The Dragon’s guide to writing a Business Plan

The Dragon’s guide to writing a Business Plan

Six simple steps from the Dragons Den.

There is an old saying in business;

“Fail to Plan or Plan to Fail”

This week, The BBC broadcast the Dragon’s Den guide to writing a Business Plan. This 6 point guide offers some top tips to getting investment for your business idea. Here they are;

1. Set Realisitc Targets

Don’t just pick a number at random as your sales or turnover target. There needs to be some evidence of the financial targets you are suggesting. Do your research, and look at the trend over the last year, 3 years, 5 years, both for the market you operate in and your own company. This should give some indication of future opportunites in your market.  In the programme the 2 guys behind The Wand Company (a remote control shaped as a magic wand) presented solid evidence of future orders as well as their current success, and were able to negotiate a great deal with Duncan Bannatyne. The pitch was spot on, as they were able to present targets with confidence and backed by evidence. In fact, their research was so good that they were able to choose not to take up Duncan’s offer.

2. You make it happen

Commercial acumen is important, but your self belief is key

“Once they like you the Dragon’s will view everything you say positively”

If you don’t believe in your product, why would the Dragon’s? The example given – Masque-Erade showed that confidence and belief, coupled to good forecasting (see 1 above) can be a recipe for success.

3. Get the numbers right

An extension of point 1.

“Turnover is vanity, profit is sanity”

Know your business essentials. These figures need to be at hand, and delivered confidently. Deborah Meaden is particularly hot on this, and has torn apart many an entrant to the den. Any decent bank manager would do the same.

You need to understand the Balance sheet, and Profit & Loss as these are the fundamentals of the business, or no one will want to invest in you.

The example of the camper duvet company showed that not knowing your numbers can cost you. They secured a Dragon (Hilary), but they had to give up 26% equity, rather than the 10% they wanted. Had they been better prepared they could have got a better deal.

4. Price it right

This is the opposite problem to that above- over estimating the value of their business, so you look deluded. The example given was Applied Language online translation services. Success came because they had got the value of their organisation spot on.

5. Timing is everything

“The right idea, the right product at the right time”

Obvious really, but hard to get right. The example in the show – online antiques valuation site “Value my Stuff” secured investment from Theo and Deborah because they reasoned that in a recession, people will want to sell their antiques. One year on this proved to be shrewd. The timing was right. The explosion of good quality camers on phones made uploading photos to the internet easier than it was even 5 years ago.

6. Know when to give up

Back to being realistic. A dud is a dud, recognise it and move on. It is good to have self belief, but not to delude yourself. Look at the evidence objectively, and know when to move away. Example of the Zigo baby cycle – massive previous investment of over a million and losing massive amounts. Dead in the water. One year on, they still have the businesss, but one of the partners, Steven,  now has an online price comparison site for funerals.

So there you have it, the Dragon’s guide to Business Planning.

The best example of a Business Plan from Dragon’s Den is Imran’s ITeddy. Imran knew his margins, and had a sustainable business model with opportunities to innovate. He secured a deal with Peter and Theo and is now busy developing new ideas for his ITeddy company. That is the final lesson;

“Don’t stand still – innovate or die”

Negotiating with Dragons

Negotiating with Dragons

Last night the BBC showed their latest guide to how to succeed on Dragon’s Den. The focus this week was on Negotiation, and a 5 point plan for success.

Here is the 5 point plan, with some sound theory behind it. Unfortunately, the programme presented the points out of sequence. I’ve re-ordered them so they are in chronological order;

1. Have a strategy

Presented last on the programme, the most crucial aspect of any negotiation is to plan  ahead and be clear on  your strategy and the tactics you may choose to use (don’t forget  to allow yourself to react to what happens in the negotiation, rather than be dogmatic). The programme showed Kate Castle as an example and her bold step of revealing her preferred Dragon (Theo). This was a high risk strategy as it effectively ruled out the other Dragons, but it paid off and she got a successful outcome. But was it pre-planned or reactive?

Good planning includes deciding what your choice of negotiating style is (competitive, relationship, collaborative or compromise).

2. Know your bottom line

This is part of point 1 really. Always be clear what your “walk-away” point is and stick to it. You need to know this before you go into the negotiation or you are likely to be disapppinted in the outcome.

3. Don’t be greedy

This starts in the planning phase, but carries on during the negotiation when you need to have flexibility. Look for a sensible level of investment and know what your WIN position is (what do I WANT? what is an IDEAL result? what do I NEED?). The example in the programme was Chinese entrepreneur Ling and her car leasing business. Ling’s expectations were unrealistic and she lost out.

4. Take (or keep) control

This is about keeping on top of your emotions and (if possible) your body language. Experienced tough negotiators will be looking for any opportunity to exploit your weaknesses, so you need to keep cool and detatched. the pitch for the mobile water refreshing unit managed to secure all 5 Dragons on board by using this tactic.

5. Know how to haggle

A crucial skill in negotiation that only works if you have clearly identified your WIN positions and you stick to them. The key thing here is that it is about give and take; don’t be inflexible, unless you stand to lose out, and never give something away for free. Know your “tradeables” in advance – those things that can get a deal moving. The ideal tradeable is something that is valued by the other side, but is of low value to you. Aim to identify tradeable that are valued by the other side as you go through back and forth negotiation (haggling).

So there you have it, a 5 point plan for successful negotiation, this time presented in the right, chronological order.

What the British Airways dispute teaches us about negotiation

I know this is last week’s news, but I’ve been reflecting on the resolution of the BA dispute and what it teaches us about negotiation. Here is a summary of the dispute from  BBC News.

This is a dispute that had been going on for the last couple of years. At times it got very antagonistic. It is also a classic example of what happens when you negotiate from positions. Effectively, both sides drew lines in the sand that they were not prepared to cross (“this is our position”). Unfortunately there was a significant gap between the two parties, so no progress could be made. Worse than this, having stated their positions, it became increasingly difficult to move from that position without losing face. So it became a battle of egos as much as principles. How do we get out of such a predicament?

The eventual successful resolution of the dispute hinged on a copule of key decisons. Firstly, the principle public figues in the dispute were removed from the discussions. This from the BBC News report:

Former British Airways chief executive Willie Walsh, who became the focus of the anger of many union members during the dispute, moved into a new position earlier this year. He is now head of the company formed by the merger of BA and the Spanish carrier Iberia, International Airlines Group, and was succeeded by Mr Williams. At Unite, Mr McCluskey succeeded former joint general secretaries Tony Woodley and Derek Simpson. Len McCluskey praised Mr Williams for being “strong, brave and courageous” in reaching the agreement.”

Once the principle antagonists (and their egos) were replaced, there was an opportunity to start again. The above quote relfects 2 other changes that followed. Firstly, the negotiation style changed from Competitive (I win, You lose) to Collaborative (I win, You win). Secondly, this facilitated a change in strategy – negotiate from interests rather than from positions. This approach is about understanding the issue from the other person’s perspective (called second position in NLP) as well as your own. The result? Compromise and an outcome that both sides can live with. Research has shown that the collaborative approach is more likely to produce sustainable results and keeps a positive relationship between the 2 parties intact.

So, when you are planning your next negotiation try usind a combination of a collaborative approach and negotiate on interests rather than positions.

The Apprentice Week 3 – why planning is the most important part of negotiation

The Apprentice Week 3 – why planning is the most important part of negotiation.

So, the current score is Girls 0- 3 Boys, but this is not a score the Boys will be pleased with. Last night the third Boy left The Apprentice.  This is particularly disappointing for the lads, as Sir Alan mixed the 2 teams up for the first time.

Team Logic was eventually led by Gavin, though Vincent wanted the PM job as well. You just knew this would come back to haunt Gavin. Team Venture was led by Susan, the youngest contestant. It is rare to be able to see who was going to get fired so early in the process, but from the earliest shots of Gavin’s leadership he was a dead man walking. His only hope was to win the task. He didn’t so he had to go.

The task involved negotiating for 10 items needed by the newly refurbished Savoy Hotel. The team that got the items for the least money would win. As you can imagine, the items ranged from the comon place (light bulbs) to the niche – a Top Hat.  Both teams started the task with some planning. Gavin’s leadership style had no urgency and he looked out of his depth in handling some of the egos in the room. Gradually, Vincent started to take over and he was eventually rewarded by Gavin with leading a “sub team”. Three hours later (!) they set off with no real purpose and few leads.

Team Venture did better in the planning stage and set off in shorter time with clear focus and good leads to follow up. Just one little mistake. They ignored PM Susan’s instruction to head East for real bargains, and ended up shopping in Mayfair. Venure’s weakness was in targeting the wrong leads and this came back to bite them several times when they found negotiation difficult. Luckily they had the redoubtable Jim, who saved the day on 1 or 2 occasions.

So in the end, the task was a battle of poor planning on both teams versus organisation. Venture won because they were better organised. In the end they only won by £8, but they found 9/10 items. Logic only got 6/10. Logic were the better negotiators, but in the end they lost the task because they found fewer items and got penalties. In fact, item by item Logic generally got a better deal than Venture. But still they lost. The team became increasingly dysfunctional as Gavin’s leadership was non existent and Sales Manager Vincent bullied his sub team of girls and left them demotivated and frustrated. This probably worked in their favour as yet again the girls were generally not on Sir Alan’s radar.

In the boardroom, it was really between nice guy but inept Gavin and bully boy Vincent. The latter came out of the process weakened as “his” girls rallied against him. But he survived. Gavin was mortally wounded by his inability to organise the team in the planning session. 

The take home message here is that most succesful negotiations are built upon excellent planning and research. This and a sense of urgency as the clock is always ticking. Venture came out marginally better on this, but targeted the wrong areas. Logic took too long, had no organisation, and ended up with no real plan. With such inept leadership, Gavin had to go.

Current Favourite: Jim’s stock raised even more htis week as he proved to be a suave negotiatior. When will the girls find themselves in the line of fire?