Page 358 - James Caan - The Real Deal

The Real Deal

business and the profits. Working out the potential size of your
business starts by working out the potential of your team. For
instance, if your top sales guy can only make 100 calls a week
because there aren’t any more hours in the day, and he can only
turn 10 per cent of those calls into sales, then the size of your
market is the number of people on your sales team times ten. So
the real question is, how big can your sales team get? The more
realistic you are, the more we will believe you, and if we believe
in you we are far more likely to back you.
The next thing I want to understand from any pitch I see in the
Den is the margin, and to do that I need to believe that your costs
are realistic and your selling price is achievable. If the gap between
your income and your costs is too small, then you’re a risky
proposition for us. The wider your margin, the thicker the
insulation you’ve got before you start making a loss and the better
an investment your business is likely to be. Be warned, though: one
of the things that can really eat into your margin is your salary,
and if you’ve watched the show enough times you’ll know that one
of the things Dragons don’t like their investment being spent on is
the founder’s salary. If you were to say ‘I need £50k so that I can
pay myself a salary for the next two years and get this off the
ground,’ the chances are that you won’t get our money. It’s not
that we don’t want you to earn a living; it’s that we do want you
to earn it. If we just give it to you, where would your incentive be?
And when you do start taking a salary, it should always be in
proportion to your profits. If your business makes £50k a year and
you take £45k of it as a salary, it won’t leave much for your
investor. The key to what you tell the Dragons is that everything
you say should be plausible, proportional and profitable.
I love it when people come into the Den with preposterous
valuations for their businesses because it makes for great telly
when the Dragons burst out laughing. A successful pitch involves
getting your valuation right. Businesses are usually valued on their

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