‘Shark Tank’ season 4, episode 19 recap: Business models

“Shark Tank” returned last night on ABC to hear pitches from four new teams of inventors looking to hit it big with their new products and ideas. This week four inventors walked in with four different business models that all had major flaws, but in two cases the sharks were willing to overlook them for the right price. Here’s how the night went down!

This week’s sharks: Lori Grenier, Daymond John, Kevin O’Leary, Mark Cuban and Robert Herjavec

Inventor: Heather Murphy-Monteith & Andy Hurwitz
Product: Baby Loves Disco
Offer: $150,000 for 10 percent stake

First into the tank this week were Heather Murphy-Monteith & Andy Hurwitz with their company “Baby Loves Disco.” On paper, this is a clever idea in that it’s a family dance party at some of the biggest clubs in the biggest cities that take place during the day. Monteith’s line to the sharks was it’s “a underground dance sensation” that they hope turns into “a big money operation.”

Yet the problem was while they consistently pulled in 350 people per event at between $12 and $20 a head, they really made their money off sponsorship deals. In other words while they made $525,000 in sales last year, $425,000 came from outside sources and not ticket sales or merchandise, which shows the business itself isn’t that profitable.

End Result: No deal

Inventors: Ryan “Cowboy” Ehmann
Product: Lose 12 Inches With Any 12 Workouts
Offer: $120,000 for 25 percent stake

Sometimes the person selling the product is more impressive than the client and that’s what happened with Ryan “Cowboy” Ehmann, the night’s second entrant to the tank. Ehmann was a former rodeo star who suffered chronic back injuries from riding and became a licensed personal trainer to figure out how to fix his body. Not only did Ehmann return to form, but he then won a national championship.

His product was a mix of a trademarked exercise technique and patented workout machine, but it is not the easiest thing to explain. Basically aside from his exercise device, Ehmann teaches his clients how to control their heart rate so they exercise right, which requires a leap of faith in itself. Yet Ehmann was so into the product and so passionate about helping other people, you couldn’t help but want to root for the guy.

In the end despite confusion on the exact structure of the program, his overall business model and solid proof any of it really worked, Daymond John bought into the “Cowboy” and took a ride off into the sunset with his product.

End Result: Deal with Daymond John for $120,000 with a 25 percent equity stake.

Inventors: David Artuso & Mike Kane
Product: Cell Helmet
Offer: $160,000 for 20 percent stake

This week’s theme really did come down to various business models that don’t necessarily work. Here David Artuso and Mike Kane entered the tank with a product and a promise. The idea was that they sold cases for your smartphone for $45 and then you would register the case online so that if your phone was accidentally damaged in the next year they would then repair or replace your phone for $50 in three business days.

Basically the worst case scenario for the consumer was if you break your phone then for $95 you’d be guaranteed a new one (whether you really even used their case or not). As Mark Cuban pointed out, it’s basically being in the arbitrage business for cell phones. The problem that he also pointed is that someone else with more money could come in with heavier marketing and do the same thing for cheaper. While Artuso and Kane may be profitable at the moment (just four months into their business), it’s doubtful they can sustain that model.

End Result: No Deal

Inventors: Byron Young
Product: CordaRoys
Offer: $200,000 for 20 percent stake

The night’s final pitch led to the night’s most interesting negotiation. Byron Young walked into the tank with “CordaRoys,” a product that he worked over 11 years to build. Basically he was selling a bean bag chair that turns into a bed and never goes flat in either position.

While he did have strong sales, they were all bought as impulse buys, which again is a dangerous business model. Young said it himself, nobody walked into his retail store thinking “I came here to buy a chair that turns into a bed.”

In the end Robert Herjavec countered Young’s deal and offered him the $200,000 for a 40 percent stake, but only if he could get Lori Grenier to come in with him on the agreement. Grenier than turned down the deal and offered one of her own that she admitted was going to be hard to swallow. Her offer was the same $200,000 but for a 60 percent stake. While Young was hesitant to give up the lion share of his company he eventually agreed knowing that after this much time and this much sunk cost, Grenier's deal was better than no deal at all!

End Result: Deal with Lori Grenier for $200,000 with a 58 percent equity stake.

“Shark Tank” airs Friday’s at 9 p.m. EST on ABC.