Learning From Dragons’ Den

Well we saw a range of different pitches in the Den last night from shoes to cleaning materials to an online recipe community.  As always, there was a lot of learning points.

Nerves

Nerves can either get in the way or drive us on.  The first lady who secured investment was nervous but she held her nerve despite some intense scrutiny. By contrast another business owner who was offering wine in a sealed plastic glass seemed overcome by nerves.

Pricing matters

The issue of pricing comes up week after week.  Price too high and you run the risk of being viewed as unrealistic.  Price too low and you probably have a business model that is not attractive to an investor.  I am sure pricing is an area that challenges most businesses.

Don’t over value your business

While there are many variations and models out there for valuing a business, what is clear is that it is important to do a sense check.  I am sure that if more businesses that were seeking funding from the Dragons’ stood back and asked themselves if the valuation made sense, there would be a greater probability of investment.

Be willing to engage in a sensible negotiation

Last night we saw a common situation where a business (the infection busting cleaning products) is growing, knows that the help of a Dragon could make a huge difference but was inflexible when it came to negotiations.

You need to demonstrate your belief that you will deliver

The infection busting cleaning products business was a classic example of this.  The business wanted to give the investor a 5% stake, had clear growth profit targets and was willing to offer a 10% stake. 

 James Caan made an offer for all of the money but for a 30% stake.  He did however, offer to return 10% back to the owner if the promised profit targets were met. 

Essentially he was offering a risk sharing agreement.  You deliver what you said you can and I will reduce my stake.  The business owner for whatever reason decided not to accept the offer.

If you want someone else to risk their money you need to be willing to show that you will take some risk.

So what did you learn from this weeks Dragons’ Den?  Leave your comments with your insights.

About the Author Duncan Brodie

Since 2006 I’ve worked with in excess of 7,000 accountants and professionals in workshops, seminars and one to one helping them land their next jobs and become better leaders, presenters and business partners. Before that I spent 25 years in accountancy climbing the career ladder from Payments Clerk to FD. I’m a CIMA Fellow, Certified Professional Coach and Team Coach Facilitator.

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8 comments
Janice Robertson says 13 August 2009

I did think it was odd that the infection busting man turned down James Caan’s offer. Was it that he was unwilling to take a risk? Did he not have the authority to make the deal (as he had a 50% share partner)? or was there another reason?

I thought the woman’s shoe idea was brilliant. I would definitely want a pair of those but she almost lost it due to the pricing.

Also, I thought the wine glass man kind of undersold his product. He briefly mentioned that he’d sold his product at a red hot chilli concert so there was evidence that it would sell. I thought that he could have researched other venues like music festivals? – maybe he did but he didn’t mention them . And also maybe he’d gone to the Den too soon without first securing a proper confirmation of an order.

Thought it was a really good episode this week.

Janice

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Duncan Brodie says 13 August 2009

Janice

Agree with you that it was a really good episode.

Hard to tell what ultimately stopped the infection busting cleaners guy accepting the offer. I am sure terms would have been discussed with business partner ahead of appearing. If he really wanted the contacts and the reach then there needed to be a willingness to offer something attractive in commercial terms.

I was surprised that the shoe lady got the backing but it goes to show that it aint over until all Dragons’ are out.

The wine glass guy got overtaken by nerves in my view and his marketing guy did not help.

Interesting how we all look at slightly differently.

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