"I'm out"— Shark Tank's Kevin O’Leary chimes in on Kaan Designs' margins

Shark Tank season 16 aired episode 6 this week on November 22, 2024 on ABC. The segment featured four entrepreneurs and their businesses. This included Foam Cooler, Pepper Pong, Taverns-To-Go, and Kaan Designs.

Kaan Designs's founders Ashley and Kenny from Wayne, Indiana shared their story with the sharks. They showcased their t-shirts — The Originals, The Remix, The Encore, and the Mic Drop and described their brand as a "parenthood lifestyle" brand. They said they were on a mission to "encourage" and "inspire" families to "get in the picture."

Their ask was $75,000 for a 15% stake in their company. As the sharks enquired more about their costs, sales, and margins, the founders said they made the adult shirts for $5.12 and sold them for $26. The kids' shirts cost them $4.24 to make and were sold for $21. Mark Cuban asked about their sales and Ashley explained their lifestyle sales were $3.2 million since 2016.

As they discussed the numbers more, Kevin O'Leary stated he didn't think there was room was an investor in the company. He added that they couldn't go retail since their margins were not big enough.

"Guys, it's not for me. I'm out," he said.

Lori Greiner, who said she loved the design also said she didn't want to invest because she didn't know much about the fashion industry.

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Kaan Designs's Shark Tank season 16 pitch explored

Kaan Designs took the stage in Shark Tank season 16 episode 6, titled, Play the Classic Game Anywhere! Ashley and Kenny sought $75,000 for a 15% stake and told the sharks the two problems they faced were cash flow and expanding the product category.

As part of their pitch, the couple revealed that their product had been spotted on several celebrities, athletes, and "even Oprah's Favorite Things."

"Our family works hard to make your memories a little more special," Ashley said.

Lori Greiner praised their concept while Mark Cuban asked about their ask since they hadn't included that in their monologue. Lori praised the quality of the sweatshirt while Mark asked about their inventory.

"We actually hold blank inventory and we screen print them," Ashley explained.

Kevin O'Leary asked how they acquired customers since it was a big market with a lot of competition. He said the "key to success" was "low customer acquisition costs" and "return business."

The Shark Tank season 16 entrepreneurs explained that their cost of acquisition stood at $9.37 but they had a 30% customer return rate. The investor asked if they made a return on any of their digital ads. Ashley explained that on Father's Day, they made a 5X return. He asked about their margins.

The Shark Tank season 16 sharks felt their margins and prices were "reasonable" and Kevin added that the duo was profiting on a 5X ROAS ( Return on Ad Spend). The entrepreneurs explained that they were reaching 5X during holiday seasons but on average they reached 3X.

When Mark Cuban asked about their sales, Ashley stated Kaan Designs' lifetime sales were $3.2 million. The Shark Tank season 16 investor asked about the time frame of their lifetime sales and the entrepreneurs revealed the $3.2 million was from 2016 onwards. They were further asked about their sales in the current year.

"This year, I believe that we'll hit around $280,000 to $300,000. We are up from last year," Ashley said.

Kevin noted their margins were close to 80% and asked how much they would have to spend to reach their goal. The participant explained they were spending only 5% in revenue on ads because of their issue with cash flow.

The investor further asked if they were "breaking even" on the 300K in sales. Ashley said they were profitable last year at $44,000. Todd Graves asked why they needed a shark and the pair explained that they couldn't produce fast enough to meet customer demands.

"And you make to order, so I think, actually, that's a good thing to hear to the extent that you don't have a warehouse sitting full of a whole bunch of different ad sizes," Lori said.

Ashley revealed they were working out of their garage and faced an issue with expanding their product category. Todd further asked the Shark Tank season 16 entrepreneurs how much of their own money they used to start their business and Ashley revealed she borrowed $200 from her father that she was yet to return.

"How are we gonna get back $75,000 if you ain't paid dad $200?" Daymond joked.

Kevin O'Leary and Lori said they were out. Daymond stated he felt they could grow their business themselves and passed on the investment. Todd Graves made an offer.

"I'd like to offer you the $75,000 but I'd like to do it as a loan and I'd only take 10% equity off of that," he said.

The Shark Tank guest shark explained that it was not in his wheelhouse but he loved the product. He explained that he was "very good" at branding and grew a restaurant from one location to 800. He said he could help them with branding and said he would love to partner up with Daymond so he could act as a mentor in the apparel business.

"I'm gonna mentor you but I'm not going to invest," Daymond said.

Ashley and Kenny walked away with Todd's investment and Daymond's mentorship from Shark Tank season 16 in episode 6.

Stream Shark Tank season 16 episode 6 on ABC to see how the other products fared on the show.