I can‘t watch Dragons‘ Den; all my shouting at the TV upsets the dog. The strange thing is that even though I know what happens, I still get fired up by the way some entrepreneurs pitch their business.

As with all things, there are good pitches and bad pitches. Many of those who enter the Den are clear that they are asking for help as well as money so there‘s nothing wrong if they don‘t know the answers to some of the questions thrown at them. I would certainly prefer that than have someone try to bluff their way through or make it up.

But when it comes to the figures there are some that are so fundamental that “I don‘t know” simply isn‘t good enough. I cringe when I hear seemingly intelligent people claiming “I‘m the ideas person; I don‘t do the numbers”, as if that is an entirely acceptable excuse for not knowing the difference between turnover, gross profit and net profit. It isn‘t. No one needs to know all of the numbers all of the time but how much income you are, or expect to be, generating and what profit you are expecting to expect to make are absolutely compulsory information.

Not knowing such basic numbers is a clear warning signal to an investor that this person is not match-fit; a big setback considering most people invest in the individual as much as the business. Worst still, it says that this person carries on whatever the financial information, which in turn questions their ability to make sound business decisions.

For an investor, the basics of turnover, gross profit and net profit are important indicators of size, viability, efficiency and, ultimately, opportunity and potential. Without the numbers, evaluating and valuing a business becomes virtually impossible, although that could explain some of the crazy valuations we get.

I have no idea where some of the entrepreneurs who pitch to us get their valuations. Valuing business by using multipliers of profits is commonplace but the key is to fix the right multiplier. The biggest error I come across is people valuing early-stage ideas or businesses by using industry-norm multipliers that would be used for fully formed, successful trading businesses with a strong track record and market presence.

To compound this mistake, pitchers often refer to some kind of multiplier of future profits (usually because there are no current profits). Future profits do play a part in valuations but usually only when the historic and current trading results underpin future forecasts of growth. But I am not buying in the future; I am buying now and it is usually my money that is needed to achieve those future profits. So why should I pay a premium for that?

Another error we see quite a bit in the Den is wildly overvaluing a business in anticipation of negotiations driving the price down. A credible, well-conceived, researched and sensible valuation is much more likely to succeed than one that has clearly been plucked out of the air or over-inflated. In fact, ridiculously over-valuing a business has a negative effect as it lets the investor know that this person either has no idea of the value of their business or is clearly expecting a negotiation, pretty much guaranteeing that they will get one.

I hate numbers. I hated maths at school and I hate it now. But these are not just numbers; they are the thermometers of the business and indicators of a company‘s health and future performance. So there‘s no excuse for not knowing them.