Hot Tot Before Shark Tank
Megan Gage from Denver, Colorado began her working life with a successful career as a Social Worker. She had earned a masters degree in clinical social work and had achieved much in her field but after giving birth to her second child, her son Christian, she didn’t want to miss out on his early years of development and chose to become a stay at home mom.
She began mixing lotions, soon developing her own mixture of baby lotion and pomade to give Christian cool-looking curls. It wasn’t long before she found that everywhere she went she was asked by other parents where they could get the same styling lotion.
At about the same time Megan noticed media coverage of children’s hair care products that revealed many of them, including many well-known brand names, contained toxic ingredients. Regulations on labelling meant that substances such as formaldehyde, potentially dangerous in the long term, did not have to be included on the labels of such products. Encouraged by her husband, she began to look into producing her own product, free from toxic substances. In 2011 she got into contact with a private label manufacturer in Canada and used them to produce a small trial run of her newly developed product, which she called Hot Tot. Starting the business with just $40,000, she operated with minimal expenses from home and even produced her own company logo on Photoshop.
Megan soon began to send out press releases and received some quick and positive responses, including an inquiry from the hugely successful Pregnancy and Newborn magazine within 12 hours of the first release. The magazine featured Hot Tot, along with photos of Christian, in August 2011, another feature appeared in March 2012 in Parenting magazine.
Encouraged by her success so far Megan was inspired to grow the company further and set out to learn as much as possible about manufacturing and business. Sales increased slowly but steadily and after a year and a half she was encouraged by her husband to appear on shark tank to seek additional investment and business expertise.
Hot Tot on Shark Tank
Megan appeared on Shark Tank in January 2013 and was seeking a $50,000 investment in exchange for a 15% stake in her company.
Megan had brought along a secret weapon to help her with her pitch, in the mega-cute shape of three year old Christian who looked happy enough in his role as her demonstration model. He had a mischievous twinkle in his eye as he met the sharks and they seemed to like him, although he was far more interested in his lollipop for most of the time.
Megan fashioned Christian’s hair into a baby Mohawk as she explained to the sharks about the presence of potentially dangerous chemicals in children’s hair-care products. She spoke use of formaldehyde in the industry, and the lack of accurate labelling about such toxins in hair-care products.
She detailed her early sales in boutiques and her subsequent realization since then that the best sales could be achieved through salons. With the help of the sharks she could begin to move into the better known salons and would be given more attention by the big names in the business.
After the demonstration, it was time for young Mr Cute to leave Mom on her own with the sharks. As he left, Christian gave the sharks a little wave, the sharks all waved back, they were impressed with Christian, but were they going to be equally as impressed with Hot Tot?
Robert Herjavec asked what the sales had been so far. Megan told him that in the previous 15 months profits had only been $20,000, although in the last week a purchase order for $7,000 had been signed with a new contact in the short-term sale flash site market.
Megan elaborated further on how the large interest in her product had been a constant surprise to her since she had first started experimenting with it on Christian, she had never intended to go into business with her own product, ‘If you’d have asked me four years ago I would have said it was a crazy idea’ she explained.
‘It may still be’ cautioned Kevin O’Leary.
‘It’s not Uncle Kevin’ Megan said, grinning wildly.
The sharks loved ‘Uncle Kevin’ but Kevin preferred his usual nickname, ‘Please, just call me Mr Wonderful.’ he joked.
Megan handed some samples of Hot Tot around and Lori Greiner was particularly impressed with how good it smelled, although she wasn’t as positive about its packaging. The various bottles were pleasantly and professionally designed, but they looked more like an adult product to Lori. She would prefer to see the child friendly and non-toxic nature of the product more prominently displayed on the bottle. She asked Megan if she was flexible about changing the packaging in the future.
Megan explained that all other children’s products were designed with packaging that would appeal to children, she wanted to appeal to the parents instead, because it was the parents who would actually buy the product. She clarified for Lori that her product was safer than other similar products.
Mark Cuban spoke about his own three year old son, who suffered from eczema. He wanted to know what allergy testing had been done on Hot Tot. Megan confirmed that the manufacturer had performed extensive testing on the product while it was being conceived.
Kevin O’Leary was more interested in the potential market for the product, he asked how big it was. Megan, who always had the right answer at her fingertips, told him there were 280,000 salons in America alone, the global baby care market was worth $48 billion annually. Kevin pinned her down on the details, he wanted to know the size of just the child hair care market, not the entire child care market.
Megan conceded that there were no real figures available, as child hair care was such a new market, but growth in child care overall was 5% annually, there would be plenty of room for new products.
Daymond John asked Megan why she believed that her product could be so successful after only $20,000 in sales. Megan, whose belief in herself and her product was one of her strongest strengths, passionately detailed the excitement that she encountered from customers and retailers alike about Hot Tot. She had recently received inquiries from distributors in Dubai and had been featured in over 100 media sources. She was convinced that Hot Tot would be a huge success with the proper guidance and marketing support.
Mark Cuban interjected at this point, he couldn’t understand how a product that was receiving so much positive feedback and interest had only achieved $20,000 sales in 15 months.
Kevin O’Leary was also concerned about the low sales, he complimented Megan on the impressive results that she had achieved to get the Hot Tot business to where it was now, he admired her businesslike and professional attitude and the product was interesting, but he wondered if anybody really cared about child hair care.
Megan defended Hot Tot with her usual passion, she detailed how she made $1,000 in sales in just two days at her first trade show in Dallas, many of the buyers had re-ordered. She needed help to get Hot Tot onto the shelves and recognised by customers, from there it would be plain sailing. With experience she had managed to reduce her costs until her mark-up was almost 300% on retail orders, and about half of that on wholesale orders, and she envisioned reducing them still further.
Kevin O’Leary was still not impressed, as far as he saw it sales of $20,000 in such a huge and competitive market was equivalent to ‘mist’. With the assertion that he didn’t know if Hot Tot would prove to be a business, and neither did Megan, Kevin dropped out of negotiations.
Megan, still smiling, thanked him for his comments but had to get the last word in with Uncle Kevin ‘It is a business Kevin, I just wanted to clarify that I do know that’.
Megan defended her product to the other sharks, she made a passionate and well articulated speech detailing the difficulties she had faced initially with a social work background and no prior beauty industry experience. She wasn’t put off, her market wasn’t people in the beauty trade but other parents, who would care as deeply as she did about the safety of the products that their children used. Her determination to succeed had been bolstered by her sudden understanding of the toxins used in other similar products and that was her main selling point, to other, like-minded businesses.
Mark Cuban, as a fellow parent, shared her ambition to make products for children safer, he asked if Megan had researched how much further testing of her product would cost. Megan, as always, was well prepared with an answer, optical testing alone cost about $10,000 and without just that one test she was unable to use the term ‘Tear Free’ on her packaging, even though she believed her product was the safest one available.
Lori was still concerned about the branding, she felt Hot Tot should be branded more appealingly towards children and she felt there was still a lot of work to be done. Lori followed Kevin and also dropped out.
Mark liked it, he believed that further testing on Hot Tot was very important and the money should be available for Megan to invest in it. He made an offer to Megan of $75,000 in exchange for 40% of the company.
Megan looked fairly happy at the offer initially but respectfully asked Mark if she could hear from the other sharks first before answering.
Robert Herjavec wasn’t sold on the business. He thought it could be brilliant, an entirely new category in the lucrative beauty market, or Megan might be ‘facing a tough road’ in the future. He conceded that Mark’s offer was generous, more generous than he would have offered and he also dropped out.
Daymond John had very limited contacts in the beauty industry and might be unable to help Megan at all, he was also unwilling to compete with Mark’s offer and he dropped out too.
Megan was only too happy to accept Mark’s deal, which was the only one offered to her, and he was probably the best shark for her to partner with, he shared her vision and passion for improving the safety of children.
Hot Tot Now in 2018 – The After Shark Tank Update
After striking a deal with Mark Cuban on the Shark Tank, Megan spoke about how relieved she was to finally have some financial stability behind the business. She almost cried as she explained how things had been so close to crashing down around her ears in the past, that glimpse of the real Megan made you respect the tough businesslike front she had so professionally showed to the sharks. This was a businesswomen with a lot of confidence, and she was as tough as any entrepreneur seen on the show previously.
Megan’s professionalism and passion for her product have helped her grow the brand steadily and surely. Her well grounded vision for her business is always clear to anyone hearing her speak about it. She communicates with Mark, and his wife Tiffany on a weekly basis, although Mark is on hand to answer questions at any time.
The Hot Tot business continues to grow at a steady rate and Megan recently revealed in an interview that she believes women care more about shampoo than men, whether its due to maternal instinct or phychology, women care about the product and generally men just don’t get it. Megan is following her steady growth pattern and using Mark’s help and experience to gradually move into the huge and lucrative salon market. It’s going to be a tough road just as Robert Herjavec predicted, but with Mark’s dedicated support behind the tough professional Megan, Hot Tot is likely to be a hot new salon product in the very near future.