Posts for November 2007
A lesson from the Den
November 16, 2007
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.
Getting past the survival stage
November 08, 2007
Ambitious corporate marketers will try to swerve the ‘SME marketing brief’ as they climb the career ladder. After all, it’s much more exciting to be working with a cool creative agency on a big budget telly campaign (and the expenses are bigger, too).
But the real reason marketers avoid the SME marketing brief is because, well, it is so damned difficult. How do you sell into a vast but fragmented marketplace? How do you create an SME marketing strategy for a brand when you have little understanding of what it is like to run a small business? Questions, questions…
It is always fascinating to watch public sector and corporate marketers wrestle with these issues. No doubt senior marketers with big budgets face a lot of pressure. But the pressures of running a start-up business are arguably greater. After all, it’s someone’s house on the line.
And an owner-manager must juggle a hundred tasks. Working capital, finding premises, commercial insurance, the list goes on and on, and they all need attention. No one can be an expert in all these functions; yet small enterprise owners have to wear many hats to survive.
Imagine you are running a hair salon. You want to put prices up. What needs to be done? Well, most people would say: ‘reprint the price list’ or ‘tell the staff’. That’s fine, but hold on, don’t we first need to work out how much we want to increase the price? And how much business we can afford to lose while retaining the same turnover? Will that actually make us more profitable? Will we need the same number of staff? Who is looking after our marketing literature? How will we pay for that? What do we tell our customers about the price hike? There are so many steps involved in implementing one simple price change… and this is just one task you face at your salon today.
There were 447,000 mainstream business starts in 2006 and current government figures quote 4.5m UK SMEs . So why doesn’t the number of new businesses rise by half a million each year? Simple: the number of closures more or less matches the number of starts. That’s how hard it is to steer a new business past the survival stage — a lesson we should all remember when helping brave entrepreneurs.
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