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Posts for November 2007

A lesson from the Den

November 16, 2007 by Simon Wicks

What does Dragon’s Den tell us about the world of small business? Not a great deal if you view it solely as entertainment. After all, this is reality TV, and reality TV’s stock-in-trade is the ritual humiliation of hapless members of the public. There are times when I find it excruciating to watch yet another hopeful squirming under the unforgiving scrutiny of the Dragons, their dreams visibly crumbling as Duncan Bannatyne spits a mocking question about sales projections that he knows they cannot answer. It’s like watching someone being skewered and roasted over an open fire.

Thankfully, there’s more to it than this. Dragon’s Den is not actually a game – these are serious investors with real cash to put into real businesses, and they’re not going to throw it away on a whim. Harsh as it is, their scrutiny has a purpose; they have to be sure that the risk is going to be worthwhile.

I know we’re supposed to boo and hiss at the Dragons whenever they grunt the dreaded “I’m out”, but I can’t help siding with them when I’m watching the show. Most of the entrepreneurs are so ill-prepared for their ordeal that they don’t deserve to be given any money to develop a business. This staggers me. There’s no secret here - they know the format, they know what sort of questions they’ll be asked and they know what’s going to happen if they can’t answer them.

Granted, it’s a nervewracking business and that’s going to affect their ability to recall information quickly and easily. Even so, if you’re seriously asking for £150,000 to open five retail outlets selling baseball caps in five major cities, you really should be able to demonstrate some sort of understanding of leases, health and safety regulations and employment law, as well as offering realistic cashflow forecasts, sales projections and some sort of basic marketing plan.

Unfortunately, too few of the applicants standing in the Den seem to grasp the fundamentals of running a sound business. They’ve got where they are on a wing and a prayer and a following wind. But the Dragons are hard-nosed business folk who don’t invest in dreamers – unless they can see a healthy profit at the end of it.

And I suppose that’s what makes the show compelling. We see, vividly, the collision between an entrepreneur’s dream and the realities of the marketplace. Every business reaches this point eventually, some sooner than others. If the entrepreneur has done their homework, they stand a good chance of getting over the wall, or around it or under it or even smashing straight through it. Their dream continues - a little tarnished maybe, but in a much better state to survive in a competitive environment.

What the Dragons offer is a reality check. It has to be harsh. It’s not easy to get a business up and running, but it is possible. And when it happens, nobody is more pleased than the Dragons who, after all, just want to invest in good businesses.

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