Richard Daniel Curtis, Enterprise Nation member, professional mentor to business owners and founder of The Mentoring School, pulls out the business lessons from the latest episode of BBC TV's Dragons' Den.
This week’s episode of Dragons’ Den saw four solid pitches. There were no quibbles over turnover or lost contracts. In terms of viewer interest, it was a run of the mill episode, but not so from a business point of view.
First up was Lucy Cox and Lerryn Ryall from Halto. They were asking for £50,000 for a 15% share of their business that sells a device that stops bikini straps digging into the back of the neck.
They clearly knew their stuff and with a 68% gross profit and a cost of £1.42 per unit, the usual questions were answered with barely even a thought. However, one question was going through my head as I watched what is the market share of women who would benefit from the product?
This was clearly something that was in the Dragons’ minds too as it became clear that a US version, which has been going for 10 years, is only turning over approximately £140,000 per year.
With 95% of their sales going through retail, to make this a scalable and profitable business they need a huge amount of sales and it is almost certainly guaranteed that there will be cheap copies available before that happens.
Lesson: Great people need the right product to succeed.
Next came Michal and Tim from Carun UK seeking £50,000 for 15% of their business. Michal has the UK rights to pharmacy and beauty products made from hemp, the non-psychedelic part of cannabis.
It quickly transpired that the first block to market was awareness. This was demonstrated by Peter Jones who didn’t seem to get his head
Lack of clinical trials to establish the benefits of the products in the UK was another issue and I was left thinking if a business owner can’t express clear defined benefits of their products, how can their customers?
It quickly transpired that Michal had negotiated a
Yet again another lesson from the Den in ownership of intellectual property and the importance of getting someone to check your contracts before you sign.
Lesson: Contracts make or break businesses, so invest in advice.
Next came Alex and Johnny from
The concept is a subscription model offering stories that begin in English and end in another language (currently French or Spanish).
The duo had run a successful crowdfunding campaign, in addition to securing £30,000 from Nottingham University.
All good so far, but here’s where the pitch turned. What do they want from a Dragon? A standard question that they should be able to nail.
The response was so alien to the Dragons that they could have easily been speaking a different language. They couldn't explain what a Dragon would get for coming on board and then offered further advisory shares in return for a Dragon working in the business.
This was the one point I was screaming at the screen. Surely the fact they have time to be on Dragon’s Den tells you that they delegate the work and have little day-to-day involvement.
Shot down in flames about the 1% conversion rate on their website, the pair faced a further battering about their marketing techniques, as Jenny Campbell describing it as “spray and pray marketing.”
I was sat thinking about the early lessons I had learnt from my mentors: Your marketing should be like a scalpel, attractive to exactly the sort of person you want to attract, not everyone.
Lesson: Know who you are pitching to and play to what they want.
Finally, we saw James from T Plus Drinks, a company selling green tea with added vitamins, seeking £75,000 for 10% of the business.
The tea is aimed at the middle of the market at £3.69 a pack, dearer than some and cheaper than others. With a turnover in the first year of £25,000, the company got off to a strong start (albeit with a net loss of £55,000).
The next pill to swallow for the Dragons was the massive £80,000 marketing spend forecast for this year on a predicted £230,000 turnover; nearly 35% of total turnover!
Surely, I thought, they should be working on partnerships and using other people’s lists to build their audience.
Lesson: If you and another company are targeting the same people and your products don't compete, how can you combine your efforts?