Dragons’ Den review: Winter strikes the Den… and cashflow tips for seasonal companies

A few weeks ago I wrote a blog suggesting that it isn't just venture capitalists that do their bit to stimulate growth in the UK economy. I think we can add the production team behind Dragons' Den to the list of contributors, because they seem to have waited until the clocks go back to air a couple of distinctly wintery pitches.

The show took a break last Sunday, but two weeks ago Karrina Oldale from Rotherham pitched for investment in an impressive large-scale de-icer product called EnviroThaw. Oldale didn't get the money she wanted because the Dragons were put off by the amount of little blue balls the company would have to shift to keep an exclusive distribution deal with their Chinese suppliers. However, thanks to the timeliness of her appearance on the show, I'm sure she's received a few calls from one or two airport executives who don't want a repeat of last winter's profit-sapping runway closures.

This week, something similar. Anne and Keith Proctor, a husband-and-wife team from Bradford, presented a workmanlike pitch for investment in Protec - a company that makes and sells covers made of sophisticated weather-proof material that stops caravans and motor homes from depreciating on driveways.

My hunch is that the show runners, where possible, choose the right moment to give new businesses or products an extra PR boost. If there's a pitch for a fancy new children's toy as the series comes to an end and Christmas gets ever nearer, I think I'll be able to rest my case.

Anyway, back to Protec. The seasonality of the Proctors' sales was in fact precisely the reason why they sought Dragon investment. The company has been trading for 12 years and is showing healthy year-on-year profits. However, the Proctors claimed they are unable to use the money in the business for their plans to expand into overseas markets because it provides cashflow to keep them operational during warmer months, when sales are inevitably much slower.

Hilary Devey and Duncan Bannatyne felt this was a reasonable explanation and - unlike the uninspired Peter Jones - were excited enough about Protec and its products to invest £75,000 and help the company conquer Europe.

Protec's plight shows that cashflow is an even bigger issue for start-ups and more established businesses that only have money coming into the company during certain peak periods. It strikes me that such companies should do everything possible to get the timing of cash coming out of the company in sync with cash coming in. This could leave them with a larger pot of money during leaner months that can help the business grow in preparation for the next anticipated spike.

It's worth scrutinising all your costs and looking for opportunities to dictate the timings of their payment. A simple example: if an annual bill from a major supplier lands right at the outset of your expected down time, this should be a prompt to pick up the phone and renegotiate your terms.

Where energy is concerned, if a business uses significantly more gas and electricity during busy periods, they may want to take a close look at their contract. It might suit them to switch to a tariff with a more favourable ratio between standing charge and unit charge - especially if they have multiple meters - so that bills are lower during periods of reduced usage. Some suppliers offer tariffs with a standing charge of zero, whereas others offer a high standing charge and a lower unit rate.

Another factor that damages cash flow is late payments from business customers, which may be particularly significant for seasonal B2B operations. Companies like this would be wise to take a look at the Prompt Payment Code (PCC), a voluntary code of practice that is championed by groups such as the British Chambers of Commerce and the Federation of Small Businesses.

Companies of any size can sign up and signatories pledge to pay suppliers in a time scale agreed at the outset of a contract. You can check to see if a business has signed the code at the PPC website - and if they have, you can remind them of the fact if you are awaiting payment from them. What's more, if you sign the code yourself you can demonstrate your commitment to good practice - and legitimately ask the businesses who buy from you to do the same.

Image: Keene and Cheshire County (NH) historical photos

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