“Shark Tank” investor Kevin O’Leary said the two sisters and owners of the Raleigh-based company evREwares, were smart and good enough, but the idea of high-end, wearable, reusable stickers stinks.
“This is a howling dog from hell,” said O’Leary, on a recent episode of the ABC television program in which entrepreneurs pitch to millionaires and billionaires. “I’m out.”
Three of the four other investors agreed and declined to invest in the company – and the one who wanted in was Mark Cuban, a billionaire and owner of the Dallas Mavericks.
“Do you have a website, because your name sucks,” Cuban said, before he made an unusual “Shark Tank” move and offered $200,000 to buy the sisters’ entire business.
All of a sudden, sisters and co-owners Becca Nelson and Ellie Brown found themselves making the crucial decision on whether they should let go of a company they founded and missed their kids’ first days of school to build.
Not only that, but they had a buyer, which isn’t typical. Only about 20 percent of businesses that go up for sale actually sell, according to BizBuySell.com, an online marketplace for selling small businesses.
When owners consider selling, Cuban said, they should think back to the beginning.
“It depends on what your goals were when you started the company,” Cuban wrote in an email to The News & Observer. “Strive to reach your goals and the decision becomes easy.”
Sell after a strong year
BizBuySell.com reported recently that transactions have reached record levels since 2007.
On average, 2013 and 2014 transaction totals were up 55 percent compared to 2010 through 2012. Nearly 7,500 transactions were reported in 2014.
Business brokers linked the increase to a growing number of qualified buyers, general improvement of the small-business environment and retiring Baby Boomers, according to a December survey.
Other reasons people sell, said Jeff Snell, founder and principal broker at ENLIGN Business Brokers in Raleigh, include losing their passion for the business, general burnout and other business interests.
Over the years, Snell, a serial entrepreneur who has had an equity stake in about 10 companies, has learned that being too sentimental or too optimistic about a business can lead to problems and delays and result in it selling at a lower price or not at all, he said.
The best time to consider selling is after a strong year, he said, which creates favorable conditions for a higher selling price.
Other factors that owners should consider, he said, include profit trends, competitive forces, disruptive technologies, government regulations, lifestyle preferences and the value of their time.
Realizing product interest
Nelson lives in Raleigh and Brown, who graduated from high school in Smithfield and went to Campbell University, lives in Zionsville, Ind.
They founded evREwares (pronounced every wares) in late 2010 with an idea to use fabric-like stickers – similar to the material that covers billboards – to easily change up children’s outfits. Jennifer Pittman of Raleigh is also a behind-the-scenes partner in the business and helps with the graphic art.
Over the years, the business evolved into an outlet for Sticky Ties, reusable stickers that look like ties for adults kids and babies. The company also sells drink labels, team spirit wear, sashes and custom corporate stickers.
In January 2011, Nelson and Brown participated in their first gift industry trade show in Atlanta and sold enough stickers to cover about $5,000 in related expenses. They even connected and worked with a JCPenney buyer on a sticker idea for luggage.
The deal never came to fruition, but they took the interest as a sign that their stickers had potential.
Nelson and Brown traveled to trade shows across the U.S. and evREwares products were picked up by more than 1,200 stores, including Urban Outfitters, The Container Store and Party City.
Orders peaked in 2013, but at the end of the year, which included the sisters’ dad being diagnosed with Parkinson’s disease, they were exhausted. The long days were taking a toll; their products weren’t selling fast enough and buyers weren’t re-ordering.
So, in late 2013, Nelson and Brown pulled back and regrouped.
“We just needed a new game plan, really,” Nelson said.
Mark Cuban makes an offer
In the fall of 2013, they sent an email to “Shark Tank.” A representative contacted them in March and the sisters flew to Culver City, Calif., in June.
While in the “Shark Tank,” investors learned that Nelson and Brown had invested $180,000 in the business. Their pitch focused on the flagship line Sticky Ties.
Nelson and Brown asked for $100,000 for a 30 percent stake in evREwares. They gave ties to the sharks. Robert Herjavec’s tie said “Kiss Me I am Croatian,” and matched his suit. O’Leary got a tie with his face on money.
“I love it,” O’Leary said. “This is going to be your best seller.”
And that’s where the positive responses ended.
To date, the company has had about $600,000 in total sales, the sisters said on the show, including a drop from about $300,000 in 2013 to an anticipated $50,000 in 2014.
“Whoa,” Herjavec said.
“Pull up! Pull up!” O’Leary said.
Nelson tried to explain they were trying to regroup.
“Becca, it’s not working,” Herjavec interrupted.
After Cuban, who wanted the company to make Mavericks products, made his offer, Nelson and Brown stepped into the hall. They talked about letting go and spending more time with their family. When they returned, fighting back tears, they agreed to sell.
“We’ll do it,” Brown eventually said.
Cuban promised to take care of their business.
“And do the best I can to raise it from the dead, and turn it into something special,” he said.
The sisters went back to their hotel, had dinner and cried over chicken pot pie. They were sad, Nelson said, but felt relief when they got home. Nelson only told her husband, who helped her focus on the advantages of the deal.
About a week later, Cuban’s team contacted the sisters, who talked to the legal team and then the business team.
The deal got a little more complicated when they started talking about existing orders for some of their other products, Nelson said.
The sisters asked if Cuban’s team wanted them to keep running those parts of the business, Nelson said. That discussion led to the sisters sending Cuban an email asking if they could keep the company.
He understood, he responded, offered to provide future guidance and then handed them over to his team to help them beef up their website before the show aired Jan. 13.
“I was fine with it,” he wrote in an email to The News & Observer. “I want every entrepreneur to succeed.”
He told them, he wrote, what he tells everyone: “Sales cure all, and you need happy customers.”
Sales jumped from about $100 a day to $2,100 that night, Nelson said. Now sales average about $375 a day.
It’s hard to say where they will go in the future, Nelson said, as they are getting offers that range from working with a professional team to a uniform company.
“I just don’t have an answer for that question,” Nelson said.