Turning Down a Sale
One entrepreneur who came on the show this week was lambasted for doing something few prudent business people would ever consider – they turned down a sale. This was not because they were to inundated with orders to be able to meet demand – on the contrary, they had essentially no other sales. They turned down the purchase order because it wasn’t the right distribution model for their business.
Pierre Beaupre and Jean-Daniel Nieminen from Quebec came on Dragons’ Den with their invention, an easy-to-install dual-flush system. Designed to be easy to install and priced at roughly 10% of what a comparable toilet would cost, the device allows any standard toilet to be easily converted into a high efficiency unit.
However, when they traveled to a trade show, they returned without any sales – because they were looking for distributors, not sales.
On the Den, the dragons frowned on their maneuver, because it undermined their credibility.
It’s one thing for a business which has an existing revenue stream to turn down orders, as it could negatively impact existing business. However, a business which has yet to see its first dollar of income should be eager to take on new customers, even if they are not ideal. Where the business has an outstanding debt to its founders in the amount of $100,000 this need becomes even stronger.
While Pierre and Jean-Daniel claimed that they turned down the order due to an inability to fill the order, the dragons were skeptical of their ability to lead a business at all. As was phrased on the show, had they come onto the set with a purchase order in hand, asking for the funds that would allow them to fill the order, they likely would have walked away with a deal.
A prediction was made on air – one year later, Pierre and Jean-Daniel would either have done exceedingly well, or incredibly poorly. It is unlikely that they would be anywhere but. Looking for their business, I discovered their site at Flush2O.com and was unimpressed with what I saw. Low visit count, nothing out of the ordinary from a design perspective.
It’s looking like the Dragons made the wise choice to avoid business owners who couldn’t close a sale.