Dragon's Den's Assessment and Quantitative Metrics
Friday 23 September 2016
Thursday 22 September 2016
Dragon's Den -- how do they assess a business?
Dragon's Den is a popular TV program where ordinary people pitch their business ideas to savvy investors. PhD by training and an entrepreneur by interest, I share key metrics that Dragons seem to use to assess a business.
- Proposed valuation by a pitcher = asking price / proposed equity
- Assessed valuation by a dragon = profit x 4
- Profit = revenue - cost (including salary)
- Cost = cost of building the product or rendering the service
- Sales = measured in the number of unit product sold and/or dollar value generated
- Revenue Forecast = Dragon want to know the expected revenue of the current year and the next.
- Investment = amount of money invested in the business by the pitcher.
- Scalable = Dragon evaluate the scalability of a product/service.
- Life = existence of a company in months/years. Anything over three years with no growing profits is generally viewed negatively. Often an indication of poor acceptance in the market.
- History = Dragons look at the performance of the company for last quarter and year.
- Debt = Any significant debt without profits is viewed very negatively.
I invite readers to extend and critique this list for the benefit of others.
Location:
Toronto, ON, Canada
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