I would say I'm mildly to moderately obsessed with CNBC's 'The Profit', and I can definitely say that I admire Marcus Lemonis (the investor on the show) quite a bit as an entrepreneur, and more importantly, as a person. If you've never seen the show, Marcus is an entrepreneur who fixes small business. He fixates on what he calls the 3 P's of any successful business: People, Process, and Product. He invests his own money, and from what I can tell, genuinely cares about the owners and employees of businesses he invests in. He has what I like to call a Growth Mindset.
The other day I was looking to find a blog post that detailed Marcus' top tips and tricks, and/or things that people have learned from watching the show. Since I couldn't find anything out there, I decided to write one myself! So, with that in mind, here are the top tips and tricks I've learned from watching every single episode of CNBC's 'The Profit' to date:
People, Process, Product
The baseline of Marcus' philosophy, Marcus focuses on making sure these 3 areas are perfectly in sync. For People, he makes sure that everyone in the organization is in the position that is right for them, and that business has exactly the right amount of team members in exactly the right job roles – no more, no less. From a process perspective, Marcus is totally committed to optimizing efficiency. This means minimizing waste, running numbers on equipment to see if its smarter to invest in better manufacturing products (it usually is), and really living by the time is money principle. Lastly, the product has to be exceptional and unique. The synthesis of these 3 principles typically results in a successful business, and is repeated on pretty much every episode.
Know Your Numbers
Any entrepreneur that doesn't know all of the core metrics of their business is bound for failure. First off, you need an accurate balance sheet. Secondly, treat cash as king, protect it and make sure your accounting and intake for payments is 100% accurate. If you watch the episode "Planet Popcorn", you'll note that they do these first two terribly. Thirdly, know your numbers such as cost per acquisition, cost of goods / making your products, ideal profit margins for your industry, etc. Other things to know are, if you're looking at retail locations, what are the number of people in a 1-mile, 5-mile, and 10-mile radius (Standard Showdown). These are valuable items to know as well.
Trust The Process
By "Trust the Process", Marcus means for entrepreneurs to trust his process of transforming businesses from sloppy, dysfunctional workplaces into healthy, efficient environments that allow businesses to flourish. His general process is to find a business that is in need of stability AND has a concept that can be taken nationwide. Then, infuse it with cash in order to put the most efficient process in place for the long term and make the product the best it can be. Lastly, and probably most importantly, he puts a fair ownership structure in place, one that eliminates silent partners and rewards those that do the work.
"I am 100% in charge" actually means "I'm going to get you out of your own way"
Once his process is underway, he trains the owners of the business to be as much of a mirror of him as he can – checking their egos at the door, and making sure they know their role and don't stray from the plan. Being entrepreneurs, they don't always do that (see: any Progress Report episode), but when they do the results can be astounding.
Inspect What You Expect
As an entrepreneur, it's really easy to delegate and forget. This is where a process of checks and balances ensures quality control. When entrepreneurs fail to actually look at the product before it goes out the door (either themselves or through a quality control system), that is when the product can become less than ideal. Always have a system and process in place to check the product before it goes out the door. Inspect what you expect (see: Fuelfood).
Care and Be Respectful of People
This is a given as a necessity in business, yet so many people fail miserably. An example that immediately comes to mind is the episode "Worldwide Trailers", where the owners of the company got into a huge yelling match at the end of the episode, even bringing in the employees of the company to witness it! Not only did they disrespect each other, they disrespected their employees and their new partner as well. Not to anyone's surprise, Marcus walked out the door in the middle of the fight and called the deal off.
Generational Family Businesses Fail... Mostly
Something like 90% of third generation businesses end up failing, which is a crazy statistic but one that makes sense when you think about the way many families operate without a business involved. Once you throw in a business, things can go haywire. Marcus implements a simple philosophy to cure most family businesses, and that is to A) have a clear succession plan in place and B) make sure everyone knows their role fully (see: Grafton Furniture). These two core methods ensure that there is a clear separation between work and family, and that the employees of the business know who will be in charge one day.
Eliminate Inefficiency, Increase Margin
Middle men (1-800-Car-Cash), too many layers of management (Unique Salon, Blues Jean Bar), old / cheap equipment (Sweet Pete's, Grafton Furniture, Kensington Garden Rooms, many more), and trying to do something that someone else can do better (Lano Company) are all things to watch out for. Eliminating these inefficiencies can drastically improve margins, often times being the difference between losing money and making money. While some can be an investment up front (specifically buying new equipment), the long term benefits are well worth it when you look at how much money you save over the long haul.
Some People Just Can’t Be Changed
In more than a few episodes, Marcus has had to deal with entrepreneurs that were stubborn to no end (Maarse Florists, LA Dogworks, ASL Signs, Fuelfood, etc). He was smart to leave all of those businesses, and while he had some financial losses incurred from being involved with those businesses, the fact that he cut those losses while they were still relatively low speaks to his business smarts. You can change process, you can change product, but you can't always change the people. And without the right people in place, the business will eventually torpedo.
Sometimes There’s Hidden Gems In Secondary Businesses
On more than one occasion, Marcus has found a goldmine of a product in a place he wasn't originally looking. Take Pro-Fit protein bars, found on the episode "Michael Sena's Pro-Fit." These bars were being created by Michael's wife, a partner in the business, and when Marcus tried them he couldn't wait to mass produce them. Another example is Unique Spa & Salon, which was selling custom branded salon products. Marcus bought into that business separately from the main business as well, knowing that with the right packaging and distribution, those products could make a lot of money. If there's one thing you can gain from this, it's that products are more valuable and scalable than physical locations.
Products Need a Model and a Story
In many episodes, Marcus talks about the model that he's going to implement for a particular product line. For instance, there was the Hub and Spoke model for the Lano Company. In that episode, Marcus picked a hub (Lanolin) that all of the products could be attached to, and then each product became a spoke. This allowed Pure Lano to be born, the story of one product line that all fit together seamlessly, from story to packaging to ingredients. How about the Good Better Best model from the episode SJC Drums? In this episode, Marcus told the owners of SJC to come up with 3 products, the first being Good or Entry level – a drumset that was affordable for all. Better came next, for the intermediate level drummer. Finally, the Best models were for professionals – custom made and tailored to their specifications.
First One In, Last One Out
This one in particular hit home for me, more than most. For many years, I worked hard at the business, but I worked on my own terms. I'd stay home randomly for a day and relax, and then work on a Sunday to make up for it. I'd leave early or come in late. I flew to the beat of my own drum – after all, as a business owner, aren't you entitled to some of the perks if you have the weight of running a business on you? When I heard Marcus say this on the show, it made me think hard about how my employees look to me for leadership, and if I'm not physically present, how can I provide it? While my on time record is still not 100%, I do find myself coming in earlier more often, staying later, having a more consistent schedule, and actually feeling better while doing it. Beyond time, though, this mentality of staying tough no matter what, out-working your competitors, and being a good role model for your employees had a high impact for me, and everyone on the team is reaping the benefits.
All in all, if you're an entrepreneur in any type of business, I would highly recommend watching The Profit. The amount you learn about how to run an efficient business with a health work environment is invaluable, and I'm continuously implementing lessons learned into our business and helping clients do the same.