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Dragons Den‏‎

Lesson Plans & Activities

Introduction

Dragon’s Den is a detailed and long-term activity ideal for a class studying Business English‏‎ . It is based on the popular television program where would-be entrepreneurs pitch their business idea to potential investors to try and raise money to get their business off the ground.

The activity can be run over the course of several lessons. It can be broken down into shorter segments which can run anything from a few minutes to a full lesson and more.

Explain to your class that they are trying to set up a new business. They need money for this so they will be approaching a group of venture capitalists or “Dragons” and pitching their idea to them. Hopefully the Dragons will like the idea enough to invest in the business.

However, each group must have all the facts and figures of their business at their fingertips if they want the Dragons to be impressed enough to invest their own money in the business.

If you can, the activity should be run with one or more small groups of two or three students each. Tell the class that the Dragons will only invest in one business so they are competing against each other for the money!

The first step is the idea. What, in other words, will the business do? It may be manufacturing or sales or a franchise or a service company, etc.

If your students all work in a particular field then this should reflect that field. The idea needs to both be related to the work interests of the students and to be of use to them in the real world.

But because this is an exercise it can also be fun. This is a chance for the business people in your class to play with ideas and enjoy themselves also.

For example, if your students all work for a company which manufactures car parts then you can explain they are going to set up a brand new company to produce a high-end supercar. If they are all sales people perhaps you can ask them to sell something exotic – a new blockbuster film for example.

You may have to choose an idea for the class or you may allow them to come up with their own idea. You can also offer them several ideas.

The Process

Each group now needs to prepare their final pitch to the Dragons. For this they need to have an intimate knowledge of what their business will do and how it will do it. They will also need to know everything about how the business will be run in order to answer questions posed to them by the Dragons in the final pitch.

Each of the elements below is a separate activity which the groups can work on during the course of several lessons.

Company Structure

Is the company going to be a partnership or limited company? Give the group the options available to them in their country and have them work through each option to decide which is going to be best. There are plenty of resources online where you can get this information but make sure you allow the students to have input here and ideally find out by themselves about this.

Once this is decided, the group must decide together what their individual roles will be in the company. Who is boss? Who isn’t? This may need a vote.

Choosing a Name

The name should reflect the company and its objectives. This stage – as will many others – is going to involve a lot of discussion and voting.

But they need to make sure that the name is available and that it doesn’t already belong to another company. This will involve research online at Companies House (or the equivalent, see below).

Business Planning

Explain to the class that they will need to have a solid Business Plan they can give the Dragons. They will need to sit down and work out:

– The Objective

What exactly will the business do?

– The Market

What is the potential market likely to be for the business? This means researching the current market and finding how the new business can fit in.

Here they will need to research and find out about:

Competitors. The Dragons will want to know how the new business will fit into the existing market and what makes the new business different from the competitors.
Customers and Demand. How many customers are out there? If there group wants to produce a new fizzy drink then there are potential millions of customers, but if they’re making a supercar then the market is very limited.

– Advertising

The Dragons will want to know how the new business is going to promote and get its message across. The group will need to think, amongst other things, about:

Viral marketing
Newspaper stories
Celebrity endorsements

During this kind of activity – and all activities here – try and step back as a teacher and allow the students to make all the decisions. You are there to help with the language only and to guide the class through the activities, not to lead them.

– Money

Stress to the group that they will need to come up with real facts and figures here which will involve them getting online and finding answers. The Dragons will ask them for financial details and they need to be able to answer questions like:

How much will it cost to produce the product?
What is your marketing budget?
What will be your turnover for the first year?
When do you expect to make a profit?
What is the potential market for the product?

And much, much more!

Here the group needs to look into the financial aspect of the company. It is a specialized area but with the right guidance the students can at least provide a decent overview of this area. They will need to look at income, expenses, taxes, staff costs, production costs, etc.

The idea here is that the class become familiar with the typical expenses of a company. In real life they would hire an accountant, but at least by doing this exercise they are getting a basic knowledge in English of what is involved.

At the end of this stage they will need to produce a breakdown of income and revenue for the first three years of the company so they can tell the Dragons how much they hope to make over that time and what kinds of costs they’ll incur.

This is the culmination of the whole activity. The group needs to get together and prepare a detailed pitch to give to the Dragons. They need to look at how they will present the new business (try and get them to think outside the box and come up with innovative and memorable introductions here).

They may want to use props, slideshows, models, samples and so on. Let them.

Finally they will need to have all the facts and figures of their business at their fingertips.

The Dragons

You need a panel of Dragons to listen to each presentation and ask questions about this. It might be possible to have other students from different classes help out here or if all your students work for the same company you may be able to get a few managers from that company (who have a decent level of English) to come in and listen to the pitches and make unbiased decisions based on what they see.

You might also like to act the part of a Dragon yourself to ask some awkward questions.

Whatever method you choose you will have the Dragons prepared to ask questions about the business and make genuine inquiries about its viability.

{youtube}859olTvuink{/youtube}Finally, of course, each group makes its pitch. The Dragons ask their questions and then decide which is the best idea and where they will invest their money.

The video shows a segment of BBC’s Dragons Den program. This can be used with the class to give them an idea of where the activity is going.

External Links

Dragon’s Den UK . Details of how the TV program works.

Setting up a new business . Step-by-step guide.

Companies House . Details and names of existing British companies. Other similar resources exist for other countries.

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Privacy Overview

How to face the Dragons and win: Six questions every business owner should be able to answer

The concept is tried and tested: Budding entrepreneurs pitch business ideas to multimillionaires. Series 13 of Dragons’ Den is currently airing on the BBC and has even more entrepreneurs jostling for investment from the Dragon investors. There may be three new Dragons in the Den joining stalwarts Peter Jones and Deborah Meaden, but they’re still looking for the same information from those pitching for investment. Taking a look at the questions Dragons’ fired at the applicants in the opening episodes, it’s clear that whatever your dream, whatever your project, you need to understand the mechanics of your business before anything else, whether you want investment or simply want your business to succeed. Time and again the same questions are asked by the Dragons to those looking for investment. Get them right and you are on a much firmer footing to securing investment.

What are your key financial figures?

In episode one, when digging deeper after an impressive opening pitch, Deborah Meaden focused on the very basic figures every business person needs to know – revenue and profit. The inability of Farnaz Khan to provide these on her ‘big knickers’ brand led to her pitch falling apart.

https://youtu.be/QB62mOF0MWo?t=1322

Understanding the difference between gross profit and net profit is essential if you want to be taken seriously in business, but you also need to know the figures that go with them. Annual figures for the past three years, if you have been going that long, immediately give you credibility – even if they are not massive figures. Indeed, even if the initial figures show a loss, that’s fine (see later). Investors understand it can take time to make things profitable. Even your loss, its value and the timescale for it are important when it comes to understanding the viability of a business. Your burn rate, the rate at which a new company spends its initial capital, shows how long a company can survive before it must turn a profit, which is important to know for any investor.

Know what your turnover is, has been and is projected to be. Know the same for your cost of sales and be realistic about the potential higher costs for new equipment, increase in staff numbers, etc. You should also know your margin. All of these are figures that are simple to memorise, which will give you initial house points with potential investors. Make sure you understand them, how they are arrived at and what they mean too. You need to be able to answer questions from investors and not be found floundering like Farnaz in the clip above, which ultimately led to her becoming un-investable.

Having these basic numbers to hand, doesn’t necessarily show you are the best company to invest in, but it does show you are a business person worthy of investment. Without them, most investors won’t take you seriously and will doubt your business acumen. Somebody who clearly cares about the figures within their business and knows them off the top of their head understands their business and where it is heading. Without solid figures to give to would-be investors, everything else will be difficult to believe.

What is your cashflow projection?

Some would argue this is wrapped up in your other financials above but its importance can’t be overemphasised and it deals with financials on an ongoing basis and not just a moment in time. Once your business is up and running this is the figure you need to pay most attention to. A negative cashflow means the end of many businesses every week because they simply can’t pay their bills. Projections won’t be certain but should be based on expected income and also expected investment if that is a possibility. However, the need to borrow money to pay bills you have already racked up should ring alarm bells as the health of your business.

New Dragon Nick Jenkins built his fortune with an online greeting card brand and understood the burn rate quoted by Oliver Tezcan for his online men’s clothing retailer, the Idleman.com, wasn’t as bad as some of the other Dragons thought. Even a cashflow loss thus far seemed to have a healthy outlook over time in Nick’s eyes @ 21:21 :

https://youtu.be/fA87ESHhThU?t=1284

Everything else stems from cashflow. Knowing your revenue and your outgoings means that you can plan a budget and build your business. Don’t over estimate your cashflow either – you’ll get found out, either by a curious investor or in the long term by a lack of cash! Unlike your other financials which tend to be annual snapshots, your cashflow is ever changing and needs to be looked at regularly. Estimates should be made on monthly or weekly cycles. The other financials can often hide cashflow issues because over an annual cycle things work themselves out. Unfortunately, a strangled cashflow can mean you don’t even make it to the end of the annual cycle.

What is the advantage of your product over things already on the market?

In the opening episode this was Peter Jones’s first question to Ben Fridger who was clearly prepared. His response was quick, informed and engaging as to why his clothes steamer is better than a traditional steam iron.

Knowing your market is important before you enter it. There may be reasons those already out there haven’t tried the slight variation you are planning. Know what your unique selling points are. How do you differ? Why would somebody buy yours when they already own something very similar already? Is your price point right? Understand not only the market but also your product and the products of your rivals too. You can’t do too much research before you move into a new business sector.

What’s the longevity of your product/brand?

In episode two, new Dragon Sarah Willingham immediately showed her passion for food and drink with an obvious interest in the West Africa inspired snacks from Chika Russell. However, she was keen to make sure the business had a long-term future.

https://youtu.be/fA87ESHhThU?t=558

Whilst some may mock, having a vision for your company is not a bad thing. You need to have a dream to aim for if you are to be successful and a vision is only that – one potential outcome – so it can be flexible and change as need and circumstance dictate. However, without a vision your proposition will lack depth and long-term appeal to potential investors.

Longevity is a concern to most investors. For many, it is not the desire to build long-lived brands, but the desire to build a company that makes sufficient profit over a long enough time to give them a return on their investment. If anybody can copy your product quickly and easily, your life cycle could be short-lived with potential competitors able to use technology to have a rival on the shelves within weeks. New models, new ranges and new markets are all things you should be considering as you embark on your first launch. You are thinking about building a business not just selling a single product.

What do you want from an investment by a Dragon?

Global fashion tycoon Touker Suleyman liked Ben Fridger’s steam cleaner in episode one but, having seen a product that clearly worked and was clearly selling, he wanted to know how his investment was going to make a difference.

https://youtu.be/QB62mOF0MWo?t=623

This is a common concern from investors. Some like to be hands on and heavily involved in projects – especially those they can see will be fun to join in with. However, many are simply looking for an investment vehicle, perhaps with the odd bit of hand-holding and maybe some introductions to their contacts. It’s important that you are clear in your mind what you are looking for in your own dragon. Do you simply want money and to be left alone to move things forward once you have that investment, or are you looking for a business partner who can share the load and share the pain of strategizing? Once you have decided on that, be honest with the investor too. They can make a business decision if you have the right financials but they also need to look at the bigger business picture. How much time will it need from them and how much are they prepared to give? Time is money so it all affects the true value of their investment. In Ben’s situation he actually turned down the offer from Touker to take investment from two Dragons (Deborah and Nick instead) which fitted with what he needed from his investors.

How did you come to the valuation you’ve put on your company?

A £20 million valuation was a shock to Peter Jones when he asked this question of Fraser Fernhead of property crowdfunding platform The House Crowd in episode two of the current series.

https://youtu.be/QB62mOF0MWo

The valuation of your company is probably the most important figure for your investor as it tells them what they’ll be getting for their money. If they are investing for a percentage share of your company, the valuation will tell them how much they need to pay to get their desired share. Getting your valuation right is vital. If it’s too high would-be investors will just see you as a joke. Too low and investors may worry that you don’t fully understand your business, or perhaps that you lack ambition. If your company is not trading, or is trading without a profit at the moment, giving it a multi-million pound valuation is unlikely to be realistic. If it means a lower valuation and a higher percentage given away to an investor so that your business can survive and take the next steps in growing then seriously consider that. Retaining a smaller percentage in something that becomes profitable quicker and more securely is far better than a large percentage in something that trades at a loss or struggles to make a serious profit.

Watch the remaining episodes of Dragons Den. These six questions will come up time and time again. They form the fundamental core of assessing a business’s health, wealth and potential. If you want your business to succeed you need to consider them all and understand how you would answer whether you are looking for investment or not. If a proven successful business person wouldn’t think your business is worth their time and investment, then why should you?

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Home > Financial Projections > Know Your Numbers – Dragons’ Den Pitch – Part 3

know your numbers dragons den pitch balance sheet

Know Your Numbers – Dragons’ Den Pitch – Part 3

This is the third in a series of posts on the numbers you need to know when preparing your startup business plan for a shark tank or dragons’ den pitch.

This third post explains how the balance sheet from the financial projections template , can be used to provide additional information often requested by the panel of potential investors during a shark tank or dragons’ den pitch.

Dragons’ Den Pitch – Balance Sheet

The format above is simplified for illustration purposes, the actual format may vary depending on the level of detail required. Page two of our financial projections template will provide all the information you need to obtain the numbers relating to your business plan projections. If you are an established business, and have historical information, this can be be found in your annual financial statements or management accounts.

Typical Balance Sheet Questions

Questions about the balance sheet during a shark tank or dragons’ den pitch tend to relate to the current balance sheet position rather than the projected balance sheets (although these should already be available). Typically the questions might be along the following lines:

How much inventory (stock) are you holding?

Inventory refers to raw materials, work in process, and finished goods either manufactured or purchased which are held with the intention of resale. In the above example inventory is shown as 12,000. The amount held as inventory is an asset of the business.

How much are you owed by customers?

How much do you owe your suppliers.

Likewise, if your business receives credit terms from suppliers, at any point in time there will be a balance owing to suppliers for goods and services they have provided to the business but have not yet been paid for. The amount owing is shown in the balance sheet under the heading of accounts payable, sometimes referred to as trade creditors. In the balance sheet above, the amount owed to suppliers is 16,000 shown under the heading of accounts payable. Accounts payable is a liability of the business.

How has the business been funded to date?

There are many different types and sources of finance but generally they fall into one of two categories, debt or equity capital.

Equity capital includes capital injected by the owners, family and friends or outside investors in the business, such as angel investors, venture capital investors, and is the type of finance you are seeking from the panel of potential investors. With equity capital, a part of the ownership of the business is sold to the investors in return for the funds, and a percentage of the profits will now belong to another party. In the above example the equity funding is shown under the heading of capital as 15,000.

Debt finance includes loans from family and friends, bank loans and overdrafts, government loans, mortgages, and leasing etc. In return for providing the debt finance, the lender receives interest and fees dependent on the amount of money borrowed and the duration of the funding. In the balance sheet above the debt outstanding is shown under the heading of long term debt as 16,500, and is a liability of the business.

Further details on debt and equity funding can be found in our how to finance a business article.

Who owns the shares in the business?

Occasionally, the panel of potential investors want to know who owns the shares in the business. They are referring to the owners of the equity capital discussed above.

Suppose the 15,000 equity capital shown in the balance sheet above had been raised by issuing 1,000 shares in the business. If the shares are split between three shareholders having 700, 250, and 50 shares, then they would respectively own 70% (700/1,000), 25% (250/1,000) and 5% (50/1,000) of the business.

This post is the third in a series of posts entitled know your numbers for dragons’ den and shark tank. The next post in this series deals with the valuation placed on the business and how this is dependent on the information supplied in parts 1,2 and 3 of this series.

Posts in This Series

Product price, cost and gross margin.
Income statement numbers, revenue, gross profit and net income
Startup valuation.

About the Author

Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.