Enterprise Nation member Sandra Garlick, a former employment and business law solicitor, works with businesses via her consultancy SG Business Consulting and will deliver one-on-one advice in the Adviser Zone at Enterprise Nation's Festival of Female Entrepreneurs in October.
She reviews the third episode in the current series of Dragons' Den and highlights some key business lessons.
1. Be a great negotiator, but know when to stop
Negotiation skills are vital in business. However, when pitching for work, you need to be clear about how far you are willing to push the boundaries and avoid the risk losing the deal altogether.
A great tactic is to plan your best, worst and likely scenarios in advance and know how you are prepared to go.
Bucharest born Alex Busianu had a great accent, according to Deborah Meaden, but it would take more than that to win over the Dragons.
His business, Temporary Forevers, a name which didn't impress Peter Jones, sells luxury leather travel, laptop and camera bags.
It would have been very easy to forget the product entirely after Jenny Campbell and Peter Jones both offered to invest and Alex's hard negotiation that followed.
It soon became evident that Alex was an aggressive negotiator, knowing exactly what he was prepared to give.
Initially though, Alex lost a Dragon in Jenny Campbell after she withdrew on the basis it was clear that Alex wanted to work with Peter.
Peter could have very easily withdrawn at that point but admired Alex's negotiation style. A risky tactic which paid off in this instance.
In contrast, Claire Gelder of Wool Couture was offered investment by Touker Suleyman and Tej Lalvani.
She gave 30% equity for £50,000, more than the 10% she was originally wishing to give.
She chose to accept on the basis that the input from two Dragons with experience was more valuable to her than the risk losing that investment via negotiation.
2. Know your route to market
Large brands pay significant sums for product placement on supermarket shelves. This is key to driving customer sales. If a supermarket doesn’t know where to place your product the customer won’t know where to find it either.
Having a clear sales strategy, knowing who your customer is and where they are, are all essential for future sales for your product or service.
Having a great product and being a great person is clearly not enough.
Deborah Meaden loved ex-police woman Rayeesa Asghar-Sandys' passion for Indian food, coupled with a great tasting natural and healthy frozen product from her business, Rayeesa's Indian Kitchen.
The other Dragons were equally impressed but sadly her stand alone freezer concept for supermarkets clearly wasn’t viable.
Rayeesa had sold in farmers' markets and hadn't really explored fully her next route to market, demonstrating that you need to identify where you are going to sell your product.
Rayeesa received some great advice from Tej Lalvani who suggested that she built her brand and sells online therefore avoiding the refrigeration problem.
3. Ensure that you, and your business, are investor ready
Being 'investor ready' means having a realistic valuation and knowing your figures inside out (including the difference between turnover, gross profit and net profit).
You should also have full knowledge of every aspect of your business and have the capacity to do a deal.
You need to back your valuation up with hard figures, have a detailed business plan and three year cash flow forecast.
Getting a Dragon on board is only the first step and a detailed due diligence process will follow any offer of investment.
Although Claire Gelder initially forgot to factor in her labour cost when quoting her profit figures, she soon recovered under gentle prompting from Deborah Meaden and secured an investment offer.
Not so fortunate was ex-Army inventor Michael Gormley of Go Bubble. Whilst he had a credible invention at first sight, to keep champagne fizzy, following further probing it soon became apparent that the invention was a prototype.
Michael was unsure where he was in the patent application process, admitted there had already been a £2m investment and had no sales.
Clever questioning from Peter Jones clarified that Michael only owned 10% equity in the business.
There was clearly no room for movement and his request for investment was destined to fail as he didn't have the capacity to make decisions on behalf of the company.
- Episode one: Business is about confidence. But not too much
- Episode two: The importance of likeability in business
At the Festival of Female Entrepreneurs on 20 October in Bristol, Rob Law from Trunki, who got turned down on the show but has gone on to achieve massive success, will interview Julianne Ponan of Creative Nature Superfoods, who got investment but ended up turning it down. Book your ticket now!