Iconic Tour

Daymond John of ‘Shark Tank’ reveals 5 principles that can help anyone become a millionaire

Andrew Zaleski, special to CNBC.com
It's not just moguls like Daymond John who discuss the importance of gratitude. Science says it boosts your chances of success.
Adam Jeffery | CNBC

Daymond John is nothing if not tenacious, and it's that determination that allowed the founder of FUBU to take a shoestring budget and wield it to eventually create an urban streetwear brand worth $6 billion.

But the road John traveled en route to becoming a serial entrepreneur and an investor on the hit ABC show Shark Tank was filled with false starts: being $16,000 in the hole after throwing a party on a boat that few people showed up to; losing the first $800 he ever made to pay for car repairs after a crash; sinking nearly $100,000 into a makeshift factory during FUBU's earliest days, while still unsure he could fill his first round of orders.

What John learned as he gradually built a billion-dollar clothing line is that sometimes your best work comes when your back is against the wall, a lesson he distilled into his 2016 book, The Power of Broke. In this case, sometimes literally being broke can be the jump-start an entrepreneur needs.

"It makes you work things out and figure things out and get it done without the tool of money giving you a superficial high," John said.

Today, when he's not considering pitches as the "People's Shark," he's sharing his lessons of business success through a series of online classes called Daymond on Demand. But as John will tell you, the key elements of any successful venture haven't changed, even if times have. He calls them his five SHARK Points, and he said they're just as relevant today as they were when he launched FUBU in the 1990s.

1. Set goals to know where you're headed

By age 16, John had told himself he'd be a millionaire by age 30. But when he turned 22, he was broke and struggling to make a buck by buying and selling cars.

"I didn't know how to properly execute goal-setting. It's not just visualizing of a number or a certain age," said John.

When the idea for FUBU came along, he decided to reshape the goal he set for himself in high school. Instead of committing to making a million dollars by age 30, John instead made it his goal to outfit the hip-hop culture. Designing a clothing line became less about earning money and more about dedicating himself to a community — one that he thought would turn into future consumers.

"My goal became doing the best I can for the company I love," John said. "The goal changed to my dedication: I want to dress people and enrich their lives, and in return I will hopefully be compensated."

2. Homework — you still have to do it

After sneaking his way into a menswear conference in Las Vegas, John proudly showed off early prototypes of T-shirts emblazoned with the logo of his budding company, FUBU, an acronym that means "For Us, By Us." He secured $300,000 worth of orders, and after his mother took out an equity line on their house in Queens, he took $100,000 to outfit a factory to get production going.

Just one problem: He hadn't done any research on what it would cost to start a clothing line and get production going. In the process, he nearly lost his mom's house and ended FUBU before it got off the ground.

Knowing what you need to launch a venture is something John stresses to the hopefuls who appear before him on Shark Tank. He has to see that an entrepreneur looking for funding has done their work to know what their market is and who their competitors are — and that they've used that knowledge to not only start driving sales but also improve on their track record.

"I have to see sales and some proof of concept, and what they learned when they sold 100 units so they can come back and sell 1,000 units," John said. "I need to see somebody at some level where their idea isn't just a theory, because if it's only a theory, then you're using my money as tuition."

How I Made It: Daymond John and the Power of Broke

3. Adore what you do, and success will follow

A true entrepreneur must love what they're doing, a seemingly trite lesson that John said is crucial for any successful entrepreneur. It's passion for a project that will allow a person to push past failures and feeling burned out.

It was John's love of his new company that helped him persevere when he was just starting his business. But after three months of running FUBU, he had sold $30 million worth of clothing.

"Do what you love, and success will follow. Money may follow; I can't promise that it will," he said. "But money's more likely to follow when you're doing something you love, because you'll do it for 10 years or 20 years."

4. Remember, you — not just your business — are a brand

These days it's easy to manufacture a personality using social media. But building a business is as much about how you carry yourself as it is about meeting quarterly sales figures or developing new products. Be transparent and honest about what you want from the business and your employees will follow your example.

"Be very honest with yourself, especially today with social media. At any given time, your employees can see you," John said. "So you have to know what the DNA of the brand is. It only takes your employees two weeks to treat your customers the same way they're being treated."

John's rule: See if you can describe who you are in two to five words.

5. Keep swimming, no matter what

John's final SHARK Point makes use of what he calls the power of positive thinking. Even as FUBU grew into a bigger company, he maintained a "healthy paranoia" about running a clothing company.

"I always said fashion brands are hot for five years and then they're gone," he said.

But keeping a persevering attitude spurred him to come up with solutions to problems instead of giving up. As John wrote in The Power of Broke: "You have to be relentless, nimble, moving ever forward. No matter what."

Disclosure: CNBC owns the exclusive off-network cable rights to Shark Tank.