January 9, 2018

One Savvy Shark: The Kevin O’Leary Success Playbook

By LB Gschwandtner

Anything you want to know about Kevin O’Leary, of Shark Tank fame, is easy to find with just a few clicks. Because he’s everywhere these days. And giving lots of advice to everyone. Mostly about money – how to make it, how to invest it, how to keep it, and why it’s so important, especially to O’Leary himself. On the other hand, he says it’s not the only driving force for a successful business.

“Money is not the only motivator of people,” he told Selling Power in an exclusive interview. “They want to work in a culture where they feel they’re part of a winning team. Which is why I say it’s always good to set sales goals you can achieve. People are motivated by money, of course, but they’re also motivated by the culture they work in. You’ve got to breathe a culture of success into your company.”

As you can tell, talking to Kevin O’Leary is pretty much “what you see is what you get.” He’s direct, focused, and doesn’t mince words. Just like he is on Shark Tank, the CNBC show that showcases entrepreneurs pitching to O’Leary and five other “sharks” for investment capital to jumpstart their fledgling businesses.

The Royal Treatment
O’Leary’s the guy who often offers a deal involving royalties or a percentage of future revenue rather than a stake in the company being pitched. He’s savvy that way. Which may go way back to his childhood, when his mother saved 30 percent of her paycheck, investing it in large-cap, dividend-paying stocks and interest-bearing bonds – something little Kevin didn’t find out until he was an adult. Mother O’Leary also did something else for Kevin. The day he graduated from college, she told him he was on his own. Sink or swim was the lesson there.

He tells this story in a video, one of many O’Leary videos touting his wisdom and life lessons. Oh, and his Cold Hard Truth book series explains his theories on making – and keeping – your money. Based solely on Amazon.com reviews, his books are not exactly economics treatises; they’re more like O’Leary-isms to the max.

Well, you get the picture. This is not a shy CEO working behind the scenes cultivating a low profile. Just the opposite. But that, too, is something that dates back to O’Leary’s early work experience.

Before we get into that, though, here’s another O’Leary life lesson. It’s about scraping gum off the floor of an ice cream store in a Canadian mall.

Scoop or Scrape
Seems, as a teen, Kevin got his first job at an ice cream store – which just happened to be located directly across the mall from a store where a girl he was interested in worked. They could gaze at each other store-to-store.

A romantic setup – except, one day, the ice cream store owner asked Kevin to close up the store and, before he left, to scrape some gum off the floor. Well, the mental image of his ladylove watching Kevin on his knees scraping gum off the floor was just too much. Kevin told the owner, “You hired me to scoop, not scrape.” To which the owner replied, “You’re fired.” Life lesson number one: Be an owner, not a scraper. O’Leary took that lesson to heart.

After taking his stepfather’s advice, O’Leary headed off to college where, between years three and four, he accepted a marketing internship with Nabisco in Toronto. That clinched his decision not to embark on his initial chosen field of professional photography. Instead, he followed an entrepreneurial trail that started with a term at Nabisco’s pet food division, then a TV production company called SET, specializing in sports shows. He and partners later sold SET, netting O’Leary $25,000, which he used as seed money – with a $10,000 assist from his mother – to start a software venture called Softkey. Enter Kevin the salesman.

“My biggest challenge in the beginning was to make a living. So, I went into marketing and sales,” he said. “I’ve been a salesman my whole life. In most of the companies I started, I took that role and maintained it for a long time.”

Tough Sell
“I think the hardest thing in the world to do is sell. It’s the most rewarding, as well,” he told Selling Power. He went on to explain exactly what the challenge of sales is all about. “The thing about salespeople is they start their month, their quarter, their year, back at zero. It’s one of the only positions where you get the euphoria of making your goals – or exceeding them – but then also having them reset every term. And that’s not easy to do. It takes a tremendous amount of focus, skill, a lot of pivoting, and a lot of realizing what the market’s doing around you to be able to sell successfully.”

Never one to soft-pedal reality, O’Leary explained, “It’s a matter of binary goals. Sales is black and white. You either meet your target or you don’t. Not every executive can do that. It’s very challenging. Things change in the market, in the competitive environment, pricing changes – there’s so much you have to deal with on the input every day, but still you’ve got to drive on and achieve your goals. Great salespeople like the challenge. They rise to it over and over and over. That’s what defines a great salesperson. They’re not scared about the future. They know how to obtain their goals. That’s why I have such respect for them.”

He added, “Great salespeople can sell anything. They have an innate ability to understand what it takes to get the job done. I can’t say enough, having lived my whole career dealing with sales, that these are unique individuals. They have a whole set of tools they have to use. They decide how they’re going to implement them and when.”

Really Big Sale
In the software-heady days of the early ’80s, O’Leary sold printer manufacturers on the idea of bundling Softkey’s products with their hardware. Then, boom! With distribution assured, Softkey developed math- and reading-based educational products. Purchasing rivals, Softkey prospered and, in 1995, acquired The Learning Company (TLC), adopted its name, and moved to Cambridge, MA. Then, although TLC lost $105 million on an $800 million revenue stream in 1998, in the same year O’Leary and partners bought rival Brødurbund for $416 million – turning around and selling the whole shebang to Mattel in 1999.

According to many published media reports, Mattel stockholders were not happy following the acquisition, when Mattel lost $105 million as opposed to the estimated $50 million promised profit from the buyout. Thereupon, shareholder lawsuits flew at Mattel. O’Leary, who disputed charges of accounting tricks to hide losses and inflate quarterly revenues, once again found himself fired while Mattel ended up paying out $122 million to settle the suit by aggrieved stockholders who’d seen shares fall by $3 billion in a single day.

O’Leary, who pocketed quite a bundle from the deal, said, “My most memorable sale was selling The Learning Company to Mattel for $4.2 billion. I’m not going to achieve that again. You just need one big winner – and that was mine.”

He then shifted gears and moved on to the next ventures. And there were quite a few. With cash in hand – and after investing in, then selling, a Canadian storage company – O’Leary turned to his earlier flirtation with TV. He first participated in a talk show co-host format, which led to his stint on the Canadian precursor to Shark Tank called Dragon’s Den, in which he was also an investor. With that show’s success in Canada – and O’Leary’s obvious appeal to TV viewers – he and another Den cohort, Robert Herjavek, appeared on what became the highly popular U.S. CNBC show, Shark Tank.

Fame and Fortune
About his Shark Tank fame, O’Leary explained, “Being a Shark Tank celebrity has merits. I can call any CEO of the Fortune 500 and have my call taken. One of the downsides of TV is everyone thinks they know you personally. That’s interesting, but sometimes can be a problem when you’re with your family and trying to get some privacy. But I’m willing to take those slings and arrows because celebrity status gives me access to opportunities I never would have had before. So I have a lot of thankfulness for what’s happened on Shark Tank. I think it’s been an amazing platform and I’m very proud to be part of it. I particularly like that our fastest-growing demographic is nine- to 18-year-old girls. They’re very interested in becoming entrepreneurs and I think that’s very good.”

No matter the negatives, O’Leary obviously likes the limelight, including a brief flirtation with Canadian elected politics (which ended in his turning back to business). While shooting zingers at supplicants on Shark Tank, O’Leary was busy off camera amassing an array of either shares or wholly-owned companies as disparate as wines and cupcakes – some of which he garnered through the Shark Tank bidding bonanza.

Investing Edge
“The thing about being an investor and having lots of ideas – some of which are great successes and some failures – is that you can never know the outcome with certainty,” he explained. “There’s always risk in business. But, if you always focus on what matters, at the end of the day revenue is what drives business. Sales drives business. You can’t have a business without sales. So my biggest disappointments have been in working with companies that gave me sales goals that were never achieved. There’s nothing worse than setting a goal for your team and not achieving it. That means either you’re a bad sales manager or you never understood the market in the first place; you can’t forecast or you’re totally out of touch with the market. I like people who achieve their sales goals 95 percent of the time. I’d rather have goals that are lower, that are met, than stratospherically high goals that are never achieved.”

When someone comes to O’Leary with an idea, he looks at three things in the presentation:

  • Can they communicate the idea of the opportunity in 90 seconds or less?
  • Can they explain why they’re the right person to execute the business plan – and why they can roll out the strategy?
  • Most importantly, do they know their numbers?

“So, if you can’t do all three, you’ll never make it to the finish line.” He ticked off the three as if they’re embedded in his brain, which they certainly are.

Shark Tank is just a microcosm of what goes on in America every day for small businesses. It’s real money and real investments. And I want these companies to succeed,” he said.

Managing the Managers
So how does O’Leary manage all this business success? “I have a whole team of people at O’Leary Ventures run by a guy named Alex Kenjeev,” he commented. “We monitor our companies on a quarterly basis. We have countless numbers of calls with them during the quarter. We’re always trying to help them – because our interests are aligned. The core management team is seven; but, when we’re looking at deals, we hire interns and may have as many as 10 or 12 people just looking at the deals.”

Many business people fail to understand the basic function of good sales managers, according to O’Leary. “Great sales managers are able to communicate in good and bad times what they can achieve – and get within 5 percent of those targets on a consistent basis,” he explains. “The whole spin of a company is based around revenue and, if you can’t provide stable estimates, you’re useless. I’d rather have a manager – even in bad times – that tells me they can’t achieve the original goal, but here’s what they can achieve, so I can plan for that outcome. That’s what matters. It’s no good to sandbag, either. Make really lowballs and go way over because you run out of inventory and can’t ship because you didn’t give the production people the right runway. The key is stabilizing the estimate of what you’re going to achieve.”

He went on to say, “Skill sets for sales managers don’t necessarily come from great salespeople. It’s two different things. So I don’t take my top salespeople and turn them into managers. It’s the biggest, most classic, mistake out there. I go and hire sales managers with a track record of achieving goals.”

Data Points
Early in O’Leary’s career, he learned one great lesson. “If you’re a good salesperson or marketing person, you assimilate data,” he said. “You take that from one industry and apply it to another. At Nabisco I learned that the key to the sales of pet food was to take two basic engines, which was tuna and protein made from the renderings of beef and poultry byproducts. Decades later, I applied that two-engine lesson to the software industry. We didn’t have to have dozens of different teams developing software. We only needed to address the learning needs between ages five and 13 with two tracks – math and reading skills.”

O’Leary may be a savvy investor and business brain, but where he really excels is in self-promotion and media. “I think it’s important in today’s world to recognize the importance of media,” he commented. “I still practice my own editing skills every week when doing a lot of social media work with my teams. We have a very large production studio. Three different studios in different cities where I produce my videos. I direct a lot of it, work with the editors to cut it. I want to keep that skill set intact to stay very competitive in sending the message out to all of my 44 portfolio companies. They all understand the importance of social media – because we use it to acquire customers. I want cutting-edge production values and good messaging with everything we send out.”

In addition to creating his own video spots, O’Leary does the research needed to make sure they work to his advantage. “I spent a lot of research money on social media. Now this is interesting,” he explained. “It’s getting tighter and more compressed each year. The average time a consumer will watch a video on any social media platform now is 22 seconds. So you’ve got to get your message out in that time – and all these people putting out five-minute videos are going to be sorely disappointed. You’ve got to be very tight and you can do a lot of testing in different markets to see what’s going to work.”

Shifting Priorities
Besides the new media and shorter attention span of buyers, O’Leary also realized the role of B2B sales has shifted in vital ways. “People don’t have time for long lunches anymore. The intensity of certain industries’ workflow doesn’t give you that access to the person you want to sell to. You have to be far more efficient in your messaging and you’ve got to maintain a level of service that’s unprecedented,” he said.

“The key to maintaining accounts is the level of service you can provide,” he went on to explain. “So, if you spend more time making sure the service aspect is working with your existing accounts, you’ll get more productivity out of them. Most people have not optimized their existing accounts. Sometimes the highest return on investment is upping the service level.

“The first thing salespeople can do to service accounts better is to ask: ‘Are you happy with our service and product? In the last 90 days, what event occurred that would have made you unhappy with our service?’ You’ll get a lot of information from that simple question. Instead of going in to sell more product, if you ask that question, they’re going to talk to you and you’ll get valuable information.”

What do his top people do to achieve success for the O’Leary brand? “My best salespeople ask: ‘What can we do for you to optimize our relationship or our service level?’ From that dialogue comes more business,” he said. “So it’s consultative, but also a communications element. People don’t want their time wasted. Leave a message, saying, ‘Look, I just want to know if there’s anything within the last 90 days you’re unhappy with’ and, if there is something, you’ll get a call back. When people are unhappy, they’re willing to make noise.”

“On Shark Tank I enjoy working with entrepreneurs. I like investing with them. I like winning. I enjoy all the different businesses I’m involved with. Every day gets more interesting. When you’ve got 44 holdings, any one day there’s euphoria coming out of some of the companies and complete disaster in others. It’s a mixed bag every day.” Mixing it up may be what Kevin O’Leary does best.