The latest series of Dragons' Den is underway, and while the show is obviously edited to entertain, it seems as if the current bunch of contestants has not watched any of the previous shows. Week after week they appear - often repeating the mistakes of previous contestants. This article attempts to shed some light on the key mistakes being made and recommends some key changes required by future entrepreneurs pitching to investors.

1. Complete a business plan in advance
The first thing that is evident is that many of the entrepreneurs appearing on the show have a business idea, but no clue whether the idea is commercially viable or not. A business plan forces entrepreneurs to cover all aspects of the business - not just the idea. If a thorough business plan has been produced, entrepreneurs should be able to handle most questions the Dragons throw at them. They are not trying to catch the participants out. They are simply trying to assess the opportunity to determine whether it is a credible investment option for them. Usually the idea is easy to grasp from the presentation - what prospective investors really want to understand is whether there is a demand for the product, what the scale of that demand is, and how these markets can be accessed.

2. Know the basics
The investor is seeking to diversify their portfolio, investing in some high-risk ventures in return for some attractive upside return. The entrepreneur is seeking investment to develop the idea further. If the company is currently trading, you will be required to have clear answers as to the current actual turnover, gross profit and net profit. Any vagueness regarding these rudimentary financials will set alarm bells ringing. Any credible business person will be expected to have a grasp of these numbers, and an investor will need to know them to make an informed decision as to whether to invest.

3. Share data and information truthfully
There is an information asymmetry between the entrepreneurs and the Dragons: the entrepreneurs have a lot more information to hand than the Dragons. The investors have to rely on the data the entrepreneurs provide when they assess the risk and the likely return. Hence, unless the entrepreneurs provide the information in their presentations, the investors are going to be asking for it. The information that is provided had better be accurate, as the due diligence that follows will examine the data in detail and will need to substantiate the figures provided.

4. Research the Dragons' backgrounds
One of the classic tips for any presenter is to ‘Know your Audience'. This is particularly important if you believe one of the Dragons can offer you more than just finance, e.g. distribution and access to a market. The Dragons tend to cover a number of different industries - if your product is relevant for one of their industries, you'd better be sure you know that in advance and have your facts right. Similarly a recent entrepreneur had three equal offers and needed to select two - he chose the two he was more familiar with whereas he should have researched all of the Dragons.

5. Make sure there is evidence of demand
Before you enter the Den and before you spend a lot of money on trade marks and patents, you must establish that there will be a demand for your product or service. Do not be too precious keeping your idea secret - people do not routinely run off with others' ideas. It is better to discuss it with a number of confidantes who are willing to give objective feedback, rather than develop a concept in isolation. In a previous series a participant had spent £200,000 developing a shower head holder, for which I saw negligible demand. Is there really a significant latent demand for such a product? Enough of a demand to achieve the monthly break-even targets required?

6. Polish your pitch
Dragons' Den is not a jumble sale for ideas. The investor is investing in the business as a going concern, and hence the entrepreneur will be required to continue to play a role in the company. In many ways the Dragons are making two investment decisions - is the idea investible, and is the entrepreneur investible? If you produce a competent pitch, demonstrate a command of the numbers, and the idea appears commercially attractive, the Dragons will be very interested. A good idea and an entrepreneur lacking business acumen is unlikely to fly. Like everything, practice makes perfect - it is recommended that the business plan pitch has been practiced and honed a number of times before you step into the Den.

7. Stand your ground
Pitching to investors can be a nerve-wracking experience. It is important that sufficient preparation is done before hand to deal with likely scenarios that have a high probability of occurring, e.g. negotiation over equity stake. Spend some time before you go in, deciding on what equity share you are prepared to give away and for what value. While you may open with a slightly different figure, you need to have a walk-away point if the Dragons - or any potential investors, for that matter - simply get too greedy. This is one area where professional advice is recommended, as business valuations can be difficult to calculate. Better to walk away with no deal (and lots of free publicity) than a bad deal.

In summary, investors start at a disadvantage given the fact that the presenter has a lot more information and data to hand. They will be keen to elicit as much data as possible from the presenter to help them make an informed decision as to whether the opportunity warrants investment. The basis for their decisions will relate to their assessment as to the idea's viability, the likelihood of it producing sufficiently strong cash flows to service their investment, and the business's potential to grow. Entrepreneurs with a good holistic understanding of their business plan will be best equipped to supply the relevant information, and at the same time, are likely to demonstrate that they understand the Dragons' requirements. As a result they are more likely to be investible over and above those who simply appear with an idea and a vague grasp of its viability.

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