Shark Tank India Season 2: The Business Terms Used in the Show That You Need To Know

Shark Tank India returned for season 2 on Sony Liv on 2 January, and before you think this sounds like a promotion for the show, it's not. Really. It isn't.While judge Ashneer Grover was visibly absent, the show continues its second season with CarDekho CEO Amit Jain in his stead.Shark Tank India is just entering its infancy, gently walking into season 2, but the original Shark Tank is well into its 14th season and has won multiple Emmy Awards since it started in August 2009.But for someone like you and I, who may not understand the business end of Shark Tank, watching the series could be a little challenging, and even straight up confusing. So, to simplify your experience, and to teach you just a little bit about the terminology used on Shark Tank, we dived into the vocabulary of Shark Tank and what it means. Valuation or business valuation is used to determine the economic value of a business. Business evaluators look at a company's capital structure, management, future earnings, profit and revenue margins to assess the economic value of the company. This is useful when a company wants to sell parts of its organisation, enter a merger, or even approach investors for more funding. In Shark Tank, valuation helps the sharks understand a company's economic position, and understand whether the business is financially sound and how it has performed in the past. This is useful if they want to enter into a partnership and even sell the company in the future.Business valuation is done by assessing a startup or a company's book value, market cap, and earnings multipliers.Warren Buffet Birthday: 25 Quotes on Life, Business, and InvestmentA prototype is a sample version of the the product that you create to test. While prototypes in science refer to physical versions of an invention, or trial versions of software or formulations, in business terms prototypes can be one of two types.The first, is a product prototype. If you're creating a unique or new product, you want to create a test version of the product to try and get market feedback. This early-stage feedback from buyers and users should shape your product as you develop it.The second, and more relevant in this context, is a business prototype. A business prototype is a financial simulation, as opposed to a tangible product. A business prototype involves asking questions about desirability, viability, and feasibility of your product. "Before a lot of money is invested in a product, you create a working sample of it. This is called a prototype. After market testing the prototype you can also improve the product and its usefulness."Anupam Mittal, Founder, Shaadi.com, Shark Tank judgeSome of the questions that a business prototype will need to answer include:What is the unique value proposition (USP) of your product? Do people want this product? Is the business sustainable?What are your costs and where is your capital coming from at present?Is it scalable to expand and grow?Getting answers to these questions is essential for a business to succeed, and for investors to make sure you're actually thinking about the future of your business.Watch: SpaceX Starship Prototype SN10 Explodes After LandingMore often than not, the sharks ask hopeful entrepreneurs what their product or service's net profit or profit margin is. Net profit is the total profit that company makes AFTER deducting taxes, operating costs, interest, and depreciation from its total revenue. It's different from turnover, which is a company's total sales over a period of time.Net profit is also called net income or net earnings. It's what the sharks refer to as the company's "bottom line".Net profit margin is the same net profit in percentage form. How are the two different? Well, net profit is the company's performance in absolute monetary terms and net profit margin provides their performance in relative terms. This helps assess the company's progress and performance compared to their past performance. Both terms are important because net profit margin might indicate that a company is performing better but in absolute monetary terms it might be performing poorly.For example, if 'A' runs a specialty food restaurant and makes just Rs 10,000 in net profit in one quarter, and makes Rs. 15,000 in the next quarter that is a net profit margin growth of 50 percent. However, in net profit terms, it's a barely profitable restaurant.Tesla Sees Profit Decline, Sells Off 75 Percent of Its Bitcoin HoldingsIn the simplest terms, equity is ownership of the assets of a company. Whether that's 50 percent, 100 percent, or even 3 percent, it gives an individual ownership of that much of a company's assets. Equity is calculated in two ways – book value and market value. Book value is a simple difference between the company's assets and liabilities, AKA how much they are owed vs how much they owe. Market value of equity is the share price of the company's shares in the stock market. Usually, the sharks ask an entrepreneur for a percentage of their venture as equity in exchange for their investment. In the long run, as a business becomes more profitable, equity pays better dividends.Which is why the sharks often try to get a higher percentage of the entrepreneur's company as equity. Because, in the long run, it's likely to make them much more money.Equity is often issued to investors or directors of a company through the issue of equity shares in the company. I-T Department Alleges Business, Tax Irregularities Against Dolo-650 Maker In Shark Tank, entrepreneurs have a set amount of funding they would like from the sharks, usually in exchange for equity. The amount of money they're asking for coupled with the equity they're offering the sharks, is the original ask.However, more often than not, the sharks respond with an offer of their own. In business terms, an offer is a proposal to buy or sell something, which becomes legally binding once accepted. Once a shark makes an offer, the entrepreneurs have to accept the offer. It's only when they accept the offer made, with all the conditions mentioned, that the offer is considered accepted. However, if the entrepreneur returns with a counter-offer, the sharks then have to accept the counter-offer or make another offer of their own to enter into an agreement.Which is why, often, you'll see the sharks upset when an entrepreneur makes another offer to their counter-offer.India’s MSMEs: Why COVID-Battered Businesses are Still Struggling to Survive

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Offer to Counter-Offer: Your Guide to Commonly Used Phrases in Shark Tank India

We look at the business terminology and finance vocabulary used in Shark Tank India, and explain what it all means.