How well do you know your own business
When Carl and Maria Griffin entered the Dragons’ Den to showcase their business and hopefully land an investment, they were awakened as to the true nature of their business. Their business, LiteLocker, makes it trivially easy to install and remove Christmas lights, by installing the system alongside the eaves of a building. The units can be painted to blend in with the rest of the building, and a handy contraption means that ladders are no longer needed either, once the system is in place.
The price, however, is what hit the business hard. A typical home would cost about $500 to get set up with the system, significantly more than what the average homeowner would pay. While cheaper that hiring someone to put up and take down the lights each season (which was estimated at about $750 for the same home), most homeowners are hanging the lights themselves to save the money.
However, one Dragon saw past that flaw, and focused on a market that would be only too happy to pay for such a product. Stores and offices, which typically do hire people to hang the lights, would see this product as saving them money. While in the first year the savings might be relatively minimal, by the second year, the savings can be quite significant.
Jim Treliving, with 350 branches of Boston Pizza to outfit with lights, calculated the savings in his first year at about $80,000. The following year, this number would triple with no more outlays needed. The money for the investment ($200,000) could come directly from the savings in the first two years of using the product.
The problem, however, was valuation. While the product was clearly good, sales were still non-existent. The million dollar valuation had to go, but the question remained how to balance out the $200,000 with the company. On air, the counter offer of 35%, which converts to a valuation of about $570,000 was accepted. The premise, of course, is that the business can do quite well.
It’s unclear from the site whether or not the deal has gone through. While they are clearly celebrating their airing on CBC, there is no indication that they have actually adapted their business model to approach businesses rather than homes. Why they would choose not to target stores is, to me, a mystery, since those are the customers who can afford their solution, and are likely willing to spend it to save in the long run.
However, more interesting is the fact that Carl and Maria learned on the Den that the focus of their business, or the market they should be aiming for, was not the same as what they came on the show airing. The question, though, is how well they learned that lesson, and whether or not it will translate into a stronger business, with or without dollars from the dragons.