the Sharks. He truly believed in his idea and that it would be successful with the right investor – which is why he immediately turned down O’Leary’s initial offer of $100,000 for 50 percent equity. This opened the floor to better offers down the line and allowed Krause to retain majority ownership of his company.
Krause also advocated for the idea of Scrub Daddy itself. When O’Leary compared the sponge to a Brillo pad, Krause pushed back, claiming that Scrub Daddy is a high-end product that consumers will find is worth the price.
Aim for the partnership that will offer you the best value
Krause, when he walked onto the set of Shark Tank, was looking not only for an investor who can offer him the capital to expand, but “a strategic partner who can open [Scrub Daddy] into retail stores.”
While Krause received multiple offers from the Sharks, including a $150,000 investment for 25 percent equity from Daymond John and a $100,000 investment from O’Leary with a per-unit compensation plan, Krause eventually partnered with investor Lori Greiner, earning a $200,000 investment for 20 percent equity.
Krause was smart to hold out for Greiner’s offer. While O’Leary and John had competitive offers, neither had the experience and mentorship Greiner had to offer.
Known as the “Queen of QVC,” Greiner earned her fortune inventing, patenting, selling and marketing household goods – which is right up Scrub Daddy’s alley. Greiner and Krause presented Scrub Daddy on QVC the day after the episode was filmed, selling over 7,000 units in seven minutes.
Greiner also netted Krause distribution deals with Bed, Bath and Beyond, Home Depot, Walmart and other retailers, helping Krause make $18 million in sales a year and a half after the episode aired and millions more in the following years.
Partnering with the right lender is crucial to making sure your business succeeds. While your lender may not be cutting deals to help market your business, you need to make sure that the loan’s terms are manageable to follow, the repayment plan works with your cash flow and that you’re getting the best deal for your borrowing costs.
Know your next steps
Krause and Greiner didn’t waste time in getting Scrub Daddy nationwide. Even before making the deal on Shark Tank, Krause already had stores waiting to sell Scrub Daddy. He also had more products in mind, including variants of the Scrub Daddy, sponge holders for sinks and more.
This helps set Krause up for success with the capital and connections Grier offers. After the initial wave of attention from the Shark Tank episode, Krause expanded his manufacturing facilities, upping production and expanding into other products such as mops, wands, soaps and scouring paste.
Knowing where to go with your business as you grow and pay off your loan will set you up for success in the future. It can help you understand how you’ll scale, when your expansion requires more staff and resources and how to sustainably expand your business model over time, while capitalizing on the concrete assets you have on hand.
The bottom line
While you might not find yourself standing in front of Mark Cuban or Kevin O’Leary when you apply for a business loan, Aaron Krause’s bombastic Shark Tank pitch for Scrub Daddy can be a helpful guide in crafting your business pitch.
By knowing your business and client base, having a clear idea of how you’ll make good on the loan and pay it back and by advocating for your business idea, you can make your loan proposal a successful one – and be well on your way to funding your next venture.
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