Entrepreneurs

'Shark Tank' judge Daymond John shares his top 3 lessons for entrepreneurs

Daymond John
David A. Grogan | CNBC
Daymond John

Daymond John has seen his share of ups and downs in business.

He lived paycheck-to-paycheck while waiting tables, turned his side-business FUBU into a massive success and then nearly lost it all in a series of poor financial decisions. Now, when he's not managing his own $6 billion empire, John invests in others as a judge on ABC's "Shark Tank."

The best business owners, he says, do things differently. In an interview with CNBC, John said that a great business mentor would teach his or her mentee these lessons:

1. Beware of early money

The best mentors, "tell you not to take in finance too soon," John says.

The pressure placed on a business owner from investors can be extremely tough to handle, experts say. Investors, usually focused on returns, seek growth and often like to have control over various aspects of a company. If a business owner isn't ready for those steps, that kind of leap can actually hurt a company.

Doug Collom, vice dean of Wharton's San Francisco campus, warns of the dangers of prioritizing capital over developing your actual product.

"There are thousands of founders who collect money and go sideways and flame out," Collom says.

2. Don't expand before you're ready

Opening up another store, expanding into a new market or releasing a new product line before you're ready can drain your company's cash flow. In fact, say scaling too quickly is one of the biggest reasons startups fail.

Every entrepreneur should know "not to scale too soon," the "Shark Tank" judge says.

A recent episode of CNBC's "The Profit" highlights this. Turnaround king Marcus Lemonis helps the owners of one snowboard shop recover from their premature decision to open up a second location.

3. Focus wholeheartedly on your business

John recommends professionals don't quit their day job when starting a business. But once you have proof that your business is working, it's time to go all in.

"Cut most of the other things you're doing out of the way," John says, "and focus."

Setting strict priorities will help you mentally, and boost your margins. As fellow "Shark Tank" investor Barbara Corcoran puts it, "In business, it's not important to just work hard. Instead, it is important to work hard on the things that result in sales."

Check out 5 things millionaires and billionaires do every day to be successful

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