Jewellers Katie and Kirst came into the Den seeking a £50,000 investment for a 10 percent equity stake in their business The Workbench London. The Workbench London provides each customer with their own ring making kits that they can design and carve at home, then send off to be polished and cast in London.
Their rings are made using recycled solid silver and people can get their designs engraved.
The pair stated that in 2018 they had a turnover of £129,000, with a net profit of £67,000. In 2019, they had a turnover of £137,000 with a net profit of £70,000. In 2020, they made £150,000 with a net profit of £97,000.
Tej Lalvani wanted to know what their gross profit was but the duo could not remember.
From their muddled response, it was clear to the Dragons’ that they did not know what their gross profit or net profits were.
Kirsty gave a rough estimate for their profit margin on their best-selling product being 72 percent.
Tej explained to them that this must be their gross profit, not their net. Net profit is the amount left after people deduct all their expenses from the profit.
Peter Jones added: “There is no way you could have made that net profit.
“At the moment I’m surprised you’ve even got here because your numbers are appalling, and that’s what concerns me. It’s not okay.
“You can’t come in asking for money, then be all over the place. That worries me immediately, so we need to get to the bottom of those numbers.”
The pair have around £31,000 in the bank and about £3,000 worth of assets. They could not account for where the £90,000 had gone.
Tej told them that this must be their gross profit, not their net. Net profit is the amount left after people deduct all their expenses from the profit.
“You’ve shot yourselves in the foot so unfortunately I’m out.”
She said: “I’m assuming the figures you quoted us were gross profit, not net profit.
“With all due respect I think I have better idea of your business more than what you’ve got, but I think it’s an exceptional product.
“You both are very creative, but you don’t have a business bone between you. If I was to invest in the business, I’d be running it for you.”
She made them an offer of £50,000 in return for 45 percent of the business as she believed she would be putting in a lot of time to help the pair. She would be majority shareholder.
If she eventually got her money back, she would drop down to 30 percent stake, giving them both 35 percent.
Katie and Kirsty both agreed to Sara’s offer.