DRAGONS’ DEN REVIEW – Episode 906

This review makes a great forum for a critique and learning experience valuable to all entrepreneurs. Learn what to do and what not to do from entrepreneurs making a pitch for money in the Dragons’ Den. The review complements my book, The Small Business Planner and there are also great free resources including fully formatted planning and marketing templates on the book’s web site. In addition, my regular Blog, along with the Video Series on my You Tube channel can be very helpful to budding and seasoned Entrepreneurs. Of primary interest to those making a pitch on the program is the Feasibility Study as described in the book. If completed in detail, this study will indicate if there is a viable market for the product or service and if the business can be profitable. An added feature to my reviews is a rating on the company’s web site – if available. The web site has become the number one marketing tool for most businesses today and my observations are based on a quick overview whether accepted web design and development standards are met. Remember – you have a very short period of time to hold the attention of a new visitor. Therefore, the company web site deserves the appropriate investment and professionalism to be effective. Constructive comments are most welcome on any of these reviews.  Larry Wilson is author of the best selling book, The Small Business Planner, and is the founder of Dynamic Performance Group, a strategic and marketing planning firm.

Season 9 - Episode 6.           Original air date:   November 19, 2014

Pitch One: EMULATOR Elite -        Asking $500K for 10%

Valuation: $5 million.

Al and Julie Smithson introduced the next generation in Disc Jockey electronics – the Emulator Elite – a totally touch screen music system and the new standard of DJ technology. They unveiled the large stand-up unit and Michael gave it a try putting on an impressive show for the other Dragons including the scratching of records on a simulated turntable.

Sales: $3 million.      Retail: $15,500.   (Full version)    $4,000.  (Desktop)   $45. (Software)

They asked for his projected sales in two years and when Al said, sixty million, they were all skeptical as the market was limited to DJ’s and that would mean the sale of 15000 units of  the more marketable desktop version. David liked the idea but had a problem with the valuation. Ten times sales has taken away the upside for the Dragons and Al agreed. Vikram also thought the valuation was too high and opted out. Arlene partnered with David for 33.3% also citing a high valuation. Michael and Jim joined in with the offer as well. Four Dragons and he made a counter of 25% upon which the Dragons held firm. Al wisely accepted the deal.

My entrepreneur ratings:

Idea: good; Competence: high; Knowledge of Market and Competition: high; Competitive Advantage: new technology; Preparation / Planning: good; Chance of Success; good especially with four Dragons as partners.

Great product and impressive sales. The valuation was high but the innovative value of the product attracted the offers.

Pitch Two: Envirobrush -        Asking $100K for 10%

Valuation: $1 million.

Terry Douglas from Surrey, B.C. has designed a paint brush that will reduce the number thrown out in landfills by fifty percent. In North America the number would be in the millions every year. With the envirobrush, a push of a button removes the brush refill from the handle for easy cleaning. When the bristle wears out, they are easily replaced without buying an entire brush. It is available in three different sizes in both consumer and professional lines. The Dragons liked the concept and feel of the brush and David verified from Terry that there was nothing comparable on the market.

Retail: $4.99 to $11.99              Sales: $500K      (U/K time frame.)

Terry mentioned that selling the brush has been a struggle.  He gave an example of Home Depot where the brush was displayed with numerous other brushes so people could not see the benefits and features. He said he had a lot of money invested in the product and when asked how much, he first said, “You don’t want to hear.” “Yes we do” came the simultaneous reply. $4.5 million absolutely floored the Dragons. Michael wanted to know how one can spend that much on a paint brush. Terry replied, $600 – $700K on patents but he could not explain the remaining $3.8 million just adding that it was wasted on administration and legal fees? The money was mainly supplied by himself with some loaned from friends. He said he devoted his whole life to making the product successful and had even resorted to sleeping on the floor for the past year. Not sure if the motivation for that discomfort was penance or poverty! He is almost eighty years old and doesn’t want his kids thinking he is a failure. (So he is squandering their inheritance!)

His story broke Arlene’s heart but she was the first to opt out followed by David. Vikram admired the dedication and penance but because he has been working on the product development for so long, he also dropped out. Michael thought it was a great product, but as a business – not happening. Jim finished him off by telling him he painted himself into a corner – now to paint himself out by not pursuing this anymore.

My entrepreneur ratings:

Idea: good; Competence: questionable; Knowledge of Market and Competition: good; Competitive Advantage: unique; Preparation / Planning: poor; Chance of Success; questionable.

The brush obviously needs an end cap for display and requires some sort of brief demonstration. The valuation was far too rich for decades of sales. There comes a time, when an inventor needs to pull the plug on pouring money into something that isn’t working. In this case – the time was long ago. It’s hard to fathom how he could have squandered $4.5 million on this product. He should have tried to sell the idea to a major paint manufacturer. What a sad state to put yourself in – especially at his age.

Web Site:     envirobrush.com/

The web site suffers from a common ailment – overcrowding with small type. The font is far too small and there is far too much of it. Nobody reads paragraphs of material to find what they are looking for. The type size should be large enough to meet accessibility standards. This includes the navigation text links which are also too small. That is why a prominent button navigation system is most often utilized – it is easy to find what you are looking for. We know it is all about the environment – but the background colour – really?

Pitch Three: Nonna Pia’s -        Asking $180K for 18%

Valuation: $1 million.

Natasha and Norm (and family) from Whistler, B.C., introduced their family business, Nonna Pia’s Balsamic Reductions. It is a gluten, fat, and sodium free reduction made from pure balsamic vinegar imported from Italy. They have been manufacturing the product from their home for several years. Competitive products have a much lower percentage of pure balsamic. They come in eight flavours which the Dragons sampled and remarked favourably. Vikram had met Norm on a previous occasion through his show and has a couple of bottles of their reduction in his fridge, uses it all the time and likes the product. Vikram questioned if it can be produced in enough quantity to make it a viable business because there is pure passion in every bottle.

Retail: $10. per bottle.     Sales: $369K 3 years ago and $722K last year.

Production is all done in Whistler and once they get a foothold in the eastern market, they will open a packaging facility there to meet the geographic demand. Ninety-seven percent of their sales are in B.C. and Alberta and they are sold at Costco in western Canada. Sales are projected to $1.3 million next year. Vikram made an offer to co-produce a balsamic vinegar with his spices. Jim offered what they were asking citing that he has a big distribution company and they are building a new facility in eastern Canada. Michael passed then David and Arlene offered more than the ask, $200K for 18% and they can take advantage of two Dragons and their contacts in the food industry. Vikram reminded them that he was offering his name on a silver platter. They accepted David and Arlene’s offer.

My entrepreneur ratings:

Idea: good; Competence: high; Knowledge of Market and Competition: high; Competitive Advantage: taste; Preparation / Planning: good; Chance of Success: excellent especially with David and Arlene as partners.

The family of entrepreneurs did everything right and it lands a deal every time. Great product with a distinct competitive advantage in a large market, proven track record, fair valuation and lots of self-confidence sprinkled with a dash of modesty. Well played!

Web Site:      nonnapias.com

The site meets all current standards for design and development and is is optimized for searches. Easy to navigate, find into and pleasant to look at.

Pitch Four: Chewber -        Asking $50K for 25%

Valuation: $200K.

Catherine from Ontario introduced her new line of dog’s toys – Chewber. The dogs love the toys because they mimic live prey by the way they feel in their mouth and the way they spring back to their original shape when let go.  She has been selling them for twelve years and the patented design is molded from reinforced rubber and switch between fetch toy and drinking dish. The multi-functional frisbee style toy is sold in Per Value for  $21.99. The main competitor is Kong and their competitive advantage over them is durability. (I don’t know as the standard Kong with the hard rubber seems indestructible. These competitive points must be proven to be stated.)

Sales: $850K in 12 years.   $50K in the last year.

The $50K in sales for an entire year after 12 years in business was totally unacceptable to these savvy investors. There must be something wrong here, and Catherine cited lack of distribution. She started talking about having problems with distribution companies who don’t have the enthusiasm to properly sell her products then said others won’t sell it because of the Kong products taking centre stage. She said that she wanted Dragon help with marketing and getting a deal with a major dog food company and getting it into Canadian Tire. Jim asked what they said to her when she went to Canadian Tire and she said that she hadn’t approached them yet, claiming that she needed Dragons for that.

Catherine admitted that it was her fault and not the product’s fault that she was only doing $50K after 12 years. David reminded her that if she watch the program then she would know that they invest in people. People who make it happen with selling. She continually interrupted and did so with David saying that she was motivated because she was on the show in front of them. All but Michael dropped out for the same reason – she hasn’t got what it takes, except for excuses. Michael, who has fourteen dogs, offered $50K for 51% AND A 3% royalty did so with another condition – the she be coachable. She questioned the equity share and Michael agreed to pull it back to 45% after two years if he found that she was coachable. She continued to question tghe offer and Michael promptly withdrew his offer stating that she just proved that she could not be coached.

My entrepreneur ratings:

Idea: good; Competence: questionable; Knowledge of Market and Competition: high; Competitive Advantage: durability; Preparation / Planning: good; Chance of Success: poor with her attitude.

Entrepreneurs have to be willing to do what it takes to make things happen. Nothing else needs to be said here.

Web Site:      chewber.com

The site meets all current standards for design and development, however it is not optimized for searches. The title tag does not contain any of the primary key words, such as dog toys, etc.

 

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