I do love a good negotiation. I’ve watched Dragons Den and now Shark Tank Australia
for years. I love to listen to the
comments the Dragons make and the rebuttal from the pitching party.
This morning I had the pleasure of being invited to be a Dragon on a Dragons
Den Panel with 2 others for New Zealand School of Education (NZSE). Simon Cope who runs this event for NZSE is
doing a fantastic job with this programme.
What a great idea for the students to work with to teach them valuable
and real-life skills in business and entrepreneurialism. I took part in this process last year and loved it so much I was back for more this morning.
Just like the TV programme, teams of students have to pitch
their ideas to the Dragons and we get to decide if we invest or not. The students spend time preparing based on
what they have learnt- financials, legal, marketing, business plans, target
markets and more. I just love to see Entrepreneurialism shining through...these poor students would have no idea what was coming next!
The process is simple, the Dragons are given monopoly money in which we decide to
invest…or not and the students have about 20 mins to pitch their idea and about 20 mins of questioning from the Dragons.
Today was a smorgasbord of pitches, mainly based on food. Shredded was a word that I would use to
describe the happenings today. Those
poor students got shredded by the Dragons, but to be fair a number of the
groups deserved it!
I had to leave before all of the pitches were completed but
got to be around for the first four. Here is my take on what happened and the
great ideas these students had:-
Group One: International Students Concierge Service
This was my idea group.
I know International Education well and have a start-up business myself
in this area. Unlucky for them this was
my area. This team of 7-8 students
started strong and then fell apart mid-pitch.
With commas in the wrong place in their financials and confusion if they
meant to say costs were $5.6 million or 560,000 amongst the group and then the
Dragons being told they were using Indian Accounting started to have us
worried!
The idea was simple- a meet and greet service for
International students at the airport as well as on-going services to show
students the best restaurants and places to go.
Even supervised shopping trips.
When we saw the budget only included $7,000 for a car and no allowance
for a commercial driving license as well as no research into the International Student
Pastoral Care laws, it was enough to put each Dragon out. I was the first to exit when they didn’t understand
the numbers of International Students in NZ and also said they would only
target Uni students. The $2,700 price
tag was enough to make me wary of there service, despite only 2 of the 7
fessing up they had drivers licenses to operate this meet and greet
service. I’m out!
I was intrigued to start with this one, despite the initial
technical difficulties with the presentation.
They started off saying tea was complimentary then later added that
snacks were also complimentary. Which confused
all of the Dragon as to how the business model was ever going to work! The shop was going to be in Sandringham and
the tea $2 (a change from the earlier suggestion it was free!). The numbers were staggeringly good- $300K in revenue
and $60K Cost of Goods with a staggering $240K profit! They were going to put up $1M initial
investment and wanted only a mere $84K from the Dragons for 15 percent of the
company. When we asked what they were
going to do with the $84K we gave them, confusion reigned amongst the team
until one student quickly said’ Marketing’, we will spend it on Marketing! We then asked them where they got their $1M
from and they quickly looked at each other and one the spot decided half of it
was bank financed. Alarm bells were
starting to go off in our heads! One of
the Dragons then asked, and what’s the bank interest rate. Another bright young student paused and said
18%! I did some quick calculations and worked
out that this would be a mere $100K in interest if not compounded, which
started to make the profit margins look awfully sick. I was also intrigued and had to ask one last
question before I bowed out. “You
mentioned that you had a new market in South Auckland and you were going to
offer them Home Delivery”. I simply
asked “And how do you propose to keep your tea hot delivering it from
Sandringham to South Auckland. Another
lot of quick thinking later and another student says “It won’t be made of
course- they will make it up when they get there”. I then let them know I was out…..swiftly
followed by the other two Dragons who also did not invest!
Group Three: Japanese Wheel Cakes
Firstly, I had to admit I had to do a quick Google to check
what one of these was while they were presenting to make sure they actually
exist. They do! Its like a Japanese Pancake. This was an all-girls team of a smaller group
size to the other groups. Their
presentation was slick. The had only one
competitor in Auckland and had their financials well thought through. There were some issues around them wanting to
import ingredients rather than purchase local, but they talked their way around
this. Their marketing plan was solid
using social media to promote their products and allowing online ordering. They were going to be better than their
competition and be located in a different area of the CBD to their competitors
who already have queues out the door. They were also planning to stock at Gas
stations and supermarkets, which their competitors were not doing. This team
had costs of $206K and managed to have a reasonable profit margin of $77K
(unfortunately they confused the word income with profit which all had us
baffled for a bit!). They wanted a
reasonable $20,000 for 40% of the company.
The numbers seamed to stack up and the investment seamed like a cheap
one. I decided that I needed to make an
offer. I offered $10,000 for 40%. Then the next Dragon went with his offer,
which from memory was the same as mine or very similar. We were then battling. My time to sell. “So girls, firstly, I loved your
presentation- very slick, I really believe I can help you here- I’m a female
entrepreneur and in support of a team of young females. I studied Japanese for 4 years also. I also have qualifications in Nutrition and I’m
great at Marketing”. Then Tony started
(the other bidding Dragon)- “I have a background in hospitality……” and the
fight went on! The girls were then asked
to decide which offer they would take, but they couldn’t decide- saying they
would take both! They were asked to
decide which offer. And guess what- they
took my offer! I got my Monopoly money
out and handed it over. I was now the
proud owner of 40% of a Japanese Wheel Cake Company to be opened in Auckland
CBD!
Group Four: JCO Coffee Franchise (ex Philippines)
On a totally different tack to the other food businesses,
this team simply wanted to purchase franchise rights of a popular Philippine
Coffee & Donut Company and bring it to NZ.
Not only this, their Donuts were HEALTHY Donuts. Yup, Sugar would be substituted with Stevia
and the Deep Frying would be done in Coconut Oil instead of regular oils. They even gave each Dragon a sample! We had the Donuts and were listening and
chopping away. I must say how impressed
I was that the usual Stevia after-taste was not there and the fat flavour was
just right, even with the coconut oil. I
was baffled. On taking another bite I suddenly
realised that the Donuts were like our monopoly money- not the real products
and I was in fact eating a full sugar and full fat Donut which I would never
ever eat! Despite our attention being fraudulently
gained, we continued to listen! They had
done their market research and new their target market. Stats were being thrown at us left right and
centre. We were impressed…until they
threw out a stat- that there were 4,125 people living in Auckland…wait what?? Although all Dragons were a little baffled,
the group continued pitching away. Now
the numbers came at us. They had a net
profit margin of 15% and they were investing an initial $120,000 of capital and
financing the remaining $195,000. They
were looking for $100,000 for 15% of the company from the Dragons. This put their company at a valuation of
$670,000.
I then asked how they were going to protect their secret recipe
for the Donuts. I was looking for a
Patent. One of the team came back with the fact they had confidentiality
agreements with their staff. Not a bad
start I thought! I decided not to bid as
the Donut was starting to repeat on my- that much fat and sugar is never a good
thing at 10.30 in the morning! The other
Dragons joined forces and ended up stealing the company for $50,000 for 15%,
basing this on the fact that the franchise fees seamed cheap at $100K!
Thanks to the students for putting up with a good nailing in
the Dragons Den- we hope you learnt some valuable lessons from the Dragons
questions today. Thanks also to NZSE for being a fantastic customer of Business Mechanix - I love doing things like this to show how a great partnership can work. Thanks also to Simon Cope for
asking me to be a Dragon on your Dragons Den Panel, just like last year I loved
every minute and I most certainly will be going and finding the Japanese Wheel
Cake stand in Lorne Street for a real sample of what I actually bought into
with my Monopoly money!
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