7. Proof

A business idea on its own is worthless. The world is awash with ideas. You must elevate your business idea to something of commercial value before you walk into the Dragon’s Den. You need proof. Proof essentially breaks down into two parts:

- Does your product work? Make sure you have a working prototype, or better still the real thing. A malfunctioning prototype and you can kiss a warm reception goodbye.

- Will anyone buy it? Research is of little value. Particularly on the scale that your limited funds are likely to reach. Try selling your product first. Get listings from high profile retailers/ wholesalers. If you can’t get listings, get a purchase order. Get a letter from the CEO saying how he will stock your product. Get anything that provides evidence that your product will have buyers. And lots of them.

8. Know everything about your business – that means ‘everything’

This is the most essential part of yor preparation. You have constructed a business plan. It may be simple. It may be short. But it musn’t have holes. The Dragon’s Den will find the smallest hole and drive a bus through it. Ask yourself questions such as:

- are your assumptions reasonable?

- do the financials look exciting and can you substantiate each figure?

- are your sales estimates based in reality or have you got carried away?

- have you allowed a realistic time frame to get to breakeven?

For further ideas on ensuring your business plan is complete, take a look at Measure Twice, Cut Once.

Once you have applied this process several times, bring in trusted colleagues or friends, show them the plan and ask them to ruthlessly tear it to shreds. Ask them to be awkward. Turn you inside out. By the end, you will know as much as is possible to know about your business and be confident to put in a good performance.

9. Practice your presentation thoroughly

Your presentation may only be 3 minutes out of an hour’s session but it must be polished, confident, believable, professional, faultless.  Ensure every word in your presentation is there for a reason. If it’s not, take it out. Use the adage “Say what you’re going to say, say it, then tell them what you just said”.  Have you clearly explained your product, the opportunity and the key financials? Practice, practice, practice.

10. Know the Dragons

There’s tons of information on the internet about the Dragons. The more you learn, the better you can tailor your presentation to hit their buttons.

11. Know the Dragon’s Den process

Finally, good knowledge of the process that you will go through will put you at an advantage to all those candidates who probably won’t bother. A typical process may look like this:

- telephone interview

- two hour ‘mini-Dragon’s Den session

- selection for show

- appearance on show with no guarantees that your performance will be aired on TV

- 3 minute pitch with up to 90 minutes of questioning

Spend some time on the Dragon’s Den website.

12. Know the candidates

Why not contact previous candidates, both successful and unsuccessful? They’re easy to find. There aren’t too many Levi Roots in this country. Google will throw up names. Try, for instance, Lesley Anne Simmonds of Shoes Galore, a successful shoe franchise who put her radio interview about her Dragon’s Den experience on her website. Despite being unsuccessful in wooing the Dragons, she found the whole experience extremely rewarding and has seen her franchise empire boom from the publicity generated.

If you follow the twelve steps highlighted then you will be in good shape to front up to the Dragons. You will have worked hard and planned hard. You owe yourself a good showing. Your preparation will be appreciated by the Dragons Den and you will be richer for the experience .

The Dragon’s Den goes from strength to strength. We can’t get enough of it. You can now even take part in the online version of the show securing up to £50,000 for your enterprise.

Individuals endlessly expose themselves to the Dragon’s Den. Occasionally it pays off but we continue to be stunned by the ill preparation and idiocy of so many.

How we cringe when a Dragon fires a gentle opener “what’s your expected turnover next year?” to which the hapless entrepreneur replies “er, um, er… ten million pounds”. When pressed a little harder, it transpires that they meant to say “ten thousand pounds”. No, wait a minute, that’s not right um, oh, er… I don’t know, quite a lot anyway.

What the hell…who’s going to be interested in a plastic cucumber protector after all?

Anyway, if you really want to succeed in the Dragon’s Den and you’re name isn’t Levi Roots then here’s the first six of a twelve point checklist to see you on your way:

1. Decide why you want to be on the show

i. You like the idea of being on telly

ii. You think that it will give valuable exposure to your business proposition

iii. You want some entrepreneurial input from Theo, Peter, Deborah, Duncan or James

iv. You really do need some seed money to kick start your business idea

If your in for ii. – iv. then ensure that your idea is innovative and investment ready. If your in for i., make sure it’s entertaining.

2. Prepare

The Dragon’s Den expect you to know your business (existing or imaginary) inside out. Business plans are not just for fuddy duddies so get planning now. 70% of businesses don’t bother. But imagine leaving your wedding day to chance and waiting to see who turns up. The Ten Pillars Of Small Business Planning will guide you through the process.

You will confront issues that may be uncomfortable or insurmountable. Listen to what the planning is telling you. If it says that the business model can’t work, don’t ignore it. Either change the plan until it does or accept that your idea is not commercially viable.

3. Know more about your business idea than the Dragon’s do

Don’t be lulled into a false sense of security that because you have designed a toilet seat protector for women you will have the upper hand. The Dragons will piece together your business plan like a jigsaw puzzle and know an awful lot about your business very quickly. That’s because the fundamentals of any business are essentially the same. Concepts such as profit, loss, cash flow, research, planning etc are common across all businesses.  The Dragon’s Den will claim your scalp if you come off second best here.

4. Key personnel

There are two key personnel you must cover in your business model.

1. The ‘intrapreneur‘ is the entrepreneur on the inside of the business. The driving force. The glue that binds the business together. The jack of all trades who understands all facets of the business. Financially astute. Inspirational. A real leader. This is a hell of a brief so it might not be you. Be as objective as you can if you think it is. Check out 30 Ways To Spot An Intrapreneur to help.

2. Industry specific expertise. Again, this could be you but if not, find it quickly.

5. Key financials

You should know every number in your financial planning before getting remotely close to The Dragon’s Den. However, if you’re worried that you’ll go blank in front of the cameras, then keep it simple:

- Cost per unit (how much can you make your widget for)

- Selling price per unit (how much can you sell it for)

- Gross profit per unit (how much profit can you make on each widget)

This is the basis for a commercially viable product. Anything less than 50% gross profit looks shaky, nearer 100% is good.

Know your breakeven point – broadly speaking that number of sales that are needed in order to keep your company afloat. This will contribute to the risk side of the equation. The reward side is covered by understanding profit.  The Dragon’s Den team usually look for the first three years trading:

- Estimated turnover

- Estimated overhead

- Estimated total profit

As a rule, net profit (ie gross profit minus overheads) needs to be heading well north of 20% to begin to look exciting. Now let’s think about cash. You need to know the answer to three questions:

- How much cash do you need?

- When do you need it?

- Why do you need it?

6. Assumptions

All the decisions you take about your business are based on assumptions. This is because you have no reality yet to do otherwise. Be crystal clear about all key assumptions used to put together your viable business model.

OK, we’re half way through our preparation for facing The Dragon’s Den. You’re well on your way to a coherent and well thought out proposal. Let’s move on to Plan To Face The Dragon’s Den Part II.

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Let’s get this straight. All businesses plan. Whether they like to think they do or not. As soon as you order additional inventory or take on new staff in expectation of a greater workload, then you’re planning. So the issue is not whether you should plan or not, you can’t help but plan. The issue is how do you go about business planning ?

The only businesses who may legitimately say ”I don’t need a business plan” would be small scale and steady state – in other words not growing in turnover or contracting. In such a case everything stays more or less the same week in week out. Thus all the information is probably in the proprietor’s head anyway and that’s fine.

But as soon as growth or contraction is imminent, you can no longer say that you don’t need a business plan.  It becomes critical to make assumptions about how that growth is going to look and that means, you guessed it, planning.

Let me put it this way. Let us suppose that I have in my possession a piece of software that allows me to input your personal details. And from that I am able to map out a model of the next ten years of your life. Wouldn’t you at least be a little curious?

What if you could see that at the age of 39 you were going to die of sclerosis of the liver from excess alcohol intake. Wouldn’t you like to know that? Wouldn’t you like the chance to do something about it now and avert such a calamity?

Well that’s exactly what business planning is. Modelling the future of your business to avert a calamity, ie its premature demise. You will be able to look into the future – by making assumptions – and see what your business looks like in a few years time before parting with your life savings. Or, perhaps, those of your investors. Do you still feel that you don’t need a business plan?

Of course, the more accurate your assumptions, the better your planning and hence the better the model of the future of your business. If you’re not happy with what that looks like, then change your assumptions until you are.

When you get to a point that you can’t change the assumptions without losing touch with reality, then you’ve just discovered that plans for your business are fatally flawed.

But look on the bright side, it hasn’t cost you much to find out. Never forget, it really is a myth that, in business, you don’t need a business plan.

Does that really mean that MOST small businesses fail? Ouch.

Like it or not, 75% of all small businesses in the UK fail within their first 5 years. So, why do small businesses fail ? Let’s take a look:

- Lack of experience This is either lack of experience with the main theme of the business or simply lack of experience at running small business.  Or both.  People who have good ideas don’t neccessarily run good businesses. “It’s my train set so I’ll drive the train” tends to prevail. Personally I would rather employ a train driver. a.k.a. The Intrapreneur.

- Insufficient capital This can be expenditure on capital items as well as working capital i.e. the cash needed on a day to day basis to keep the business afloat. Arises from a combination of poor planning, over enthusiastic sales estimates and lack of a contingency fund.

- Overestimating sales The desire to make the business model work bears pressure on a range of small business startup issues. Not least predicting sales. Sales projections are often based on “how much do we need to sell?” rather than “how much can we sell?”. Sales projections are inevitably based on assumptions. So first and foremost make sure your assumptions are rooted in reality. Then divide the answer by two.

- Overinvesting in fixed assets Resist the temptation to buy some piece of manufacturing kit because it will save 10% off your direct costs. You’re a startup business, you have no sales so you have no direct costs. Much better to start with a product that costs more per unit to produce by, perhaps, outsourcing and invest available funds in creating sales. Then worry about direct costs.

- Personal use of business funds Every penny you spend on your new BMW is a penny lost to grow your business. Owning a business doesn’t give you a right to earn profit. Sort the profit first then buy the BMW.

- Too much business Sounds ironic. Businesses often fail as they chase rapid growth. Why? Because they can’t finance it. Growth generally entails buying new plant & equipment, increased stock holding and inventory well ahead of cash received as a result of that growth. It’s all about the planning.

- Poor planning Or sometimes no planning. The better you have planned your road map, the better the journey. Your small business planning should cover a range of outcomes so there is little chance of catching you out in the event of….

- Poor financial control Part of your business planning process is about recording ongoing performance against plan so you can react to any changes in plenty of time. Most commonly cash flow management is either bad or non-existent. There is nothing more likely to scare off an investor or your bank manager than last minute requests for cash.

- Poor customer service You may have spent so much time and energy servicing your big idea that you have overlooked servicing your customers. Get this right from the outset as it is very difficult to claw it back. “No second chances at a first impression.”

- Underestimating the competition A common failing for ‘big idea’ startups is to imagine that because there is no competition now, it won’t be there in the future. I can assure you that as soon as your idea shows visible signs of success, you will have competition. Plan for it now, not when it happens.

- Give up too quickly Ross Perot, one time US presidential candidate, had an answer for “why do small businesses fail ?”  He said, “Most people give up just when they’re about to achieve success. They stop one yard short of a touchdown”. Then there are those who keep going at all costs. Ah well, no one said this was going to be easy.

- The wrong idea.  Let’s face it, some ideas just aren’t very good.  With all the research and preparation in the world, starting a new business with a big idea is little more than a glorious guess.  The key is being able to recognise it.

The most striking of all these is actually the first. When asked “why do small businesses fail ?”, Dun & Bradstreet suggested that 90% of small businesses fail “because of lack of skills and knowledge on the part of the owner” .

This is striking for two reasons: Firstly that it accounts for nearly ALL business failures. Secondly because it is so easily overcome by use of carefully chosen business advisors, small business consultants or intrapreneurs – i.e. people who know about running business.

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Hans von Bülow the virtuouso concert pianist was due to visit the Konzerthaus in Vienna to play Tchaikovsky’s Piano Concerto No. 1. His beloved Steinway piano was enroute. But there was some concern that it wouldn’t fit through the stage door.

To damage the Steinway trying to get it through would be a disaster. So the bright young floor manager suggested that they build a full size replica piano in the workshop and use it to test whether the Steinway would fit through the stage doors.

A week later, after some expense and effort, the replica piano was ready for testing. Stage hands were assembled, management looked on anxiously, though none as anxiously as the bright young floor manager. Problem was they couldn’t move the replica piano because it wouldn’t fit through the workshop doors…..

A bad case of overplanning and losing site of the horizon. Small business planning can be a delicate balance between planning and just getting on with it.

Small business usually comprises two types of individual:  planners who don’t do much and do’ers who don’t plan much. The Intrapreneur (i.e. the entrepreneur on the inside of your business) must find the right balance between the two.

How? Simply, the Intrapreneur must learn to do both at the same time and all of the time.

Small business planning is more a state of mind than a written document. But it can’t function on its own. It needs to sit alongside the real action. It needs to see what’s really going on in the business and make adjustments to itself as it goes along.

The Intrapreneur wears his business plan like a suit. It follows him round whilst he is ‘doing’. He moves around the business being curious. Adding value. Exchanging information. And all the while he is mentally updating the plan. A little adjustment here, a little adjustment there.

It is only at the end of the day, perhaps when others have gone home, that he downloads these thoughts into his planning document. (His small business planning procedure ensures that he doesn’t change the official document on the fly but proposes changes at the next review meeting).

If he has a real need to sit behind a desk for long periods then he does so in the privacy of his own home.

Small business planning and small business ‘doing’ can – and must – happily co-exist in equal measure.

The Intrapreneur who can grasp this grasps the business.

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