The recent CBC-TV series Dragons’ Den offered an entertaining dose of two things we don’t get often enough on TV: seeing how multimillionaires think, and hearing how startup entrepreneurs pitch their business concepts. The wise entrepreneur can learn from both.
I had my own quasi-Dragons experience recently when I sat on a panel reviewing business plans by participants in an entrepreneurship program run by the Toronto Business Development Centre. This was pretty much the last test before the newly minted entrepreneurs were let loose to pursue their business ideas. Nobody actually explained the role I should play, so I decided to do what I do best: ask impertinent questions and poke at the weak points of each plan.
By the end of the first session, I saw my error. This wasn’t Final Exams; it was Open House. The three other reviewers, all associated with the TBDC program, took the soft approach. It was obvious that my dragon-ish questions as to how the first entrepreneur’s business was going to work, and how he intended to market his services, were as welcome as a shout of “Go Leafs Go!” at a Habs game.
Yes, the three entrepreneurs I saw were very professional, and their business plans bespoke hard work and thought. But if we were truly the last line of defence before these hopeful warriors entered the business battlefield, they were not quite ready. Watching Dragons’ Den, as the pitchers spouted outrageous claims and nonsensical projections, I realized that most were not getting honest feedback at home. Someone close to them would have done them a huge favour by asking, “Why do you say that?” or “How do you know?” As Dickens’ David Copperfield learned from his unhappy childhood, “the best steel must go through the fire.” So, I decided that I would rather be tough than tame.
In case your line of work compels you to make pitches of your own, here are three reflections from that trial by fire.
1. The first entrepreneur started off well. He told a story about the hardship endured by someone he knew, due to the shortage of services of the sort he’s intending to launch. It was a graphic way to describe the problem his business addresses. He was a great communicator, or well coached.
Sadly, the entrepreneurs who followed him were neither. They didn’t start out by addressing their customers’ pains. They talked about themselves and their qualifications — and in such detail that it took me quite a while to figure out exactly what their businesses were aiming to do.
Moral: Starting with a customer-centred story not only humanizes your business, it focuses attention on the key points you need to make.
2. None of the entrepreneurs seemed to have a firm handle on how they were going to market their business. Some talked about using mass media that I’m sure they couldn’t afford, but mainly they glossed over the whole area.
I’ve argued before that marketing is the glass jaw of Canadian entrepreneurs. But there is no excuse for someone coming out of a business startup program not to put marketing front and centre. I thought Google’s targeted AdSense messages (online ads you pay for only when someone clicks through to your website) would be perfect for one of these businesses, but the entrepreneurs had never even heard of them. And the basic idea of guerrilla marketing — saving your money by piggybacking on other people’s contacts and sales efforts — seemed to be a concept they hadn’t heard.
Moral: Investigate the new tools available to you. And determine who’s already talking to your target market, and how you can partner with them. Lone wolves freeze to death.
3. The entrepreneurs seem not to have done much market research. (One of them had talked to two [!] potential customers — both of them his friends.) When money is tight at startup, market research seems like an expense without a payoff. But every penny you spend analyzing your target audience will pay for itself in no time. All three entrepreneurs were experts in their field, but that can be a disadvantage. They all assumed their experience eliminated the need for research, but I don’t buy it. Your perceptions of a market change forever when you give up your salary and start asking it for money directly.
The line between success and failure is so thin that the very wording of your message, or the niche you decide to attack first, could determine whether your business lives or dies. Yet these entrepreneurs had not collected the most basic data.
Moral: Customers will eventually determine the shape and success of your business. So, why not include them in your planning from the outset?
On the plus side, each entrepreneur had a clear understanding of the necessity to focus on a niche, not a mass market. They spoke well, and confidently. And I was genuinely moved by their grateful, heartfelt thanks to the TBDC people for all their mentoring and support.
I guess I’ll never be a Dragon.