So this year’s series of Dragons’ Den has been and gone. It’s given us everything from record labels to portable toilets, and, once again, offered a fascinating insight into the pitching process.
Having watched all 10 episodes with rapt attention, we now give you the key lessons we’ve picked up from the series just ended – and hope you find these ‘dos and don’ts’ useful if you ever pitch to an investor yourself.
Dos
Get your figures right
This might seem obvious to the clued-up entrepreneur, but it seems many Dragons’ Den applicants don’t have the faintest idea of their figures – and they always get ripped to shreds by the Dragons for their oversight.
Before you go into pitch, make sure you nail every key number, down to the last decimal place. Go through your order books, your purchase ledger and your invoices with a fine tooth comb, and engage a specialist accountant to give you advice if you’re not sure.
Play to your strengths
Each business has its own strengths – be it the client list, the balance sheet, even the product itself – so make sure you tailor your pitch to emphasise the best bits of your business.
If you’ve got a particularly interesting or unusual product, take it with you; if you’ve managed to secure a high-profile client, mention them as early as possible; and if you’ve yet to begin trading, use statements of intent and expressions of interest to emphasise the viability of your business.
Understand your weaknesses
As a start-up entrepreneur, you’ll inevitably have weaknesses in your business. And, just like your strengths, it’s important to recognise them.
As you’re analysing your business before your pitch, make a note of each of the areas which need improving – and work out a way to tackle them. Then, if an investor asks about them during the pitch, you can acknowledge the weakness, and give a clear indication of your plan of action.
Listen to questions
When you see an entrant ignoring or twisting a question, it’s almost possible to hear the rumble as the Dragons’ fury grows. Many an entrant has scuppered their chances of investment by failing to give the details the Dragons demand.
Even if an investor asks a question you think obvious or unnecessary, they probably won’t see it that way. Treat every question from an investor with respect, and try and answer each one in as much detail as you can. If you can’t answer the question instantly, ask for a second to think – the investor won’t mind waiting a few seconds for the information they need.
Negotiate
Investors have invariably run successful businesses themselves – they’ve probably negotiated hundreds of deals in their own business careers. So they’re accustomed to haggling over the finer points of an agreement.
If you don’t think an investor’s terms are satisfactory, be prepared to negotiate – you might even impress the investor with your self-assurance and bargaining skills. If you don’t know your own value, you’ve no chance of running a successful business, so the investor will be glad to see you’re prepared to fight your company’s corner.
Don’ts
Make your pitch gimmicky
This year’s series of Dragons’ Den has been replete with unusual presentations, from a children’s play to a middle-aged woman doing a gym triathlon. These gimmicks have provided genuine entertainment for the viewer – but they’re totally unsuited to a genuine pitch scenario.
As discussed above, it’s perfectly acceptable to bring a product to the pitch if it’ll wow your audience. But don’t turn your whole pitch into a gimmick – investors expect their investees to be serious, grown-up businesspeople, and if you turn your pitch into a pantomime, you risk giving them the opposite impression.
Argue the toss
Two weeks ago we were treated to the site of an American realtor arguing vehemently with Theo Paphitis about the prospects of his property business. It was only going to end one way; Paphitis held the money, the knowledge and the credentials, and he walked away from the deal angrily, taking the rest of the Dragons with him.
You don’t have to treat an investor like some kind of deity, but make sure you give them genuine respect at all times. If they criticise your pitch or your company, just take it on the chin – hell hath no fury like an investor scorned!
Use emotion
As we mentioned last week, saying “I believe in my business” or “I’m certain this venture will succeed” will alienate an investor, not entice them.
If you make a statement based on emotion, you’ll give the investor the impression that your business lacks solid credentials, and that you’re the type of person who prefers blind faith to reasoned judgement – in other words, totally un-investable.
Ask for more than your turnover
When one of the applicants requested a £50,000 investment for his £40,000-turnover business last night, it brought a swift tongue-lashing from Theo, and with good reason; an investor wants to buy into an established, successful business, not take a punt.
When you’re working out what to ask for, look at your current turnover, and work out a sensible fraction of that turnover, considering factors such as the state of your market and the fortunes of your competitors. Always remember that investors are in it to make money – not give it away.
Say “I’m not a…”
Few people possess all the skills necessary to run a small business. Some struggle with sales; others hate doing the accounts; many find it difficult, or boring, to research their market and competitors.
Investors will understand this, but they’ll expect you to have at least a working knowledge of all aspects of your company. If you tell them “I’m not a salesman” or “I’m not an accountant” they’ll think you’re lazy, and lack the diligence needed to start a successful business. You simply have to avoid doing this, at all costs.