Hit T.V show - The Dragon’s Den - has allowed many of us, whom have no idea of how a business pitch should (or rather, shouldn’t) work, to see real pitches made by individuals and business partners hoping for an investment. Yes, we get to see it all - the good, the bad and the ugly! Whilst there are many bad pitches, every now and again there will be a business idea that captivates the “Dragons” (wealthy business tycoons), enticing them to stump up the cash for a share in the entrepreneur’s business.
It’s a wonder that after several series, entrepreneurs still enter the Dragon’s Den with business ideas that are essentially, rubbish! You might remember the pitch made by a woman who had invested a staggering £200,000 of her own money into her project – only to find that all the Dragon’s refused to invest and told her, in so many words, that her idea was useless and would never sell. So, why did she flop? Well, her idea was a showerhead holder (yes, I thought the same – what the hell?!) Not only was her idea and financial projections pretty farfetched, but she had created a “solution” to a non-existent problem. And what is the first rule of entrepreneurship? – Find a problem and fix it!
So, with this in mind, it seems appropriate to list a number of lessons that can be taken from the Dragon’s Den.
#1 Competition is fierce so make sure your idea is profitable
With almost 400,000 new businesses registered in the UK in 2012, it is clear that entrepreneurship is most definitely on the rise. Therefore, it has become more important than ever to have an edge on the competition and stand out from the thousands of other entrepreneurial hopefuls. Make sure your idea fits into the market, determine a business plan, and base your business on filling a gap in the market. You need to have a deep understanding of your chosen industry, know your competitors, and familiarise yourself with market trends.
#2 Research and plan your financial projections
The first hurdle that entrepreneurs fall at when pitching to investors, is when they are questioned about their financial projections. If your numbers don’t add up, you "over value" your business, or you have done no ground research to determine expenses, costs and profit margins, then don’t plan on getting an investment any time soon!
#3 Know what you want from a deal
The art of negotiation is present in every business deal. Whether you get the best hand out of the deal is down to you though. You need to walk into a negotiation knowing exactly what you need from the deal, and exactly what you want from it. These are two different things: knowing what you need is essentially knowing the minimum you will accept before walking away from a deal, whilst knowing what you want is the best possible outcome of a negotiation. Be sure to research the investors you are pitching too – after all, an investor who could also provide mentoring to you would be far more valuable than a wealthy investor with no experience in your line of business.
#4 Develop a strong brand
The stronger your brand the more likely it is that investors will buy into it. You need to be a solid sales person in order to convince those you are pitching to, to invest into your brand. Branding is everything, and without a PR concept or how you will promote your business to your target market, you will only make it harder on yourself when trying to explain how you will gain recognition in the market to investors. Depending on the product or idea you have, it is wise to protect it! File for a design right, patent or trademark (whichever suits your business best) – this will entice investors even more, knowing that your idea cannot be copied.
#5 Develop a thick skin
As you may have noticed, the Dragon’s are fierce and challenge entrepreneurs over their ideas and financial projections. This is not for the entertainment value of the show, this is what happens in real life business pitches – so be prepared. Any criticism you get should not be taken personally, and if you want to succeed, you will need to develop a thick skin! You may get knocked back several times before you hit the big time; all you need to do is remain positive, persevere, and adjust your business approach so that you learn from whatever mistakes have made your plan fail.