This installment of The Matt Allen Letter is free for everyone. If you would like to read about stock analysis, stock market analysis, and much more.

Subscribe now

This Email Is Sponsored By…

“If you have debt, you need this app” Mark Cuban, Changed Investor

You may have seen Changed on Shark Tank as the stress less debt payoff app. Or from your financially savvy friend who uses Changed to become debt free years sooner than scheduled.

Changed lets you pay off your Student Loans, Mortgage, Auto Loans, Personal Loans and save with Stash My Cash.

Changed rounds up your purchases to the nearest dollar and transfers the rounded-up amount towards your debt. The faster you shave down the principal, the less interest you pay.

Changed members have saved over $50 million in interest costs.

Download and get your first month free.

Let’s do debt differently!

iOS App Download Android App Download

Dear friends,

In honor of one of our sponsors being shown on Shark Tank and landing a deal with Mark Cuban, I thought it was appropriate to discuss how Shark Tank can help you become a better investor.

I watch Shark Tank on a regular basis because I enjoy it, and it helps me become a better investor. It is awesome because you get to watch as some of the best investors in the world decide on if they want to invest in a company or not.

When you invest in stocks, you should be asking yourself the same questions that Sharks ask entrepreneurs when they step inside the tank.

For example:

What are your sales?
1. When you look at a stock, you should check out their revenue and see how it is doing each year. You always want steady growth from one year to the next.
How much debt do you have?
1. When you look at a stock, you should make sure that they don’t have to much short-term debt.
What are your costs?
1. When you value Apple, you should know that it costs around $499 for Apple to make an iPhone, and they retail it for $999.
Who is your target market?
1. If you are valuing a B2B software company, you should understand who they are trying to sell their software too.
Are you profitable?
1. Just because a company has tons of revenue doesn’t mean that they are profitable. You want a company that has a 40% profit on their revenue. For example, if they make $100,000 in revenue then they can distribute $40,000 to shareholders.
Tell me about yourself.
1. When you invest in a company, you are putting your hard earned money to work. You should know everything about the leadership behind the company that you just invested in.
How unique is the product?
1. When you invest in a company, you are looking to invest in a company that has a competitive advantage and can’t be knocked off by anyone.
Do you own a patent?
1. Let’s say a drug company finds the cure for cancer, you should ONLY invest in this company if they patented the cure. This is because no one can knock this new drug off and create a generic brand.
Do you sell direct to consumer?
1. A company is more lucrative when they sell online. This is because they do not have to worry about wholesaling the product, inventory, and their profit margins are much higher.
How do you scale this product?
1. This is my favorite question. I always look to invest in stocks that I believe can be scaled to almost everyone in the universe. For example, you can scale the iPhone to anyone who wants a phone which is almost everyone.

I will get questions from people asking me about some of the terms that are used on the show.

Here are 10 Shark Tank terms that every investor should know:

1. Equity

Equity represents ownership in a company.

When the entrepreneur says, “I am looking for $100,000 for a 10% stake”

The 10% stake represents the equity in the deal aka 10% ownership of the company.

Using my example above, if the company profited $40,000 then the 10% owner would receive a distribution of $4,000.

Valuation
Valuation represents what the entrepreneur thinks the company is worth.
In the example above, “$100,000 for a 10% stake” means the company valuation is $1,000,000 (100,000 divided by 10%)

As an investor, it is your job to decide what you think the company is worth.

Revenue
Revenue is any income generated from the entrepreneurs business model. For example, when Apple sales an iPhone that is revenue on their balance sheet.
This includes net sales, investment income, service income, miscellaneous fees, ect. Revenue is key when deciding a valuation.
Contingency
This is an agreement to do something as long as another thing happens.
For example, “this investment is contingent on your company getting a patent for your product.” You would never want to invest in a company that needs a patent but doesn’t have one.
Royalty
This a payment to an investor/owner every time a sell is made.
For example, Mr. Wonderful will receive $2 every time a product is sold. If the product is worth $12, he is getting $2 of that $12.

This is great for an investor!

Scalability
We talked about this earlier. With that being said, this is another word for the companies ability to grow.
For example, an internet based company has unlimited scale because it can sell to anyone. A store in your local downtown can only sell to the individuals in your town.
Purchase Order
An agreement between a buyer and seller to purchase a certain number of products.
For example, Walmart has placed a $1 million purchase order for my product. It will be on the Walmart shelf in Fall 2023
Pre-Revenue
This is a fancy way of telling the Sharks that your company has yet to make any money.
This is common when the business has yet to launch or is building a brand.
Margin
This is a way of measuring how profitable a product is.

It shows how much of the profit, a business will get to keep.

For example, if a product sells for $5 and costs $1 to make, the profit margin would be 80%.
Customer Acquisition Cost
The amount of money it costs for someone to purchase your product or service.
For example, if you run an ad for $1,000 and 100 people buy your product, your customer acquisition cost would be $10 per customer.
I hope you enjoyed this newsletter! I look forward to speaking with everyone next week.

If you have any questions, feedback, or just wanna say hey, email me at mattallenletter@gmail.com

Stay Hungry, Stay Long

Matt Allen

P.S. Follow along on Instagram, TikTok and Twitter for more recommendations, inspiration, and giveaways.

The Matt Allen Letter

Shark Tank and Investing