What do women’s clothing, Key Lime pie and toys have in common? They are all businesses that Marcus Lemonis turned around. Marcus is the star of the CNBC reality show, The Profit. He takes a major equity stake in failing businesses and turns them around. He may only have 30% ownership but, as he states in every show, he’s “100% in charge.” I have no doubt that the shows are scripted so that the “reality” fits into a great television plot. But the lessons for any business owner are indispensable. And ALL of the businesses that Marcus fixes face the same problems. In fact all businesses face these problems—including mine.
The lessons learned from The Profit are few. But if you don’t learn them you fail. They are:
1. Know your business. Reduce it to its core competency. Everything else is a distraction.
2. Not sure what your core competency is? Look at your margins. Sell products with high margins and healthy demand. Eliminate all low margin items unless they are “loss leaders” that link to high margin items.
3. Inventory is cash on the shelf. More inventory equals less cash.
4. Three things make a great business: People, Process, Products. Screw up on any one and you fail.
5. Without a strong vision, backed by facts, you have a business that is really a hobby.
When I purchased AquaMetrix I got lucky. I bought a company that had struggled but that, at its core, made a great product. I didn’t need to overhaul the product. We make all our pH, ORP, conductivity and membrane dissolved oxygen sensors and our controllers.
But on one point I strayed. We bought instrumentation made by others that we put our label on. Some of our staff spent about a quarter of their time on items that generated less than 5% of our profit. We all rationalized that sales of these “loss leaders” were tied to our “bread-and-butter” items. But when we analyzed our sales we realized that the facts didn’t support the theory. So they’re now gone.
It took us 4 years to make some tough choices, like cutting items that we’ve sold for years—including some we even made ourselves. What I learned from The Profit is that, when the business I analyze is my own, I can fool myself into making decisions that don’t stand up to scrutiny. But when I pretend I am Marcus Lemonis everything I need to do suddenly becomes very clear. Marcus is successful at turning around businesses in which he has no experience, i.e. no preconceptions. That lack of familiarity is an asset—not a liability. It means he can look at a business with complete objectivity. Richard Branson founded Virgin Airway and Virgin Mobile even though he knew nothing about flying and even less about phones. He succeeded in both businesses because he carried no personal baggage. He didn’t do the same dumb things that United Airlines or AT&T do that drives consumers nuts—like being packed like cattle into a plane or forced into an oppressive 2-year contract.
There’s one more reason why I always ask “What would Marcus do?” He’s a good guy. Sometime, when he takes a controlling interest in a company, he makes sure that a neglected but deserving employee or spouse also gets equity he or she never had. His drive to make money is always backed by his belief that a rising tide really does lift all boats. He is not the “How-is-This-Going-to-Make-Me-Rich” Mr. Wonderful of Shark Tank. When Marcus takes over, everyone wins.
So now, when I think about what I should do to grow my business I ask myself, “What would Marcus do?”