Charlotte Moore, founder of specialist food, drink and lifestyle copywriting company That Copy Girl and blogger at Lottie Loves Food, reviews the latest episode of Dragons' Den, and shares six useful business lessons.
There's nothing better than picking up new business tips while sitting in your pyjamas, drinking a steaming mug of hot chocolate! I’d personally never be brave enough to be interrogated by the fearsome five, but always enjoy watching and learning from the entrepreneurs who make it onto that big stage.
Bristol-based Ellen Green manufactures, sells and distributes stylishly designed wallets for disabled blue badge holders, and was looking for £70,000 for 7%. They were already stocked in Boots, the Post Office and Halfords, and Ellen was proud to confirm that they were all proudly made in the UK. Her near perfect account of the current healthy finances of the company meant marketing expert Nick Jenkins offered half the money for 12.5%. Sarah Willingham loved her business ethos but knew it wasn't her niche, while Peter Jones loved her focus, but believed she’d overvalued the business, so they were out. Deborah Meaden agreed the valuation was an issue, but offered all of the money for 25%. Touker Soleyman was always her preferred Dragon and despite also doubting her valuation, offered the full amount for 40%, negotiated down to 35% after she mentioned he was the one she’d originally hoped for.
A verbal tussle ensued as offshore production specialist Touker didn't embody the 'made in the UK' credentials Nick had admired about the company, and Ellen’s flustered response about her UK commitment prompted Nick to withdraw, with Deborah closely behind because she was a 'second choice' Dragon. Ellen declined Touker's offer citing too high a percentage and his offshore production preferences.
Business lesson one: Get your valuation right
Declaring the value of your business is always a difficult strategy when pitching to investors. A mix of cold, hard current figures combined with sales trends and accurate forecasting, must lead to a valuation that is both realistic now, and in the future. Anyone with previous investment experience will immediately be suspicious of valuations that are indicative of what the business owner wants to achieve, rather than what is realistically possible.
Business lesson two: Be firm about your principles
These days, something as simple as 'made in the UK' can be a convincing selling point, and if it's an ethos your business is based on, don't be swayed by the temptation of an investor who embodies the opposite view. Stay true to your values if that's part of what makes your company stand out from the crowd.
Anglo-French duo Adam Symons and Tarik Fatihi introduced their business Haircvt, an online service where searching for your ideal hairstyle matches you to your perfect stylist and salon. They wanted £80,000 in return for 5% equity, and had managed to sign up big salons like John Frieda and Tony and Guy, plus tapped into the hair product market with brands like Revlon and L’Oreal. A 15% fee on every booking secured their current income.
Touker questioned their market research, knowing that many people have had a special relationship with their hairdresser for years, so was intrigued to know how many would be willing to go to a stranger. The partners confirmed this was an assumption on their part, rather than based on any evidence. Sarah and Nick's questioning revealed that there was no capability for an instant, live booking using their site, which rendered it as a far less valuable service.
The finances revealed they'd be making a loss for at least the next three years, so one by one, each Dragon pulled out as they all agreed that too much capital would be burned before they had a valuable and useful client database brands could benefit from. Deborah summed it up by saying they needed millions, but was disappointed that their lack of vision prevented them asking for it.
Business lesson three: Do your market research
A business can be born out of a great idea, but no matter how brilliant you think it is, do your market research. Once you establish that there's a gap in the market to be filled, you can build, mould and shape your product to be the very best fit for your ideal customer.
Business lesson four: Dream big
A conservative request for cash may seem like the easier option when pitching to an investor. However, if you know that your business requires a significant amount of investment to reach its full potential, don't be afraid to share your vision with someone more experienced who could easily recognise the same.
Rachel Wicklow, an entrepreneurial mum who struggled to get her children to eat their vegetables, created a meat-free, vegetable sausage, and wanted £50,000 for 15%. While already stocked in Wholefoods, Planet Organic, Holland & Barrett and Ocado, Rachel demonstrated her knowledge of the expanding veggie and vegan market.
Nick questioned the implication that hiding vegetables insinuated there was something wrong with them, which flew in the face of encouraging children to eat them. Deborah was quick to agree with the principles of some people choosing not to eat meat for periods of time, as she is a 'flexitarian' herself, and challenged Peter’s notion that this was just a 'fad'. Sarah, Nick and Peter all agreed with the main business principle that children should eat veggies, but didn't like the 'hidden agenda' and felt the branding didn't support her ethos. Touker agreed there was a market, but didn't think the product looked appealing. Deborah loved what she was doing, but didn't think the taste and texture was good enough, so every Dragon was out.
Business lesson five: Think carefully about your branding
Creating a business based on a specific concept provides a good focus; so don't let confusing branding cloud the message. In this instance, every investor admired the reasoning behind the product as they too believed it was important to encourage children to eat vegetables. However, hiding them in order to 'trick' them into being eaten as the name and tagline suggested, made them feel that the brand was undermining its core principles.
Marc Wileman, aka 'Mad Marc', entered the Den pelting the Dragons with giant smoke rings. He explained how he has made science awesome for children over the last six years, with school workshops and kids' parties. His vision was to broaden his reach of customers in the UK and globally, potentially licencing his books, and wanted £50,000 for 10%.
Peter was impressed by the turnover and profit, yet Touker questioned his need for any investment at all and pulled out. Nick felt they shared some similar passions, so offered all money for 10%. Sarah followed suit citing her extensive experience of international licensing and franchising, and Deborah jumped on the bandwagon, but suggested she help with the untapped holiday and tourism market. Peter floated his 35,000 convenience outlets and ownership of Red Letter Days as potential avenues and opportunities, and gambled on his reputation by asking for 20%. Nick then upped the ante by suggesting a split with Sarah so that Marc benefited from two Dragons, which he happily accepted.
Business lesson six: Be open to new opportunities
In this instance, the entrepreneur had identified a clear pathway that his business could follow, which demonstrated his future thinking. Some Dragons latched onto this and reassured him that working with them would mean he'd achieve those goals. However, others saw potential for the business in different ways, and tried to woo him by offering integration with established businesses and connections in ways he hadn't yet considered. Plan the future of your business, but always be open to suggestions and new opportunities from others who may have spotted a market or niche that you'd never even considered.
Previous Dragons' Den series 13 reviews:
Episode one: Lessons in financials, valuation and charm
Episode two: Eight brilliant business lessons
Episode three: People are the heart and soul of entrepreneurship
Episode four: People or product?
Episode five: What's your 'why'?
Episode six: The journey to success means small steps along the way