CNBC’s new show, The Profit, starring businessman Marcus Lemonis, should be required, must-see-TV for any small business owner. The show is a unique hybrid between Shark Tank and Bar Rescue. Mr. Lemonis, the uber-successful CEO of Camping World and Good Sam Enterprises, evaluates struggling, small businesses and by the conclusion of each episode decides whether or not to financially invest in the business.
The Profit focuses on providing valuable advice to the chosen small business in hopes of rescuing them from impending bankruptcy or other struggles. In a recent episode, Mr. Lemonis assisted Eco-Me, a green cleaning products company, during a sales pitch meeting to a hotel chain. To prove his belief in the products, Lemonis got his hands dirty cleaning one of the rooms to substantiate Eco-Me’s capabilities. His method – step in, take control and right the course was an essential lesson for Eco-Me.
What other lessons can small businesses learn from The Profit?
Read more tips on our Answers site.
#1 Embrace Change, Don’t Resist It
One episode of The Profit was an examination of how one business owner can single-handedly sabotage a feasible business.. LA Dogworks was once a prosperous dog boarding, grooming and training supercenter. The amenities are top-notch, and, as Lemonis mentions in the opening sequence, with 50 million dog owning households, LA Dogworks should be a recession-proof business even in a rough economy. Since pets are loving extensions of the family, affluent dog owners in the LA area will certainly splurge to ensure their dogs receive the utmost care and comfort. Sounds like a successful business opportunity, right? Meet Andrew, the vitriolic owner of LA Dogworks. This man, with “delusions of grandeur” (Lemonis’ words) has demeaned his staff to the point of revolt. Given every opportunity to see the error of his ways, Andrew ultimately lost a $1 million dollar cash injection that would have spread his vision nationally. He could not keep his ego in check or respect his business’ greatest asset – his employees.
If Lemonis was able to tame Andrew, the potential for LA Dogworks was significant. Ignoring the unhealthy workplace hostilities for a moment, Lemonis wanted to improve the business and the brand before taking it national. With a higher occupancy yield, a customer loyalty program and the introduction of private label retail products, LA Dogworks would make a sound investment. Lemonis even wanted to partner with the local SPCA to offer dog adopters their initial service free to promote return business and encourage dog adoption. Unfortunately, there was no common ground with Andrew – even with these seemingly common-sense business suggestions.
By ignoring the advice of a successful CEO, with 6,000 employees in over 100 cities and an estimated $3 billion in sales in 2013 – an empire established in only 10 years – LA Dogworks is destined to continue its struggle.
#2 Manage Your Business, Don’t Let it Manage You
There is a reason The Profit emphasizes process (one of Lemonis’ three Ps) throughout the first few episodes. Managing a business takes a great deal of effort and there is a plethora of moving pieces. That being said, as we saw in several episodes throughout the season, it is unacceptable for a general manager not to understand the numbers in regards to the business.
Effective inventory management is a recurring issue with the struggling small business. A business’ inventory is the single, largest investment on the balance sheet. “Bad inventory management can bankrupt your business,” shares Lemonis on the show. Knowing what you have, where it is, and how it turns over is crucial – as the following CNBC Tweets can attest.
“Sitting on unknown inventory will lead to bankruptcy” #TheProfit
— CNBC Prime (@CNBCPrimeTV) August 7, 2013
— CNBC Prime (@CNBCPrimeTV) August 7, 2013
Automated barcode inventory control solutions offer a cost-effective way to get a handle on your business. With a quick return on investment, ignoring inventory concerns will cause your business to suffer – if not go bankrupt. Avoid costly inventory write-offs or write-downs by understanding exactly how your inventory is performing.
As Lemonis has demonstrated on multiple occasions, managing inventory can mean the difference between flourishing and closing the doors permanently. In the episode centered on Maarse Florists they had no inventory tracking system, and, therefore, had no way of knowing how much inventory they had, which resulted in excess inventory that was just sitting around a cluttered store.
#3 Be Willing to Take Risks
In last night’s season finale (September 3, 2013), Lemonis encountered a specialty ice cream purveyor, Mr. Green Tea, with a stable $2.5 million annual business. The family-run operation had a philosophical difference in management. While the son, Michael, had visions of growth on a massive scale, the father, Richard, exhibited an unwillingness to take risks. Throughout the episode Lemonis continuously stressed the importance of understanding the business’ financial numbers, stating, “if you don’t know your numbers, you just don’t know your business.”
Richard’s aversion to taking a risk on the expansion revolves around him not fully comprehending the numbers and from Michael not making a compelling case with the financial implications to persuade him to take action. Upon further examination, Lemonis clearly illustrated that by investing in a manufacturing facility of their own, bypassing the co-packers, Mr. Green Tea would recapture 20-25% in gross margin on the $2.5 million annual revenue and achieve total ROI within two years of the expansion.
Establishing manufacturing capabilities will allow the business to be more flexible testing new flavors and products and extend into retail. Lemonis established Keystone Creamery as an umbrella brand to encompass Mr. Green Tea and the future stable of products, the company is now well positioned to expand into additional markets and offerings. These dramatic changes will potentially double the company’s revenues within 12 months.
#4 Don’t Bully your Employees
About 13 to 14 percent of Americans work under an abusive supervisor, Dana Yagil of the University of Haifa in Israel told LiveScience. The LA Dogworks episode of The Profit examines a deplorable phenomenon – bullying in the workplace. Employees are reluctant to leave secure positions in the current economic climate. As a result, nightmare bosses are able to push boundaries. Andrew, at LA Dogworks, elicited many tears; he harassed and degraded his employees to the point Lemonis sought the assistance of a workplace psychiatrist. “Happier workers [are] 12% more productive. Unhappier workers [are] 10% less productive,” Warwick economists found. Happy employees are more loyal to a company and want it to do well, so they will work hard to make that happen.
#5 People, Process and Product
Throughout the series Lemonis stresses his three P’s mantra – people, process, and product. Each episode and business is unique. While there are no cookie-cutter suggestions, they always lead back to one of the three P’s. The Cash Car episode highlighted a Manhattan-based used-car purchaser. Lemonis walked into the business to find that the product, in this case, the overall idea of appraising and buying cars, was working. However, the process and people needed some adjustments to ensure that the business functioned better in hopes that the company would expand and become profitable.
If your small business could benefit from a cash injection and sound business advice, Season 2 of The Profit is now taking applications.
This guest post is courtesy of Jason Sentell. He is a Product Marketing Manager at Wasp, responsible for development and execution of Inventory Control and Point-of-Sale (POS) solutions.