A Good Entrepreneur Knows How to Listen
Doug Burgoyne came on the den this week pitching his business Frogbox, which supplies hard plastic boxes as a rental in place of cardboard boxes. His pitch, coming in with a valuation of $1.2 million, was that the business is profitable (though apparently not yet to a significant level), and is designed to scale.
The basics of the business model is that Frogbox drops off and picks up sets of hard plastic boxes which are sturdy and waterproof, at a cost to the consumer on par with using new cardboard boxes. A quick check of their website shows that renting 35 boxes with a dolly for a week would cost about $109 plus a delivery fee (in the case I looked up, the delivery fee was $40).
Robery Herjavec and Kevin O’Leary made the first offer with a valuation of $400,000 to which Arlene Dickinson pointed out that the offer was ridiculously low. Jim Treliving and Brett Wilson then put out an offer with an $800,000 valuation. Arlene, who had been pushing a higher valuation, made an equivalent offer to that from Jim and Brett.
Doug Burgoyne, after some discussion, came back with a request – that Jim and Brett join their offer with Arlene, which would mean that the investors would bring the full set of experiences needed. Jim, of course, with his various franchises, could show them how to scale their business to add new cities to their list. Brett could provide more general business experience. Arlene, the master of marketing, would help in bringing their brand into the public awareness.
On air, the dragons accepted, and the deal moved forward with the three dragons. However, after the show, Arlene stepped out of the deal when it became difficult to determine the exact role she are her business, Venture Communications, would play in the marketing of Frogbox. However, Jim Treliving and Brett Wilson continued with the deal and closed recently.
Part of coming on the den with a pitch is being prepared to explore new options. An entrepreneur who believes they know how to run their business better than anyone else and cannot listen to new suggestions will find themselves on the receiving end of harsh criticism from the dragons. At the same time, there are aspects to every business that are truly best understood by the people in the trenches.
Doug was aware that expansion was the key to making the deal go forward. The two offers dealt with the problem in different manners. Jim and Brett were likely to focus on the ability to franchise the business (starting in a new city had a cost of about $60,000 which is not unreasonable for a franchise model). Arlene was more likely to focus on how to market the business more extensively. During growth, both aspects of growing the business are important, but one needs to dominate the other.
Ultimately, the business would take one of the two paths, and that would be determined by conversations between the owners and the prospective investors. As smart business owners, they made the decision before the deal closed, and will be more likely to see success in their growing business.