Would your business win in the Dragon’s Den?

The bear-pit for budding entrepreneurs returns to TV next week, a new series of Dragon’s Den.

Let’s imagine a couple of scenarios from the businesses of sellers and buyers of media space, to see how they might stand-up to the intense scrutiny of the Dragons.

The landlord of major railway stations wants to maximise income from advertising, mainly poster sites inside termini, on platforms and by the tracks, with some facing main roads. A number of outdoor advertising companies (sales contractors) are invited to tender (bid) for the contracts to develop and maintain the media and sell the space to advertisers, or more commonly their media agencies.

Here’s the imaginary sales pitch in the den. We need £1m to fund the purchase and installation of some new digital billboards to enable us to win the tender. In return we’ll give you a 20% share of our company. We expect advertising income to be around £5m per year from this new media. After a few rounds of probing questions from the Dragons, they summarise as follows.

“You will use our money to fund the capital expenditure for digital poster sites you won’t own and will have on lease for only seven years. In return you give 80% of the money paid by advertisers to the landlord, the people who will own the poster sites at the end of the contract. For your 20% of the money you pay all the costs; the sales-people, marketing costs, maintenance. In fact you pay for everything AND you take all the risk. What happens if advertisers aren’t queuing all year round to buy this space, you have fixed-costs which will eat into any profit?”

We’re out and so are you, there’s the stairs. That’s not a business and we haven’t just come down from the trees.

Another team enter the Den to pitch their business. We need £500,000 to fund the expansion of our communications agency. With the cash we will expand our team and buy-in the latest media and consumer research tools. This will allow us to seduce advertisers away from the large factory-style media agencies with our “more senior people working on your business” pitch. Once again questions and answers follow prior to a red-faced Duncan Bannatyne summarising for the unusually unified Dragon’s.

“Let’s get this right, you’ll pitch to advertisers as potential clients based on this business plan. You’ll assign a team of highly paid people to meet with clients when and where they wish, on demand, to discuss their communications needs. You’ll use high value research resources to propose any number of different advertising options, one of which they may choose to buy, or not. You’ll then buy all their glossy ad pages and TV spots and let them pay a month after it’s all been displayed, or longer if they negotiate hard. For all this you’ll only charge 1.0% of what they spend. Oh and also, if they have to cancel their advertising you’ll get them off without incurring any financial penalties and you won’t get paid.”

“We’re out. There’s the window, jump now”

All this is imaginary of course but it will still be interesting to see if commercial relationships between landlords, clients and their so called business partners are modified to reflect the changed world of advertising and communications.

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    Vote Ivan! Failing that, vote Ian. Sensible policies for a better Britain.