26 August 2010 by Rebecca
This week's Dragons' Den was an interesting lesson in the
importance of looking at your business from all angles. It kicked
off with an internet start-up company who presented the concept of
creating a marketplace for unused gift cards.
The company, Gift Card Converter, was created by Allan Brown
& Simon Jamieson, who had invested several thousand in building
the website. The pair believed that one in five gift cards go
unused, and therefore hoped their website will allow users to buy,
sell, trade and donate their cards to charity. With the gift card
market making a huge profit, the duo estimated a potential 8
million customers, and compared the movement to the highly
lucrative mobile phone recycling business.
Whilst the Dragons understood the idea and the potential market,
many were dubious of the long term money making opportunities. For
a start, how accurate was the 20% redemption figure they gave?
Peter Jones, an expert in the area of gift cards, estimates the
redemption rate to be closer to 10%, whilst Duncan Bannatyne was
unsure whether customers would change their current habit of
storing the card away or spending it to be rid of it. Peter was
also quick to point out that the USA market for this business is in
strong decline, rather than increased demand.
Theo Paphitis felt uncomfortable with the whole concept, comparing
it to ticket touting, but it was Deborah Meaden who finally crushed
their pitch by pointing out the lack of legal advice the team had
invested in, leaving the business open to attack. Whilst the
initial idea sounded like it targeted a large potential market and
the pitch appeared to go smoothly, the resulting discussion
revealed far too many weak points for the pair to win the £50,000
investment for a 25% stake.
Theo summed up the pitch with some classic common sense advice
"Not all good ideas are money-making ideas and the sooner we all
start realising, the better our businesspeople will be." Something
a number of the entrepreneurs visiting the den should bear in mind
before coming up against the dragons.
If you're in the midst of starting up a business, make sure you
ask your most honest friends for their opinion, discuss it with a
mentor or head to Smarta for a huge selection
of advice and tools that will help you identify whether your idea
is a money making one, or simply a good one.
To join the conversation, find me on Twitter @shaawasmund, visit my website: shaawasmund.com or
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