Mark Cuban is trying to to prevent $1 million from going down the drain.
Next Tuesday's season premiere of ABC's Beyond the Tank will feature Cuban advising the co-founders of boxed wine company Beatbox Beverages. Cuban bought a third of the business for $1 million in October, but at the time, he wasn't sold on the company's growth plan that relied heavily on hosting tasting events.
"In my mind the strategy was wrong," Cuban said on Shark Tank. "You need a lot of help."
Beatbox co-founders Justin Fenchel and Brad Schultz founded their company in 2013. The Austin, Texas-based business sells unconventional flavors of wine, such as "Cranberry Limeade," in packages designed to look like boomboxes. When pitching the sharks, Fenchel and and Schultz had generated $235,000 in total sales in just 14 months in business.
After landing the investment from Cuban, the co-founders were eager to add new flavors and hit the road in an RV to do tailgate promotions across the country. Once again, Cuban had other ideas for the best way to build the business.
"He definitely pushed back on that," Fenchel says.
Cuban's advice: Focus on selling existing products before adding new ones. And instead of a pricey cross-country tour, hire part-time brand ambassadors across the U.S.
Beatbox is projecting more than $1 million in annual revenue for 2015, but has yet to reach profitability. Including six regional managers, the company's headcount stands at roughly a dozen people.
Beatbox still plans to introduce new flavors, but Cuban has taught them about the risk that comes with expanding too quickly.
"He's told us not to drown in opportunity," Fenchel says.
One challenge for companies in the highly regulated alcohol industry is obtaining state and federal permits and negotiating with separate distributors in every U.S. state, according to the founders. Today, Beatbox sells its boxed wine in 15 U.S. states.
Though Beatbox received one of the biggest deals in Shark Tank history, Fenchel and Schultz say the pressure that comes with a seven-figure check has been intense.
"You don't want to be the company that got $1 million and didn't do anything with it," says Schultz. "It's an added level of expectations."
The season premiere of Beyond the Tank airs September 29th at 10 pm EST.