THIS Common Mistake Ruins Small Businesses | Tom Segura

But within families, there's always ego intention. Always. There's the brother, the sister, the mother, the cousin, whatever. If you are unable to fire your own mother, you shouldn't run the family business because you've got to think about the business first. Of course, I've like many people, um, been mesmerized many times by the endless, endless cycle of Shark Tank and it airs uh 24/7, 365. Whether you're walking through an airport, a lobby, at home, it just never stops.

It's incredible, this incredible show that is now in your, what is it, 13th season or something like that? Yeah, we're in the middle of the 13th season right now. It's really an incredible success that, um, I know people just can't get enough of. I likened it to a little bit of when it first started, when American Idol first started. You would watch people being like, I want to be a singer, and then you'd watch them sing and you're like either they are terrible, and you get some joy out of that, or you're like, oh my god, this person is incredible.

There's something about watching people pitch successful business ideas to, or pitch ideas to successful business people and hearing what kind of feedback you give them that, I don't know why, but obviously a lot of people feel that way. It's exciting. It's exciting to either see them go down in flames or get you guys to compete and start wanting to invest in that business.

Well, it's really hard to get financial freedom singing. If you get a hit product and you sell hundreds of millions of dollars of it, which happens all the time on Shark Tank these days, just because you think it's a hot product doesn't mean it's so. You need a portfolio approach because my biggest winners were ones I thought weren't going to work and vice versa.

Is that really true? Your biggest winners, you weren't even convinced that they were going to be that successful? Yeah, I took a flyer because I liked the person or the team or the woman or the man pitching it, and in the end, the thing ends up making me millions of dollars. You just don't know, and that's why you can't stop watching it. It really is. It's kind of a combination of luck, timing, marketing skills, social media; all of these things have to come together to make a product really work or a business.

And we've learned that. I mean, that's why, you know, every day in my portfolio of over 34 companies now, there's something euphoric going on in a few of them, and catastrophic on the others. It's like a passion play. The phone is ringing. I'm getting emails, oh, we're going out of business. The other ones just said we're being acquired for ten times revenue. You just don't know, and that's what I love about it.

Yeah, I imagine that's a pretty exciting thing. Well, how do you handle the catastrophic news? Like when you get news that, like look, this business is in, and you know you put your money into it. Like, I guess I feel like most people would be like, don't get too emotional, but isn't it almost impossible to stay without emotion when you get those kinds of calls?

Well, I want to assure you, when I lose money, I cry like a baby. I really do because it's so hard to make it. And it doesn't matter how much you have, when you kill it that way, it's just really stressful. But the way I look at it is, look, it's going to happen. Some percentage, even in venture capital, you know, if you can look back since the 1950s, you're only going to get a two out of ten that are really going to work, and they're going to pay for the other eight dogs you invested in.

But on Shark Tank, we do way better because we have hundreds of millions of people watching the show. And so, at the end of the day, after through syndication and international distribution, products get distributed worldwide as people get to know them. It's the most powerful eight minutes of consumer advertising you can get. That's why everybody wants to bring their idea to Shark Tank.

You know which one I remember, by the way? Sometimes, you know these things. I don't know if you'll remember this one. You probably will because you invested in it, but it was Seize. It was multiple, it was many seasons ago but I remember watching this pitch and watching you, uh, you know, compete for it. It was a guy who had come up with a Play-Doh that was maybe— it was like for— like had an ingredient missing that no one had thought to do. You know what I'm talking about?

Yeah, I do. I do. And then you, um, he wanted to give you— he had agreed to give you 49% and you were like nah, 51%. 'Cause I need to be able to, you know, make decisions on this thing, and he ended up going for it, and I thought it was a brilliant idea, a concept. I don't know whatever happened with the company.

You know products like that aren't companies yet; they're just products, and that's why I need 51%. Because I know at the end of the day, a lot of people have great ideas, but you need executional skills with great ideas. You can't just have a great idea; they're a dime a dozen. Executional skills are really hard to find. So when you combine executional skills with a great idea, then you have a business, but that doesn't happen that often.

So when I see somebody, there's a great product, no distribution, no idea what to do with it, maybe I'll take a flyer, but I'm not going to let them manage it. I mean, look, you got to take— you have to tell the truth on these situations. I'm the only shark that tells the truth. Everybody else lies to everybody trying to make them feel better.

Yeah, hey man, I'm on your side a thousand percent. Now, uh, the new show Money Court, you're going to be flanked by a trial attorney and a former— a former public defender and judge, and you're taking real people's money issues and, and hearing them out and making a decision, giving them advice, and having the other two attorneys weigh in on it. What do you find is the most common money issue for most people? Because money is obviously such a huge factor in all of our lives.

We live in this capitalistic world and society, so money is a thing that people argue about, people break up over, people get together over. It's a huge thing. So what is like the most common issue you find when it comes to money?

So the problem, if you think about categorically, uh, small business in America represents 65% of job creation. Mostly, these are family businesses that were started sometimes by the existing generation or maybe the previous generation, and they've grown to 30, 40, 50, 60, 100 million dollars in sales, and they're successful. But within families, there's always ego intention. Always. There's the brother, the sister, the mother, the cousin, whatever.

And, you know, even though the business is really successful, these emotional aspects surface every once in a while and cause a lot of chaos. And it's sort of the way I tell everybody this: to think about this, if you are unable to fire your own mother, you shouldn't run the family business because you've got to think about the business first. It is what sustains everybody: all the employees, all the customers, all the bank loans, all the investors.

You've got to take care of the business. You can't let yourself get caught up in a huge legal battle with your brother. What a dumb idea! But it happens all the time, and that was the essence of what Money Court is. And so, what we tried to do is, first of all, break the log jam that's been created during the pandemic. There are tens of thousands of cases waiting to get into court because the courts haven't really been open during the pandemic. So, they've decided to go to arbitration.

Now you can choose who arbitrates your case, and what's really interesting about this, we started casting it because these are real cases, the real litigation, real money here. They've got to sign a contract that they abide by my rendering, by my decision, and many of the people said, you know, I don't really like that, Mr. Wonderful, but I trust him. How about that? And that just shows you telling the truth is not a bad thing because at least they think that you'll render the truth.

I've got Katie Fang with me who's absolutely spectacular. She's a trial attorney. I've got Anna Pozzo, and she's amazing too. Adam knows exactly what it's like to sit on a bench because that's what she did. She can smell BS a mile away, and when it comes to contract law, you know, Katie Fang’s like a weasel; she'll rip your flesh if she smells anything wrong with what you're telling her, and I love it. I've got these fantastic legal advisors, but ultimately, I render the decision.

So you make the final decision. I saw a clip, I think it's from the new show, or maybe it was from an interview that you did promoting it or something where you said that you— it was your take on when family asks for money. In this clip, you said, you know, when family asks for money, I have like a basically a steadfast rule that I stick to, which is if I'm giving you the money, I'll give you the money and it's not a loan; you don't have to give it back, but you'll— you never ask me for money again.

It's worked for me. I constantly get asked for money, and with my own family, this happens. Anytime one family member has a windfall, it's my advice to them. Everybody's going to come crawling out of the woodwork saying, look, I want to open a bowling alley, a restaurant, a disco, I want to buy a truck, whatever it is. And if you get yourself into a situation where you have family members owing you money, which you know with certainty they're never going to pay you back, you're way better to say, look, I'll lend you this— no, not as a loan, it's a gift.

It's yours. I was very fortunate; I'm gifting this money. Never call me for money again. That's our unwritten contract, and I've lived through that many times, and I'm able to go to Thanksgiving dinner every year and smile at everybody and they smile at me. We have no tension; we have an understanding.

And has anyone who ever borrowed or taken that money been like, all right, thanks? Have they ever tried to hit you up again? Of course, but we have an agreement. You have an agreement with the deal.

Yeah, look, you know, everybody's life is full of complications, and that's just the nature of family. There's always the black sheep, there's always the story, there's always the mother-in-law. I mean, that's what makes life interesting, and there's never a day that isn't boring. But you know, I've got a lot of CEOs that I invest in. I've got a lot of operating companies. I have my own operating company. You know, I try and keep a balance in life, but at the same time, I realize how it works.

You've got to be transparent, you've got to be honest, and sometimes people can't stand the truth. Well, Kevin, let me ask you something. I do pretty well, and I make a good living, and, uh, my mom keeps hitting me up for money. Like it's constant. It's luggage, it's trips to casinos. I just bought her a freaking MacBook so she can just play bridge. Like it never ends. Do I just keep buying her stuff because she's gonna die someday?

Yeah, if it's your mother, you've got to keep buying her stuff. Okay, so that's the— that's the one. I mean, that's the one rule. You can't mess with your mother; it’s bad karma, man. But everybody else, I can tell them to, yeah, they're not your mother— hit the bricks.

Yeah, okay, cool. Just wanted to make sure on that. She's gonna love this portion of the show. So, um, now I wanted— I read a thing about your investment philosophy about age versus holding stocks and bonds. I wanted to know, do you have an opinion on real estate? Do you believe that having real estate as an investor is a good idea, worthwhile, or—

Lexi, this is my take on this before you tell me: I feel like people are drawn to the types of investing they're familiar with. So I have friends whose families were raised in real estate families. In other words, the family owns homes and apartments and counters that they rent out. So as the kids get older, that's what they invest in. My father was a stockbroker, so it was like the market is what I'm familiar with and I feel comfortable with.

But I've also thought of diversifying in the way of getting into an investment property. I'm wondering if you think that is wise or not?

Yeah, I do have a lot of real estate in my portfolio, but I'll tell you a rule that my mother taught me who was not, you know, an analyst or a portfolio manager, but she did incredibly well during her life. Simple rules. She said, never put more than five percent into one— any one position, and never more than 20 into any one sector, including real estate.

And her theory was that no matter what happens, if something blows up on you and it's only a five percent position, it can't wipe you out. Where people get killed, particularly in real estate, particularly in commercial real estate, which has gone under a lot of pressure because people's work patterns are changing as a result of this last year and a half of the pandemic, this is not a great asset anymore because basically some percentage of the work population never wants to go back to headquarters.

And as a result, you're seeing all kinds of buildings that used to be AAA supreme in Boston, New York, Detroit, you know, Florida, Miami, you name it. These buildings are, you know, 15, 20% empty right now. And everybody's saying, don't worry, it'll get back to normal. No, it isn't going to go back to normal. Some percentage of the population, particularly people who work in accounting, logistics, and, you know, compliance— those are the ones that sit in those cubicles. They have no interest in going back, and if you can't provide them, you know, a way to work from their homes in the suburbs, or they're taking care of their kids and elderly parents, they'll just work for somebody else.

And so I think, at the end of the day, we're going through a change. So I'm not really as excited about commercial real estate as I used to be. I still own a lot of residential; I'm okay with that, but not commercial. I'm on a breather on that.

Imagine if you owned a movie theater chain, how screwed you'd be now.

Oh my god, I know. I mean, like I think about the, um, you know, that lawsuit that was all in the news recently, uh, Scarlett Johansson against, uh, Disney Plus for her movie that came out. And, you know, as somebody who— I'm a comedian and performer— I automatically side with Scarlett. But then also when I heard the details, at one line of theirs told me how full of, uh, they were, which is that, you know, she had a theatrical window that her movie could come out in and that was in the contract.

And then they put out a statement that said she didn't take into account the, um, you know, all the pressures and the catastrophic effect of COVID-19. It's like, yeah, that doesn't get you out of the contract though, man.

But I mean, I understand why their position is we needed to stream it as well, but I still feel like it's not a legit, uh, case on their part.

Yeah, I mean, look, I look at those numbers almost every week because we have businesses that support, uh, movie theaters and they are down 60% year over year. The box offices are abysmal. It's a bloodbath on every release. People don't want to go back to those places, not just because COVID, because they're used to streaming. They spent a year and a half streaming anything they want.

If you don't want to release your movie the way people want to watch it— too bad, lose money. That's exactly what's happening. These people, I think they made James Bond five years ago and they're still waiting to release it. I think I'm not going to a theater to see that. If you can't serve it up to me in my basement with my own popcorn and my own can of pop, forget it, I don't care. I'll watch something else. That's the new reality, and you've got to listen to what the customer wants.

Look, if she wants to get into litigation with Disney, good luck; they're not easy to fight with.

That's true. I mean, I don't know how that'll end up, but point being— well, let me make a prediction— not well for her.

Okay, and is that prediction just based on the giant that Disney is and the heavy hitters they'll bring?

You know, I've been working for Disney for almost 15 years and Sony, and I learned to respect the way they run their business and the way they license their content and the way they work with their talent. It's a mutual respect that's required. I would never litigate the hand that feeds me. I would go sit down and try and work it out in private quarters; they would respect me for that.

I remember when I was negotiating my contract for Shark Tank in season three and I didn't want to have an agent, and I went to see the then president of ABC, the studio that was putting it on the air, owned by Disney. He said, "Kevin, can we have a frank conversation? Can we be honest and transparent with each other?" And I said, "Yeah, I negotiate my own deals; I don't want to pay an agent 10%." He said, "Yeah, you do, and you’re going to because if it's you and me negotiating your deal, there's going to be blood on this carpet— it'll be yours, and I don't want that to happen because I have to work with you for the years ahead.

I would rather draw blood from your agent who has to work with me every day for the rest of his life across a wide range of products, and who knows, you may benefit from the fact that he'll horse trade you; you're just meat. You're just talent. It's time you learned that here in Hollywood." And I went, "Whoa, you got to be kidding; I'm just meat?"

He said, "Yeah, now you're expensive meat." And I met my new agent that afternoon at the SLS Hotel. His name was Jay Cerus; we've been together a lot of years, 10 years. He made me a ton more money— a ton. And the reason was he was able to horse trade assets across all the studios. That's how Hollywood works, and it's never going to change, but you never sue the studio.

Hey, Scarlett might want to rethink this one!

[Laughter]

Well, I for the record, I didn't sue you Disney. If you like that video, wait till you see my next one! Don't forget to click right over here and subscribe.