Learning from a Dragon

Hannah Dawson, Futrli's CEO talks to Entrepreneur, Investor and Dragon's Den, dragon, Sarah Willingham about hospitality, small business recovery, what investors really look for, how to pitch and more.

Hannah Dawson, Futrli's CEO talks to Entrepreneur, Investor and Dragon's Den, dragon, Sarah Willingham about hospitality, small business recovery, what investors really look for, how to pitch and more. Read on for a full transcript and key points.


Just a bit about you, to begin with, Sarah, as you are one of Europe’s most prominent entrepreneurs and investors, and you've had a fascinating beginning of the year, haven't you?


We have! This time last year, I sat on the floor sobbing, thinking what my future looks like. Was everything I've always worked for just about to disappear? Hospitality’s part of my soul. It’s an industry that I love so much, and I was very concerned that we didn’t have a route out of 2020. 

But as the months progressed, what became very clear to me was that it wasn’t a P&L problem facing the industry but a Balance Sheet problem. 

People still wanted to go out and drink when restrictions lifted, but the Balance Sheet problem became more apparent as the year progressed.


When you talk about it being a Balance Sheet problem, what do you mean?


I’m talking about cash and debt leveraging. It became much more about how a business is structured and how it's been set up. So many businesses have taken CBILS and BBILS, but they are now over-leveraged and will not have the cash to grow when doors finally open properly. 


And the P&L side? Did anything change?


On the P&L side of it: money was coming in through the front door again but for the first time ever I think, operators really really cut back. I don't think any of us have gone through the ins and outs of our Profit and Loss in the way that we did at the beginning of the initial pre-furlough period!

Cost-cutting wasn’t enough for us though. London Cocktail Club is one of my first Dragons Den investments. I’ve been there since the first brick was laid. But due to restrictions, we had no choice but to shut all 10 bars. Genuinely, It was one of the worst days of my life. But, from the ashes…

Fast forward a little bit, and London Cocktail Club’s situation had sparked further thoughts about the industry:

  1. We're going to have a huge opportunity if we're well invested - ie we have cash that we can inject. 
  2. The opportunity is going to be unprecedented as the property market will be very different as there will be more available sites due to some of the competition not making it
  3. The businesses that do make it won't have the capital to grow due to debts and loans outstanding. It's going to have to continue to be a really tight ship for some businesses even with the Furlough Scheme. 

The more I discussed this with my husband (Michael Toxvaerd) the more we felt that founders/ operators will be underwater in their equity i.e literally working for nothing because the senior debt from the banks will be so high due to the prevalence of businesses using CBILS loans. These are businesses that are fundamentally sound. There is nothing wrong with them but in order to survive, they’ve had to restructure their balance sheet in such a way that actually the people who are operating it now no longer have any skin left in the game. And, there's nothing worse than a business being run with people that aren't incentivized nor motivated.


Of course. And have you come to a solution as to how you can help as an investor?


Yes, we think so! Our solution is to create a cash shell and float it on AIM in order to buy up some of these businesses so that we offer a home for safe restructuring. On the 12th of January we simultaneously IPO’d and acquired the London Cocktail Club as our first brand.

Our IPO raised £4million and I'm glad to be sat here in a position now to be able to talk to lots of those businesses, well funded and to say: we are a sensible home, come and talk to us about growing your business as you always dreamt you were going to in 2021 with a significant amount of expertise on the board.

The essential Hospitality KPIs according to Sarah Willingham, Dragon’s Den investor


If we look ahead to the future, post-2021, and we think about hospitality businesses recovering; what would you say are the absolute essentials for hospitality owners and managers to be drilling into on a daily, weekly, monthly, basis?


  • VAT (GST) is really, really important. Are you maximising the 5% vs 20% VAT? (which ends on the 30th of September, being replaced by a 12.5% VAT rate for 6 months.) Whether it's for an event, tickets, food, look at ways to absolutely maximize that VAT because it is worth a lot of money and is not to be underestimated. 
  • Don't leave a pound on the table. This is your chance to be able to take as much money as you possibly can. Put out as many tables as you can. Speak to the council you get tables outside if you can. Absolutely maximize your turnover. If you need to sell tables by the hour, then sell tables by the hour. Do whatever it takes to try and make up for some of the losses of last year. If that demand's there don't leave a pound on the table! 
  • Forecasting is really really important. I'll be completely honest it did go out the window last year for a time as it was impossible because things were changing every three or four weeks sometimes every three or four hours.

But now, you MUST look at:

  • What are they offering? 
  • What else is out there?
  • What could this demand look like?  
  • How big could we be? 
  • How do I absolutely maximize my sales? 
  • Do I need to spend more time looking at reservations?
  • Do I need to change the structure in which I do reservations? 
  • Should I ditch reservations altogether? 
  • How do I staff for this?
  • Understand when I am closed, what does it cost? Bring those Covid learnings through into your operating now 
  • We as a public have got used to smaller menus. Less choice = less waste.
  • Think about your margins. Set yourself up now to absolutely maximize the amount of cash that you can make. You've got to make up for last year. Customers won’t be angry because you've got fewer things on the menu - they're so happy to be out! 
  • Go through costings again, and again.
  • Try to maximize your average spend per customer. What can you upsell and cross-sell?

Best case vs Worse case

Then taking the above into consideration you now need to play with the output. (Hannah: If you aren’t confident in creating forecasts from scratch - don’t! Futrli Predict will create a pretty blooming accurate base forecast, for your Profit & Loss, Cash Flow and Balance Sheet, which you can then tweak as Sarah has said.)


  1. Do the gangbusters forecast prediction version where footfall and demand go mental (that’s the fun one)! 
  2. Then most importantly, look at what happens if these things are 50% lower - are we still okay then on the Balance Sheet? is everything still okay? Can we afford to do this or that? What are the variable factors?  
  3. Are staffing levels headcounts going in line with the number of customers that you're forecasting? Labour is a semi-variable cost so there is a point at which you've got to break even. That is an exercise in itself and is so key. 
  4. Are you cash break-even? It’s not the same as making break-even (or making a profit) in the P&L. It’s when tax and other liabilities like paying loans off are also taken into consideration with staff and stock and all of the P&L movements. I would be very surprised if there are many hospitality businesses that have come out of 2020 without understanding their cash break-even because it will have been the most important number that you will have looked at throughout the whole of 2020. 

If forecasting's not something that falls within your comfort zone play with your numbers in something like Futrli Predict - it’s amazing how quickly you’ll get comfortable seeing the impact of costs and sales over time. It doesn’t need to be a huge amount of microscopic detail, just understand the main key drivers.

These are my hospitality benchmarks for a great hospitality business.

  • A good hospitality model will have Costs of Sales at ideally no more than 25% of Sales. 
  • It’s about the same for labour at 25% of Sales. 
  • A good cash margin for day to day business should be 20-25% 
  • A great cash margin is 35%+ plus. That's irrespective of whether you are food-led or wet-led.


If you find that on some days you're actually not covering your costs, would you completely advocate for closing on those days? 


The first thing I would do is look at my competition and see if they are full. If the demand is there for a Monday night and everybody else is full then you're doing something wrong. It's either in your offer or it could be that you're not reaching your customers - that they don't know what's available on that particular day. Are my lights on full blast? are we actually looking hospitable? If there's demand, I would want to make sure that I can meet that demand before I closed.

Also, if you have salaried staff, they are a fixed cost, and so you need to go back to that minimum costs work up, to understand what you’re losing by closing as well. 


What do you think the biggest change in hospitality is going to be coming out of this pandemic?


I think pre-booking is here to stay. Places that didn't take bookings before are now and are selling a table for an hour or two hours. So many of us wouldn’t have done this a year ago. We would have assumed that we would outrage customers if we limited them to an hour on a table. Turns out, they are ok with this! I think it’s here to stay.  

I think a lot of people love ordering at their tables online. It’s efficiency within the restaurant scene now, which is most welcome. 

I think the big change is going to come in a lot of restructuring. Groups will have to operate very differently because sadly the industry has got so much to make up for from last year that everybody is going to have to go some this year to even come close to the pre-pandemic growth levels. For this reason, businesses will not be able to grow, as in multiply their sites. 

Private Equity will have to change their investment model and will have to change the model. If all of the operators with Ordinary Shares are under Water, and the PE investors have Preference Shares that are paid back first, on default, or sale it just doesn’t work. 

I think there will be a restructure within the industry at a larger level: Equity should be equitable after all right?! 


Do you have a recommended finance process setup or finance function in your startups and small businesses?


I'm a bit of a data geek actually I love numbers and data, but I understand that it's not everybody's default so I'm very careful not to go on and on about it. But one thing is absolutely certain. No matter how much you hate those numbers, you can tell everything that's going on in your business through them.

You could sit anywhere in the world, look at the current and predicted daily P&L, Balance Sheet and Cash Flow of your business. and you would know exactly what has happened on that day within the site.


One thing that's really important is a lot of operators don't know what really good looks like in a business. I would love to see accountants understand the context of an industry more, in order to inform operationally. And, to ensure that “numbers” are structured in a way that helps a business run itself better, as it makes sense to their day to day. A considered and consulted-on chart of accounts can really help here.


It’s really empowering to get those regular management accounts. Get the regular numbers that help you to run your business. Not all accountants will want to do that, so find one that can and does and that has other clients in your industry.


Would you advocate ensuring all data is in the cloud? And that a business is fully automated where it can be?


Software that's available is amazing. It is worth learning and understanding how these systems can work for you because you will save so much time in the long run. 


Sarah tell - me,  what does success really mean to you?


I've always said in business and it applies to this conversation, that success is when you make yourself redundant. 

That defines success, right? Being redundant -  because once you have your own operating system and by the operating system, I don't just mean software I mean people, process, the modus operandi of your entire business. Once you have that functioning really well without you, you're there, you've done it. 

I’d tell my younger self about my dam analogy. Imagine a dam in front of you and it’s got lots of little holes in it. Water is coming out everywhere and panic is rising. Don’t look at plugging one hole and then the next ad thee next. Look for the source of the water. 

It's very easy in business to get caught up plugging holes.  Running a business is hard, and fast-paced if you’re breathing it all the time. But, if you can find the source of the water  - there may be more than one source, you’ll stop the water coming out of a third or quarter of the holes in one fell swoop.

Focus on the three or four things that are the source issue. One source for sure is your financial planning, so take the time, embrace the fear and learn about it. It may take 3-6 months, and those holes will continue to drench you, but at the end of the three to six months there’s no more water, which feels amazing and your business will thank you for it. 

It just takes time, patience, vision and commitment. It's very, very, very, hard to ignore the fire fighting today but with the belief, you're going to plug the holes in that dam in the future, I promise you you will.



Absolutely brilliant advice. Ok, let’s move on to your investor hat. As an investor what information would you expect to always see in a plan or deck from any kind of business? 


Whenever I sit and look at a business as a sort of potential for investment I ask myself firstly:

  • What are they offering? 
  • What else is out there?
  • What makes you better than something else that I can go and get at the moment? 
  • Are you actually trying to fill a new need? 
  • Is it a new innovative product? 
  • Is it a new service?  
  • Who is it that you're aiming for? 
  • Why do people need them?
  • Who’s going to buy it?

The marketing model is really important to me because it's often very much part of the business: 

  • How am I going to get these customers? 
  • How are they going to know about me? 
  • How am I going to make sure that they're going to use my new product or service? 
  • Why are you the entrepreneur better placed than the person standing next to you to do this business? 

The answers to these questions have to be very clear in my head before I would consider any investment. In a pitch, these questions have to be answered.


Incredible starter for ten. Now looking at the Investment Memorandum or Pitch Deck - nitty gritty?


No problem! 

  • What historically have you done? 
  • What’s your vision for the future and how are you going to get there? 
  • What is your growth plan? 
  • What is the experience of the team? 
  • Where are the opportunities and how are you going to make them happen? 
  • Why are you the person best suited to this? 

I’ve actually just been on the other side of the desk when we did the roadshow right for the IPO this year. Being sat at the other side of the table doing the presentation I did this:

  1. Tell them what you're going to tell them.
  2. Tell them.
  3. Tell them what you told them.  

It absolutely works!!  I start every single roadshow with,

“Thank you very much. What we're going to do today is:

  • Tell you about Nightcap (Sarah’s company), 
  • Tell you why we're we're best placed to do it, 
  • Tell you about our first acquisition, 
  • Tell you why we're raising money, how much we're going to raise and what we're going to spend your money on, 
  • and then finally why we think this is a great investment opportunity.

Before each section, as I go through the whole presentation I say, “Now we're going to tell you a bit more about us…”, “Now we're going to tell you a bit more about the acquisition…”, “And finally we're going to reinforce why we think this is a really good investment opportunity…” so you're constantly hooking.

And don’t forget to hook back to the beginning. Always go back to what you told them you were going to tell them in the first place! As people switch off because they do, you've got to keep coming back, “So now I'm going to do exactly what I said I was going to do, and now I've just done what I said I was going to do, and I'm going to do something else I said I was going to do, is everybody awake?” :D 


Brilliant! That is stored! Ok some trivia now: on Dragon's Den when everybody's writing in their little black books, what calculations are you doing? Are there any specific financial calculations that you're penning? 


I don't! It's actually really embarrassing this, but they really went in really close on my notebook once during the filming and I'm a terrible doodler: I don't know why I draw hearts, smiley faces, weird people with curly hair: we could all read all kinds of things into what my doodles are! Oh, and Christmas trees! So you expect to see such really clever, intelligent stuff on those pages and they went into my notebook and all you could see were blooming Christmas trees and hearts! 

Ok so, obviously you're trying to work out the business model: it's all about the business model. If I spent a pound, what would I get back? I'm trying to find a simple replicable business model. 

Then also because of the way that Dragon's Den works, you can't really interrupt during a pitch, so I write down my questions as people are talking. It's actually still something that I do. I've just interviewed somebody, and as he was talking I just kept writing questions so that I didn't interrupt him.


Great takeaways! Ok - to funding. General small business funding. You think you have your simple, replicable business model nailed. You need capital. What would be your top three recommendations to get your business off the ground?


First I would absolutely ask myself if I really need it. Depending on what stage you're at I see all too often founders that end up with no equity. There's literally nothing left in the business because they've gone through so many rounds of funding, they've been diluted and diluted. I find that really disheartening, so I think that's a really important question.

As an investor, this is my thing. I am so focused on shareholder value. I don't like mass dilution, because I want incentivized and motivated teams running the business. When I invested in Craft Gin Club, we had 3,000 members; we've now got 130,000 and the two main shareholders still own nearly 90% of the business. This isn’t normal, however, so as an entrepreneur, it's really important to understand how much investment you're likely to need over the lifetime of the business? This is where your financial planning and prediction comes in. You have to be prepared that you may be significantly diluted as time passes. 

The amount of people that have sat in front of me and I've said you're doing the wrong thing, actually, you shouldn't be getting investment at this stage because there are other ways of doing this is significant. 

If you're literally a startup and you've just come up with an idea I'm a really big fan of the likes of Kickstarter. Craft Gin Club was started on a blooming credit card. It's incredible how they did it.

I'm not advocating getting a credit card, by the way! There are startup loans, they're low interest and it's per founder (talk to our partners at Swoop Funding to tailor your best approach, with no fees).

There's also a difference between money and the brain. Do you need money or do you need expertise?   

When I invested in Craft Gin Club they didn't need my money. What they wanted was some help on the board and they needed to pick the right person to work with. Had I not been given enough help we would have got somebody else in. So really think about what you need. 


Sarah you’ve been amazing! Thank you so much for your time and insights.

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