Facing the Dragons: the rookie errors that so many businesses just keep on making
Judging by our most recent post, you may have noticed that we’ve been watching a lot of television recently. One programme we’ve always enjoyed is Dragons’ Den on BBC1. As an accountancy practice committed to helping businesses grow, watching start-ups and entrepreneurs pitch their ideas to successful business leaders is right up our street!
Now in its fifteenth series, there’s a wealth of knowledge that businesses can learn from the Dragons and the hopefuls pitching their ideas in the hope of winning their investment.
In life it’s often through mistakes that we learn the most. Thankfully, with Dragons’ Den, you get to learn from the mistakes of others so you don’t have to make them yourselves!
The latest series has highlighted numerous ‘TV gold’ moments, but ‘business gold’ is what we are looking out for at DP Accounting. We decided to highlight some of the mistakes we see being made in order for you to learn the instrumental principles that will help your business grow.
Whether it’s the actual Dragons from the show, or the day-to-day dragons of business, read on to see the rookie errors that so many entrepreneurs and businesses make over and over again…
1. Not knowing your numbers
Fifteen series and counting yet time and time again business owners appear on the show not knowing the basics.
On a recent episode, a stern Deborah Meaden said, “when you’re in business you don’t need to know a lot of numbers… but you do need to know the three numbers that are really going to make your business tick. You need to know your turnover, gross profit, your net profit – that’s what you need to know!”
It’s unbelievable how many entrepreneurs enter the Den, not knowing what these terms mean, let alone what the figures are for their business!
Sadly, this is also a reality that we deal with on a day-to-day basis.
Our experience is that many companies don’t know their gross or net profit… let alone their break even position!
These businesses are leaving themselves in a vulnerable position and they are usually very happy to have input from DP Accounting which helps to give them a foundation for success and growth.
2. Not doing the research
For every entrepreneur, research is hugely important. You may have a great idea, but no matter how brilliant it is, you must do your market research!
Many people enter the Dragons’ Den with products or services that are very similar to others already on the market.
When pressed about what sets them out from the crowd they are often unable to answer. If you can’t distinguish what you do from your competitors, how will anyone else be able to?
Not doing their research has resulted in many a contestant leaving empty handed, without investment from the Dragons.
However, thorough research allows the entrepreneurs to defend their corner – they know exactly where the gap in the market is and how they will fill it. They know how to build, mould and shape their product for the customers that are crying out for it.
Do you know your market? Do you know your competition? Spending time with these questions is vitally important.
Similarly, knowing where to go to for investors or lenders in your market can be equally beneficial as you look to build a company that is able to grow and grow.
3. Overestimating the value of your company
Do you have a realistic valuation of your company?
Do you have any idea what it’s worth?
Many entrepreneurs walk into the Den with an inflated opinion of what their company is worth. An over-valued business is quickly exposed by the Dragons – an embarrassing experience for the eager entrepreneur!
Investors are looking for cold, hard and current figures coupled with evidence of positive sales trends and robust forecasting. Your valuation needs to be realistic for today, as well as for the future.
Valuing your company can be a tricky process, particularly if you don’t have a good grasp of your numbers. This is where DP Accounting can really assist your business! If you want to attract valuable investment, an accurate valuation is imperative.
4. Not patenting your products
How many budding entrepreneurs have fallen at this hurdle? It’s a classic Dragons’ Den error… the business owner walks in thinking that they have a profitable business, only for it to emerge after a bit of questioning that they don’t actually own a patent for their product.
This is a problem that immediately turns off the investors.
If you are an entrepreneur, make sure you have thoroughly protected your invention or products through the necessary patents.
Recently one businesswoman to appear on the show thought she had secured a patent but had actually only registered the design – not good enough at all for the Dragons.
If you haven’t protected your products, your business is highly vulnerable to market rivals.
5. Not accepting the help of an expert
It’s one of the tensest moments of the show. The Dragons have made their offers but it’s not what the entrepreneurs had in mind – they need to hand over more equity than they initially wished. Will they take the offer?
In that moment the entrepreneurs can be tempted to turn the offers down, refusing the investment so they can hold on to more of their company.
These entrepreneurs have forgotten that it’s not just the financial investment that will help them but the advice and support of the experts. Accepting the help of an expert can transform a business, even if it does cost more in equity that you originally wished.
At the end of the day, it is better to have 50% of something than 100% of nothing.
We face a similar issue, albeit on a smaller scale, with surprising frequency.
DP Accounting exist to help businesses grow – we’re more than just numbers. However, we often meet entrepreneurs and start-ups who have decided to try and do it all themselves. They’ve decided to steer clear of the experts, going it alone in order to save a little money.
Sadly, they usually end up getting themselves in a mess – running just to stand still and watching their business stagnate despite their ever increasing efforts.
We’d much rather help you get things right from the start instead of sifting through all the problems a year or two down the line. Take the advice of the experts. It will leave you in good stead for the future. Allow them to invest in you, even it costs a little more than you had planned and it could pay dividends for years to come.
6. Lacking wisdom in the choice of business partner
In the Den, occasionally there’s a great product where several of the Dragons make competing offers of investment. The entrepreneurs have a tough decision – who will they choose as a business partner?
It’s important to pick your business partners wisely.
In the Dragons’ Den, entrepreneurs need to quickly decide which Dragon is going to be best for their business. Is it the Dragon who has experience in your area? Is it the Dragon who is offering the most money?
Sometimes the wise choice is to compromise on equity or investment in order to gain the experience of the right investor for your business. Sometimes wisdom is being open to new or unexpected opportunities that you hadn’t considered before.
If you are looking for investment from a business partner, it’s important to know your goals.
In or Out?
The world of business is a tricky one to navigate – as many of the start-ups who appear on Dragons’ Den discover.
More and more businesses are coming to us for expert help in how to grow their business. They’re fed up with making the same mistakes and are looking for support.
The great news is this – we’re don’t just take care of your finances, we are committed to providing the information and advice that will help your business succeed and grow.
After a brilliant pitch, the Dragons begin to make offers. Here is our offer: if this sounds interesting, we would love to begin the conversation with you. Our services could be just your business needs to take it to the next level.
We’re in… Are you?
If you could benefit from an accountant that gives you more than just numbers,
then its time to get in touch!
Call DP Accounting today on 01246 451 133
We look forward to hearing from you!