How to know your numbers like you’re going on Dragons’ Den

Financial literacy isn’t a common skill. We’re not taught it at school or college and (being proud and British) money isn’t something we talk about over the dinner table. 

It’s no wonder we see business owners crumble when under questioning on the BBC TV show Dragons’ Den. 

The good news is, if you’re preparing to pitch to investors, you don’t have to be a maths whizz to know your numbers. You just need to prepare for what you’re going to be asked. 

1. Know where your numbers come from

You can be spectacularly good at what you do, and you could have an amazing product or service. But if you don’t know your numbers, and you can’t answer the Dragons’ questions, they’re not going to invest. 

Investors want low risk with high return, which means they want a business owner who knows how to manage their money, a company with a proven track record of not wasting cash, and the potential for growth and healthy profits. 

If you’re going to show them that you’re a good investment, you’ve got to know your numbers inside out. You do that not just by memorising and regurgitating the figures but by understanding why you achieved those numbers. 

Take time before your pitch to truly understand what the numbers mean and why they happened. Look at your revenue, your gross profit, and your operating profit. Be able to talk about your forecasts and how you plan to achieve them, in detail. Work with an advisor beforehand if you need help understanding it all.

2. Put yourself in their shoes

An investor’s goal is to make money. So they’re not going to partner with anyone where they don’t think they’ll make a return on their investment. Put yourself in their shoes; why should they trust you? You’re effectively asking them to take a massive punt on you and your business, so you’ve got to see it from their perspective. 

With so much at risk, it’s exactly why investors are famous for asking difficult questions. You need to be able to defend all your business decisions, the good ones and the bad, and prove that you can run your business in a responsible way. 

While you’re getting to grips with your numbers, think about what jumps out. Any anomalies that are likely to raise questions are the ones you need to prepare for alongside the basics of knowing how much revenue and profit you’ve made.

3. Be confident, not cocky

No founder is going to have a perfect understanding of their numbers, and investors are aware of this, but if you go in there with confidence, you are more likely to win them over. 

They don’t expect a perfect history with no hiccups or bumps in the road, that’s not realistic. What they expect is confidence in the decisions you have made and an ability to defend them without being arrogant. 

If you’ve made mistakes along the way, own them and explain what steps you’ve taken to make sure they haven’t happened again. Dragons aren’t expecting perfection. If there’s no value for them to add to your business by partnering with you, there would be no point in them investing! 

If your answers are well prepared and you’re confident in your abilities, whilst knowing your limitations, they’ll see the story. Ultimately they’re buying into you as much as the business, so don’t put them off by being arrogant.

4. Don’t pluck a valuation out of the air

Dragons know how to value a business so swanning in there with some absurd figures will put them off straight away and lead them to dig even further. Figuring out how much you need and the percentage you’re willing to give away isn’t a valuation, it’s wishful thinking. 

If you’re asking for £500k in return for 20% of your business, you’re valuing your business at £2.5m. Whether you’ve based it on current profits, expected profits or the assets of the business, you need to be able to back it up.

These are astute business owners you’re talking to so don’t treat them like market traders haggling over fruit prices. Be honest with them and yourselves about what the business is worth. You’re asking them to take a risk, so make it worth their while.

5. Don’t let the spotlight burn you

All investors are human. They know how nerve wracking it is to be in your shoes and they’ve all built businesses and made mistakes along the way. They’re there because they want to find investment worthy businesses; not to make a fool of you or trip you up. 

They’re asking you questions to give them confidence that you’re a safe bet so keep that in mind and try to keep your cool. All you’re trying to do is show them that the person to invest in is you, and the time is now, so take a deep breath and show them you’re the one.

By Laura Linden

Laura Linden is a financial strategist, Fractional CFO, and founder of Feisty FD, on a mission to take the fear out of finance and help women - and entrepreneurs. Her debut book UnF*ck Your Business Finances: Unlearn the Shame, Reclaim the Power and Change the Game is out on Dec 2nd.

Learn more about Laura Linden