One of my favourite programs to watch on the television is Dragons’ Den, in which entrepreneurs pitch their companies to a panel of five “dragons” for investment. Although primarily a form of entertainment, I think there are some important lessons to be learnt about business from the show.
The first is the art of pitching, whether you are pitching your company, your product or yourself. The television show is a rather unusual pitch to make: although you’re pitching to the dragons for investment, most companies are also pitching their product to the TV cameras: even if they don’t any funding, I’m sure that an appearance on the show is massively beneficial to all but the most crazy products, given you are getting national exposure to a large audience, a large proportion of which fall into demographic categories that advertisers swoon over.
If you watch the show regularly, as I have over the last month, you will quickly see a pattern in the questions that are asked by the dragons. They are
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What is your product: This can either be implicit, or if the pitch went badly or the product is complicated, explicitly,
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What are your projected earnings: this usually involves some combination of market size, ASP (average selling price) and projected market share.
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What is the margin on the product: there is no point in selling a product if you’re not going to make any money out of?
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Are there any significant competitors in the market place, or are the barriers to entry to the marketplace so low as to mean that there?
Finally, there are usually some questions about the valuation of the business, usually involving the assets and liabilities of the company: I’m sure a lot more of this is done in the due diligence stage once the television cameras are turned off and the real work is done (the dragons are allowed to back out of any deal that make).
So, the key take away from this is that if you are planning on investing in a company, or starting one for yourself (which clearly involves an investment of time and money), then you should ask these questions about your company, and you don’t get the right answers, then have another think as to how you can make it a more attractive business proposition.
