Way of the Dragon – Why some entrepreneurs succeed

Business issues make compelling television. Who would have thought that the reality tv revolution would result in the excitement of programmes like The Apprentice and Dragons’ Den? There are probably very few of us who haven’t toyed with the idea of submitting an idea into the Den. In some ways it’s like a grown-up Jim’ll Fix It – if you manage to succeed and get the big prize (ie £100,000 worth of investment), it really would be a major thrill. But what does it take to make your business into an investment-friendly success? The programme’s host Evan Davis, who is also the BBC Economics Editor and presenter on the Today programme, outlined some of the main questions asked by the millionaires before they invest in a new business[1]. Here is some real food for thought.

 
 
What have you got and why it has value?
One of the first questions they want to know is: what does your product add? This is all about establishing why your product is different to other things in the marketplace, whether other people have tried something similar and if the business is going to be short-lived or go on for a long time. Avid viewers will also notice that the ‘patent’ question comes up and is a major issue for all investors; if you have a short-term patent for the product then it could be potentially risky because otherwise people could easily copy what you’re doing and that would be dangerous for your investor (because they’d lose their money quickly!). Scale-ability is another huge issue and this is often the major problem for small businesses. Michael Gerber talks about this a lot in his book the E-Myth, as it’s often forgotten by small businesses. If you don’t have a viable business model that can be expanded and rolled out on a larger scale, as is often the case with self-employed specialists who consider themselves to be entrepreneurs, then it’s going to be very difficult to attract investment. One of the most successful ‘scaleable’ models of all time was created by a man called Ray Kroc who developed a system for making the perfect hamburger. It could be cooked by barely-qualified teenagers and every single one would taste the same in any of their restaurants around the world. You’ve probably heard of Kroc’s restaurants – they’re called McDonalds.
 
 
How do you want to exploit it?
This is the money question that often catches out would-be Bransons and Sugars. Do you know your main revenue stream, ie exactly how you are going to make your money, and do you have any other ideas how to create the revenue? Possibly more importantly, how are you going to use the money that’s raised for investment – is it going into the production side of the business, do you want to blow it on a huge advertising campaign or is it to pay yourself a comfy salary? If your answer is the ‘salary’, then it’s worth saving your train fare before even heading to the Den – any investor worth their salt is going to want to know that you’re prepared to take the same risk they are and commit 100%!
 
Who are you and how can you maximise the value of your idea?
You’ve seen the episodes. The ‘contestant’ has presented what looks like the perfect pitch, the perfect investment opportunity, and then…it goes tragically, irredeemably wrong. The question is simple enough; “tell us more about yourself?”. Easy, huh? Not when people start admitting that they’re also running two other businesses, that they liquidated a company a couple of years earlier with a bunch of unhappy creditors, and that they really haven’t got the necessary skills (or commitment) to make their business a success.
 
Do you still want to go for it? Great stuff! Be prepared and good luck.

[1] To discover more, see the excellent book “Success from Pitch to Profit” by the Dragons’ Den (published by Collins).