Experience is not the only teacher there is. You can learn a lot of things from TV shows as well. Watching programs like the Dragon’s Den will teach you both essential and significant things about business and investments.
This program is all about entrepreneurs trying to secure investment from venture capitalists. The panel of venture capitalists is called the dragons. The show gives entrepreneurs a few minutes to pitch their business to the panel.
Here are the lessons you could pick up from watching the show.
Knowing Your Business Well Is Important
For example, your business is selling pool chemical solutions. It’s not enough that you know about the basics of chemistry. You must understand at least how pools work.
This includes knowing the standard layout for pools. In the same vein, you need to know what filtering equipment and water tanks are required in order to regulate water conditions. Understanding these things will help you market your product better. You have to be sure that the chemicals you are selling are not harmful to the equipment.
Errors that are a result of a lack of research will be highly damaging to your business. When looking for funding, ignorance will hurt your chances.
Many times in the show, business owners fail to answer basic questions from the dragons. Naturally, investors are going to inquire about your product. Don’t even attempt to look for pitching opportunities if you don’t know your business well.
Investors don’t risk their money on business owners who don’t understand their industry. A practical takeaway here is to polish your business model. The dragons only give entrepreneurs a few minutes to do their pitch. You must be able to explain how your business makes money in that short period.
A Great Product with No Competitive Advantage Is Not Worth It
The show has a fair share of failed pitches. Some of them are great products. However, the dragons do not invest in them for one reason. It is the lack of competitive advantage.
Warren Buffett calls this competitive advantage the so-called economic moat. This term is a reference to the protective structure that surrounds a castle, serving as a line of defense.
This line of defense is what investors are looking for in a product. What feature of your business will protect it from attacks from more prominent companies? How are you going to maintain your market share?
If your product is something big companies can mass-produce, your line of defense is weak. They will eventually get the market share.
Products that are your own invention or with strong branding are great economic moats.
Negotiation and Smart Decision-Making Are Important Skills
At the end of every pitch is the part where it gets exciting. The entrepreneur will state how much they are trying to raise and the share of the business they are willing to exchange for the funding.
Entrepreneurs always know how much they want and who they want to invest in their business. That’s even before they set foot on stage. However, the dragons might think that they are asking for too much. Or that they are offering too little.
The dragons will name their price and how much of the business they want. They sometimes add a few words that describe how their expertise can help the business.
Suppose you are in the position of the business owner. You should be able to assess the offer carefully. An additional 5 percent of the business in exchange for the dragon’s expertise seems like a good deal. But of course, that will depend on your personal assessment and preferences.
You have to be quick in reaching a decision. If you think that the value of the investor’s expertise is worth 5 percent, go for it. Remember, one of the factors to succeed in business is network capital. It pays to know and be associated with certain people.
Some people walk away from the dragons’ offer. And that’s another lesson. Know what you are worth. Learn to walk away if you are unappreciated and undervalued.
Running a business is a complicated and tedious process. A ten-minute episode of the Dragon’s Den might be too intense for some audiences. However, that’s just a glimpse into the life of an entrepreneur.
You need mental toughness in a lot of situations. Running a business will require you to make a lot of decisions. It’s not easy to get to the top. There will moments where you lack inspiration. Turning to other people’s stories and experience will help you.