Feeds:
Posts
Comments

Posts Tagged ‘the profit’

In this episode of The Profit, “The Soup Market,” Marcus Lemonis visits a Milwaukee-area soup shop.

The store has been reasonably successful, but with grand plans to expand its footprint from 5 stores to 50+, and a co-owner who died unexpectedly, owner and soup chef (“soupier”?) Dave Jurena needs Marcus’s help.

Within a few minutes of stepping inside one of The Soup Market locations, meeting Dave in person, and tasting a few soup samples, Marcus already has a few thoughts. The inside of the shop, he says, looks like a hospital cafeteria. The soups themselves are a little thick, not the light fare he expects when ordering soup. And he’s concerned that the calorie count of these thick soups isn’t posted anywhere, nor does Dave care to know how caloric his soups are.

Marcus also hates the sloppy presentation of the soup and bread on a plate, thinks the bread smells like it’s not fresh, and is concerned the shops aren’t collecting data at the point of sale for which soups sell best and worst. Dave estimates soup makes up about 60% of the shop’s revenue, but doesn’t know what the second-best selling item is.

Marcus asks Estephanie, one of the shop’s young, friendly assistant managers, to step outside to ask her a few questions without Dave hovering. When he asks Estephanie who she reports to, she squirms and says, “Dave…?” It’s obvious to Marcus, and the audience, she’s hiding something. There’s clearly an underlying issue, but it’s above her pay grade. No one can blame her for not getting in the middle of whatever it is. Estephanie grudgingly mentions someone named Grace, but says she’s unsure of Grace’s role at the company.

Next, Marcus pokes around in the kitchen at another TSM location, getting to know some of the other employees including Kevin, who is introduced as the director of operations. Kevin, in front of Dave, mentions Grace as well. Dave quietly says to Kevin, “Don’t mention Grace,” and then tells Marcus Grace will be leaving the company soon. Dave is red-faced and clearly uncomfortable talking about Grace.

Marcus smells something fishy–besides the cioppino. Unwilling to let the Grace thing go, he also asks Mayra the kitchen manager, outside of Dave’s earshot, who she goes to if she has a kitchen problem. “Grace,” Mayra says without hesitation. When Marcus asks if Grace reports to Kevin, Mayra says, “I really don’t know,” with the same awkwardness we saw from Estephanie and Kevin earlier. He revisits the issue Kevin, who describes the relationship between Grace and Kevin as “brother-sister,” and “dysfunctional,” before Dave interrupts them.

Upon visiting a third store, Marcus is confused to see Dave’s wife, Jill, again. He had met her at the first store that morning, but since she’s not technically involved in the business he thought it odd to see her twice in one day. When he asks Dave why she’s here, he says it’s “to support me.”

“Is that really the reason?” Marcus asks. Dave says: “And to keep Grace away.”

When Marcus prods, Dave is as cold as gazpacho and says three or four times, “I’m not going to talk about it. Next subject.” Marcus won’t let it go, and finally Dave says, “I wish you would go. I have no interest in your services,” and storms out.

Marcus reaches Dave on the phone an hour later. Dave explains there was a “blow-out fight” between he and Grace, and they mutually agreed to part ways. Marcus is satisfied, for the time being, and agrees to set the Grace thing aside. For now.

Marcus and Dave go over the numbers together. We see the little cartoon infographic we get every episode, this one specific to increasing the margins on a cup of soup–though Dave himself doesn’t know how much it costs him to make a cup of soup–from 52% to 70%.

And finally, here’s Marcus’s offer: factoring the $85,000 TSM is in debt, Marcus is willing to pay $315,000 for 50% of the business. Before agreeing to take Marcus’s money, Dave wants to know “what that looks like” in terms of how Marcus intends to spend money when it comes to improving the look of the stores, which Marcus hates. Marcus says no, he’s 100% in charge and won’t agree to any such conditions before making the deal. Dave, who pretty much has no choice, agrees. And with a handshake, Dave and Marcus consomme-d their relationship.

Marcus has Dave to bring a few of his soups to a lab to test their nutritional content and, surprising to no one, they are found to be heart attacks in a bowl. (As if this episode didn’t already smack of Seinfeld, the lab scene calls back Jerry, Elaine and Kramer having the “no-fat” frozen yogurt tested.) Marcus suggests tweaking some of the recipes to make them healthier. Dave wants no part of it, suggesting Marcus should stick to business and let Dave stick to soup.

Later, who makes an appearance at the store but Grace. She blows past the counter and walks to the back room. Marcus tries to stop her, pretending he thinks she’s a customer, but he knows what’s up. Her explanation is, “I’m Grace,” and she keeps going. Since Dave isn’t around, Marcus takes the opportunity to ask her what the deal is.

Grace says she is “kinda freaked out, I’m shaking right now.” Grace tells Marcus she is the director of operations–not Kevin–and that Dave requested she be invisible during the episode. She very much still works at TSM and still draws a paycheck. After a little more Marcus-style prodding–he’s like the Howard Stern of small business reality shows–Grace finally says she thinks Dave’s wife, Jill doesn’t trust her, and that she has become a problem in the Jurenas’ marriage, though nothing has ever happened between she and Dave.

The plot thickens–much like Dave’s African peanut soup.

As Marcus leaves the store, Dave’s wife, Jill, is skulking literally around the corner from the store. Is she keeping a lookout for Grace?

Marcus confronts Dave about Grace. Again. Dave says she’s a great worker who really stepped up when his business partner died, and that he developed feelings for her. He says he told his wife about it, and that nothing actually happened between he and Grace. Marcus considers walking away, but decides to power through for the sake of the employees. What a guy.

Marcus forges a deal with a pretzel company to supply TSM with a better bread option. And Dave even agrees to make a healthier soup to appease Marcus. Marcus is simply inspiring, not unlike chicken soup for the soul.

Marcus goes home to Chicago, then comes back two weeks later for the grand re-opening of one of TSM’s locations, having spent $60,000 renovating the shop and installing a point-of-sale system. People are lined up at the door. Dave gives an emotionless speech about how excited he is for the re-opening, and everyone files in for free soup. Dave’s wife, Jill, says she’s very proud of Dave. But wait…

Marcus spots Grace hanging around outside the store. Marcus brings Dave outside to take one last shot at ironing things out between Dave and Grace. He mediates, Dave apologizes, and Grace accepts. But Marcus is still pissed that Dave, against his wishes, excluded Grace from the opening. Marcus is again questioning his decision to partner with Dave. Perhaps he should have chosen salad instead.

Ten days later, while back in Chicago, Marcus gets a call from Grace. Grace says Dave fired her for insubordination, and when she refused to leave, Dave had the police escort her out. She also reveals that two years ago she filed a sexual harassment complaint with the Equal Employment Opportunity Commission after Dave made a sexual advance toward her. While that’s messed up, and Dave is now coming off like a scummy weirdo, I kinda feel like this is something Grace might have mentioned to Marcus a little sooner.

Marcus goes back to Milwaukee to confront Dave and sees that the new menu board, fresh produce display, and POS system are gone. The pretzels are missing, too, and TSM is now selling ice cream.

Marcus, now stewing, questions Dave, who tells him he doesn’t like any of the ideas Marcus implemented. They bicker, but it’s all beside the point. Marcus whips out his trump card, the paperwork from Grace’s EEOC complaint. Dave goes back into red-face mode, says the complaint is “being taken care of,” and that he doesn’t think he and Marcus are a good partnership. Marcus, class act that he is, wishes Dave good luck, shakes his hand, and walks out. After taking about a $100K hit on this failed investment, Marcus may be eating ramen tonight.

“I saw his true colors,” Marcus concludes. “I’m outta here.” I can believe he walked away from the deal. What I cannot believe is that he didn’t even attempt a soup-related play on words to end the episode. Personally, I would have gone with, I ultimately decided that Dave’s bisque was simply not worth the risk.

This was an entertaining hour of TV but it leaves me with one question: had Dave been more flexible and cooperative with Marcus, would Marcus have been willing to stick out the partnership despite Grace’s sexual harassment claim? How much of a role did ethics play in Marcus’s decision to walk away, and how much was simply because Dave was a pain in the ass to work with?

What do you think?

Advertisements

Read Full Post »

I was all set to write a snarky review about the season 3 premiere of The Profit. I assumed it would start off with a bang–and by bang I mean another stubborn, inept small business owner who, by halfway through the episode, the audience ends up hating and rooting for Marcus to walk away from.

Instead, I saw actual human beings having actual human emotion, and the story about the failing business was secondary.

Marcus and the audience first meets Mike and Chris of SJC Drums at a trade show in California. Their booth is packed and everyone seems to be having a good time–a little girl shredding it on drums!–but we learn that Chris, a “partner” at SJC, quit his six-figure job to make half that doing the operations and books for SJC. Oh and “partner” is in quotes because he doesn’t have any equity in the company for some reason. Huh?

The product seems top-notch–Marcus says the drums are “badass.” (From what I know about drums–literally nothing–they look really nice.) SJC’s customers, apparently, include Green Day, Imagine Dragons, and Lady Gaga. But they’re only making “15 points,” or 15% margin, on their drums. (Marcus says their low margins are “not badass.” Good one.)

Later, Marcus visits SJC a  their headquarters in Massachusetts. The warehouse is pretty messy and we learn their process for making drum kits stinks–Chris and Mike aren’t on the same page on which orders are the highest priority, which means the employees don’t know which ones to make first–and they are just about broke. Nothing surprising here as far as The Profit goes–if the business was doing everything right, Marcus wouldn’t need to be there.

But here’s where it gets interesting. Marcus sits Mike and Chris down in the back office and Mike tells him that he and his brother Scott started the company (SJC are Scott’s initials) but Scott left in 2013. Mike bought out Scott’s half of the business for–get this–$533,000.

WHAT???

Mike explains that in order to pay Scott back, he has been paying $2,000 a month and will do so until year 15, when he will pay the remainder in a balloon payment of $285,000.

WHAT???

Mike says he didn’t want to short change his brother on the way out–whether he jumped or was pushed we’ll find out later–by offering less than the company was worth. He starts crying when Marcus observes that Mike put his brother ahead of himself. “I wish he understood that,” Mike says through tears.

But something’s not quite right here. Mike’s coming off as the caring brother (no idea if he’s older or younger than Scott) but clearly something big and ugly happened that we don’t know about yet.

After a scene where now Chris is also crying to Marcus in the snow about how much he loves the business–despite being a 0% equity partner–Marcus is ready to BALL OUT. Here comes symbolic handshake and check time.

BOOM. $400K for a third of the business. Mike hesitates and has dumb concerns. Marcus shoots him down. YOU WILL TAKE THIS MONEY. Mike takes the money. But there’s a catch. Marcus is also pushing a third of the company to Chris, so they are all equal partners at SJC. Mike is like, oh yeah I was totally gonna suggest that, and agrees to Marcus’s conditions.

Marcus rounds up all the employees the next day, explains the deal he made with Mike, and tells them from now on they are selling three levels of drums–good, better and best. Instead of only selling kits worth of Imagine Dragons, they will sell sets that a beginner can afford and hits the 40% margin goal Chris set so that they can, ya know, make money when they sell drum kits.

But the staff is having trouble cutting costs without cutting quality significantly.

Marcus goes to visit the mysterious other brother, Scott. Scott is a soft-spoken, seemingly sensitive guy who clearly loves music and making instruments. (He estimates having made 5,000 drums in his life.)

Scott’s side of the story is that Mike hired all his friends to work at SJC and those guys would all make fun of Scott. Listening to him talk and having seen some of SJC’s employees, I can totally see that. Mike’s the guy with tattoo sleeves, a black cap and a black hoodie, and so is all the staff at SJC. Meanwhile Scott is a little artsy, maybe a little music-nerdy, not necessarily the go along to get along type. It’s not hard to imagine a work environment in which he, despite maybe being the most talented guy in the shop–AND THE FREAKIN’ CO-FOUNDER–might feel intimidated into walking away from his own business, which has taken on a bully culture in which he’s the sole target.

Marcus convinces Scott to come back to SJC, at least temporarily, to put his expertise towards their 40% margin problem.

When Mike sees Scott walk in with Marcus it’s Awkward City, population: 3.

Mike tries to open the conversation but Scott is clearly hurt. “What did I ever do to you?” They go back and forth a while and finally agree to talk about drums rather than personal beefs. Marcus brings Scott out to the warehouse.

Now Mike is crying–literally crying, again–to Chris in the back office about how it’s too awkward, he won’t work at SJC if Scott is there, etc.

Marcus comes into the office and rather than trying to play therapist he gets REAL with Mike. He tells him his earlier apology to Scott during their bickering session was garbage. (Marcus was totally right, BTW. It was one of those apologies where you apologize for how the person is feeling, but not for your part in it. Classic apology loophole.) “I’m not Oprah. To think that your brother doesn’t add value is f—ing asinine.” Go fix it, he tells Mike.

Mike goes back to Scott and makes a better apology, but Scott is still not ready to talk about “brother things.” Mike replies, “Well just so you know, I am ready to talk about brother things. I want some sort of relationship that is healthy for us.” As much as Mike has ostensibly dicked over his brother, it sounds like he’s genuinely remorseful and feels really bad about what went down. This explains why he’d be agree to those ridiculous buyout terms. At this point I kinda just feel bad for both of them, not being able to settle their brother things.

They shake hands and leave the conversation there. It’s a rare case in reality TV where the emotion feels real, not manufactured by the producers.

The next day Scott is back and straight SCHOOLING SJC’s staff on how to cut costs for the drums to get to a “40 points” margin. Dude is just solving EVERY problem the rest of the guys couldn’t. Even Marcus is blown away. “It’s kinda cool to listen to your brother,” he tells Mike. “Cuz he’s got some crazy s–t in his head, but he’s very smart.” Watching Scott work is pretty fascinating, even if you–like me–don’t know jack about drum-making. He’s like Matt Damon in Good Will Hunting, banging out that math problem on the blackboard at MIT like it was nothing.

Thanks to Scott, SJC now has a prototype they can make for $537 and sell for $895–a 40% margin. They test it at a studio with fancy schmancy audio equipment–which, BTW, who the hell knew there was so much technology in music?–and it passes with flying colors. You could actually argue the SJC “good” prototype is actually too good compared to what you’d get from most beginner kits. But either way it’s within the quality standards of SJC’s brand.

Mike–who up to this point doesn’t seem to be all that valuable of an employee at SJC–has the tall order of going to Sam Ash in New York City with Marcus to convince them to carry SJC’s “better” kit alongside their better-known, multi-national brands.

They’re not having it.

Mike, a better salesman than I gave him credit for, pulls out the big guns ad plays up the handmade in America angle. On top of that he name drops Green Day–they don’t actually say say Billie Joe but it’s implied that “he” and Mike went to each other’s weddings–and says he could get the band to make an appearance at Sam Ash. Richard Ash, grandson of Sam Ash, eats it up. (This scene, BTW, feels TOTALLY fake, but whatever.)

Meanwhile back at SJC Mike and Scott are tight again. Mike says the best part of Marcus’s visit was that Scott is back in his life and they have a relationship again. Again, it seems genuine. They hug it out. And scene.

Marcus does it again–rescues a failing business, and this time mends a family riff. WHAT CAN’T THIS MAN DO?

Read Full Post »

This week’s episode of The Profit has Marcus Lemonis in Surfside Beach, South Carolina, helping ASL Sign Sales and Service. (Why do I have a hunch that the “S” stands for signs?)

ASL’s owner is Anthony Leggio, who you could probably guess from his accent has relocated to SC from Long Island. With a $200K loan from his dad, Louis, Anthony had the shop up and running. Revenue ($441K YTD) seems in pretty good shape, but Anthony, who I’m going to call Strong Island, is apparently very ambitious.

Strong Island is rocking some transition lenses with plastic black frames, a fade with spiked hair, tattoo sleeves and big arms, but is also thick through the mid-section. This has nothing to do with the episode, but it’s a very unique look.

ASL manufactures and sells any kind of sign you can think of. This is a big deal, Marcus says, because I guess most companies that sell signs have to get them manufactured by someone else.

Turns out, ASL is actually Anthony’s, I mean Strong Island’s, initials (middle name Sal because of course it is). But Anthony says ASL could also stand for “American Sign Legion,” which is pure gibberish, but I’m giving myself partial credit for that one. The logo, of course, is a cartoon version of Anthony himself.

It's about to go down... (Photo credit: cnbc.com.)

Just a coupla guys talkin’ about signs. (Photo credit: cnbc.com.)

Anthony’s non-Jersey Shore looking girlfriend Christina Christian (did I hear that right?) works at ASL for free and has no equity. I believe this is the way most Fortune 500 companies do it, so…

In Marcus’ little cartoon infographic he always does in every episode, he says ASL makes a sign for $45 and sells it for $450, so they’re basically printing money.

But Marcus has a wicked burn for ASL when it comes to their sales process: “1985 called and they want their sales process back.” OHHHHHHH SNAP. Don’t forget to tip your waitresses.

Despite his overbearing personality, Anthony is not aggressive enough when engaging a walk-in customer in Marcus’ view.

Marcus asks why Anthony why he called The Profit. If business is good, what does he need an investor for?Anthony is obsessed with growing business as quickly as possible. He reminds me of a young, Italian, tan, stocky Walter White. “I’m getting in the sign business,” Marcus says. “The question is, am I’m getting in the sign business with you.” Sort of a weird thing to say.

I just realized ASL also stands for American Sign Language. Why do I feel like Anthony has never heard of this?

Marcus says he’s not prepared to write a check today. He is putting the check book away.

Other people in the business, including Anthony’s dad (who BTW doesn’t have any equity, either) told Marcus that Anthony is a know-it-all. Also the shop is kind of messy as is the sales process, per the 1985 joke. But all in all the place is making money. It’s still not clear why Anthony would want to give away equity to Marcus for his help, which he doesn’t really seem to need.

Next, Marcus finds out that Anthony has been picking ugly, hard-to-read fonts for customers. Anthony is not a designer. He is also not a sales guy. The Bobs from Office Space and I are wondering, What would ya say…ya do here?

Josh, ASL’s head designer (for the sign company, not the sign language), and Anthony, give a customer conflicting estimates on how long it’ll take to refurbish his sign. Josh conservatively quotes him three weeks, but Anthony says they can bang it out in a week. (Okay, he didn’t say “bang it out,” but it seems like something he would say.) Marcus pulls Anthony aside and he seems to get it…or does he? Five seconds later (in TV time) he reprimands Josh in front of the customer for trying to quote the customer a cost.

Anthony reveals that he doesn’t need money but does want Marcus’ business–I guess making signs for Marcus’ hundreds of businesses? He says he wouldn’t be willing to do a deal with Marcus if Marcus didn’t throw a bunch of business his way.

Okay now a former customer of ASL’s finds out Marcus is in town and tells Marcus that Anthony–crap I was supposed to be calling him Strong Island this whole time–has a bad reputation in Surfside Beach and actually sued this guy. The guy says Anthony/Strong Island has a bad temper.

Later, Marcus walks into the shop and Anthony tells him, “Ya late!” IT’S ON. Only Marcus can call out tardiness on his show. There’s some yelling which is all macho-like, but no one throws a punch and both guys storm off in opposite directions. Lame.

Eventually things cool down and Anthony tells Marcus “I bent ova backwards for that son of a bitch,” re: the disgruntled customer he sued.

“Sometimes you gotta take a pile of poop and stick it in your mouth,” Marcus says, meaning you have to make customers happy even if they give you a hard time. I didn’t go to business school but I assume this poop thing is a common metaphor you learn in the better MBA programs.

With 17 minutes in the episode, Marcus says he’s walking out without doing a deal. I like when this happens, especially when Marcus says that lots of other small businesses can use investments and he’s not going to waste his time with the ones that don’t deserve his money. I couldn’t agree more.

“Marcus kicked me right in my f-ing a$$,” Anthony says through tears, ostensibly realizing the errors of his ways, i.e. trying to scam Marcus into investing in ASL a way to get sign business from him. It’s hard to take him seriously when he’s wearing a shirt with a cartoon of himself on it, but he sort of seems genuine.

Back from commercial and now we’re in…Los Angeles? Marcus is now revisiting a gourmet popcorn company called Planet Popcorn, which he walked away from in another episode of The Profit. Apparently after agreeing to invest, Marcus found issues with accounting and inventory. Also the owner, Sharla, seemed reluctant to make changes.

It kind of seems like Marcus feels bad for Sharla because after the episode aired she came out looking really bad, and she lost a huge account with Disneyland. That’s gotta hurt.

Marcus looks around and sees a more organized office and a more professional-looking Sharla (despite her dress’ plunging neckline) who knows her sh-stuff. But when Marcus asks her about the Disneyland account, Sharla says she doesn’t want to talk about, tears up, and goes into what appears to be a closet to hide. I mean I’m sure it still stings, but, like, get it together when the money man is standing in your office potentially ready to make you a deal.

Aaaaand she’s back. Despite losing Disney and apparently some other accounts and being humiliated on TV, she has picked herself up by her bootstraps (classic entrepreneur word!).

Now they’re sitting down talking business. She offers 20% of her business for $50K; he’s not having it. He’ll take 40% with a 50-cent per popcorn bag royalty, a la Shark Tank‘s Kevin O’Leary. The check book is coming out. Sweet redemption for Sharla and Planet Popcorn! Maybe Marcus will call ASL when Planet Popcorn needs a new sign! Maybe not.

Read Full Post »

I wasn’t a lemonade stand kind of kid.

Instead, when I was 8 or 9 years old I told my mom that when I grew up, I was going to own an entire fleet of ice cream trucks. Back then ice cream was the most valuable currency I dealt in. So, naturally, my dream job involved having unlimited access to it.

I would sit in an office above an ice cream distribution center—where the ice cream men went to fill up their trucks on in the summer—and do whatever one does in an office when one owns an entire fleet of ice cream trucks. (This was before the internet and even before computers were ubiquitous, so I imagined some sort of hopper for my papers and maybe even a paperweight.) And the best part, I told my mom, was that she could come visit me at work whenever she wanted and I’d give her free ice cream.

More than two decades later, shockingly, I do not own a fleet of ice cream trucks. I do not have an office above an ice cream distribution center. Hell, I barely even eat ice cream anymore. As best laid plans of third graders often go, this one sort of fell apart after I got really into Teenage Mutant Ninja Turtles.

For Alex Blumberg, the host, producer and subject of the new podcast StartUp, there’s a little more at stake than free ice cream.

Blumberg is best known for his work with public radio, including the program This American Life (producer) and podcast Planet Money (founder, co-host). But he recently quit both those gigs to start his own project: he’s starting his own media company which will focus on producing and distributing high-quality audio content via podcasts. Oh, and the best part–for us, anyway–is that he’s letting listeners in on the process. Here’s how Blumberg describes it on his website:

This show follows what happens next – my difficult journey from man to businessman. It’s a classic start-up story, but one that’s recorded in real time. I’ve documented disastrous pitches to investors, difficult conversations with my wife, and tense negotiations with my co-founder. The result is an honest, transparent account of something that happens all the time, but that we can rarely listen in on: starting a business.

StartUp is not a prescriptive how-to guide to starting a business from the ground up (this, despite several episode titles beginning with “How To”). It’s quite the opposite. It’s a show about a guy who knows very little about starting a business, and what happens along the way as he starts to figure it out.

The weekly series, which premiered on September 5, is just seven episodes in. So far Blumberg has taken us through a failed investor pitch, the process of taking on a business partner (after realizing he couldn’t do it alone), figuring out how to share equity with that business partner (a very cool insider’s look at emotional side of the process), assigning a value to a company that doesn’t make any money yet, and even picking a name for the company.

As I’ve written about previously on this blog, I’m big fan of ABC’s Shark Tank. On that hit reality show, entrepreneurs come to the sharks (i.e. potential investors) with a fully (or partially) formed companies asking for investments in exchange for shares of their businesses. Some entrepreneurs get deals, others are sent packing. On the show it all seems so simple.

StartUp is, in many ways, a prequel to Shark Tank.* As of episode #7 Blumberg’s company, Gimlet Media (for the origin of that name, check out episode #5), is still “pre-revenue.” On Shark Tank most pre-revenue business don’t get a deal unless the idea is very, very novel.

 *If StartUp is the prequel to Shark Tank, then shows like Hotel Impossible, Restaurant Impossible, and The Profit–all of which deal with businesses gone bad–are the sequels.

For those of us who have dreamed about owning their own business—for the record the ice cream thing is still on the table, though I haven’t figured out what I’d do all winter yet—and those who haven’t, StartUp gives listeners a fresh look into those steps between concept and actually taking those steps towards turning that concept into a living, breathing, (and hopefully) profitable thing.

The most interesting stuff for the listener tends to be that which is most gut-wrenching to Blumberg–from figuring out how much equity to give his partner (episode #3), to the constant self-doubt that comes with starting a business in your forties when you have a wife and two young children to consider every time you make a decision about anything.

In episode #2 Blumberg debriefs with his wife on the phone after an investor, Matt Mazzeo, in Los Angeles. Blumberg has been out to L.A. before, in episode #1, to meet with Mazzeo’s business partner, Chris Sacca. Mazzeo and Sacca are venture investors and business partners at Lowercase Capital. They have successfully invested in the technology space. After talking with Mazzeo, Blumberg is left with a pit in his stomach:

I’m feeling the same shitty way I’m feeling the last way I was out here. … It just makes me feel like I don’t know what I’m doing. … This is the thing: I’m sitting there talking to this guy and I’m describing something that feels like the biggest thing I’ve ever done, a scale beyond my wildest imaginings, something that I can’t even tell if I can pull off, and it’s totally not big enough. Like it seems small to him.

This is a really important insight, and one that I suspect a lot of startup business owners face when pitching investors. Especially in the tech space.

Can you or I invest in companies like Gimlet Media?
Episode #7 was about crowdfunding Gimlet Media. According to the episode, the 2012 Jumpstart Our Business Startups (JOBS) Act allowed for Americans to invest in private companies like Gimlet Media, which they were formerly not allowed to do. This means that through companies like Alphaworks, would-be investors could go online, find a company they wanted to give money to, and in exchange they’d receive equity in that company. (This is different than sites like Kickstarter, where you “donate” money but don’t receive any equity.) A Shark Tank for the Average Joe, right? Wrong.

Due to current Securities and Exchange Commission regulations, only “accredited investors,” i.e. those who make $200,000 a year and/or have a network worth of $1 million, may do so. (Alphaworks covers this in their FAQ.) If you’re an Above Average Joe, invest to your heart’s content. Otherwise you’re out of luck until the SEC loosens those regulations. Fortunately for Gimlet Media, they had enough friends in high places–in part thanks to attention the StartUp podcast has been getting–to get to their investment goal.

New episodes of StartUp are available about every two weeks. Whether you’re a future ice cream magnate or not, I recommend you give it a listen.

You find the StartUp podcast here: http://hearstartup.com/ – or you can use a podcasting app on your phone or tablet and search for StartUp. Happy listening.

Read Full Post »

“You know, I do business on handshakes and I try to help people, and I do it to make money.”

That’s a quote from Marcus Lemonis, the star of CNBC’s hit show The Profit. Each week on the show Lemonis tries to help a failing business get back on its feet. Sound familiar? Well, it should (especially if you have read this blog).

Reality shows like Hotel lmpossible, Restaurant Impossible, and Bar Rescue feature industry experts visiting foundering businesses, addressing problems big and small, and within a week, transforming former money pits into profit machines.

But The Profit is a little different. Lemonis isn’t necessarily an expert the type of business, like hotels or restaurants, that he’s trying to rescue. He’s an expert in business. (For more on his background, check out his Wikipedia page.) His oft-repeated mantra is People, Process, Product. In each episode he examines all three and determines if the business has any hope for a turnaround.

And here’s the kicker: Lemonis isn’t just a hired gun, like Hotel’s Anthony Melchiorri or Restaurant’s Robert Irvine. Lemonis is putting up his own money, a la Shark Tank, to revive these businesses but also make a profit for himself. (The name of the show is just one big spoiler, isn’t it?)

Lemonis’ financial contribution is typically enough to pay off the business’s debt, plus some money for some upgrades to equipment that will have an impact on the bottom line. In exchange for his cash—it’s always such a baller move on when he whips out his checkbook and writes a million dollar check to a business owner—he asks for a large chunk of equity, often as high as 50%. He also requires full operational control of the business.

Like the “Impossible” shows, most of the time Lemonis business proposal and management style are met with some initial resistance from the owners, but eventually they realize that what’s good for him is what’s good for them. Happy ending, right?

Not quite. Sometimes, and this is much rarer on the various Impossibles, Lemonis can’t come to an agreement with the business, and he backs out. (While the check presentation is a big moment on the show, in reality I’m sure there are lawyers and accountants digging into the company’s financials and the owners’ credit histories to make sure the business isn’t a lemon.)

On the episode I caught last night, featuring Swanson’s Fish Market in Fairfield, Connecticut, Lemonis wrote the business a million dollar check to temporarily buy the building in which the market resides and clear up its debt, which he believed would be the pecuniary boost they needed to get back on track.

But as Lemonis (or his lawyers, off camera) dug deeper he discovered that the mortgage on the building was not, in fact, “in good shape” as the business co-owner Gary had said it was. It was in foreclosure.

Besides that, Lemonis couldn’t get past the fact that Gary owned a boat while some of his employees were covering the costs of the fish out of their own pockets. He also couldn’t get through to the other co-owner, Sue, about why her owning a BMW with $500 a month payments was sending the wrong message to her employees. Neither were willing to sell off their toys in order to take a little pressure off the business and, ya know, pay their frickin’ employees. (Unlike many struggling businesses I’ve seen on shows like this, these two had no guilt over paying themselves.) The icing on the cake was that when Lemonis came back a few weeks later to check in, he found out the owners were doing renovations on their home.

In the end Lemonis walked. There was no text at the end, like you’d see at the end of Hotel Impossible (“Occupancy is up 75% since Anthony’s visit. The hotel has plans to upgrade all rooms within the next six months.”) It was Lemonis’ quote (from the beginning of this post), and then the episode just kind of ends.

In a previous post I wondered why this didn’t happen more often, as it did in an episode of Hotel Impossible last season. If these people aren’t willing to do what it takes to run a successful business, why does the show still insist on helping them? I imagine there are so many American businesses doing things the right way (or at least what they believe is the right way) and still struggling. Why not help them instead?

(Here’s an idea for a show: when one small business is too stubborn or foolish to accept the free help of an expert—who, by the way, they called!—that expert goes across the street and helps their biggest rival. Or better yet, the expert starts his own business just to crush them. Too much? Watch the Hotel Impossible episode about the Thunderbird Motel–or read my post about it–and tell me those people deserve to stay in business.)

The only regrettable aspect of Lemonis walking away from Swanson’s was that the owners’ 24-year-old daughter, Larissa, was apparently working the hardest of any of them to keep the company afloat. She also seemed to be the only one who saw the value of Lemonis’ involvement and potential investment. Maybe somewhere in the near future she’ll open her own fish market and put her parents out of business? Or at least buy them out? After all, what better way to learn how to run a successful business than seeing first-hand all the ways not to run one?

***UPDATE*** I’m not sure about the sequence of events here but Larissa Swanson, the daughter of the owners of Swanson’s Fish Market, wrote a treatise on the company’s website in response to the way their episode of The Profit was edited and the deal that Lemonis ultimately walked away from. You can read the whole thing here, but the her key points are quoted or paraphrased below (with my own thoughts in italics).

  • “When we sat down for the deal they told us before hand that if he writes us a check, it is only for show purposes and we have to hand it right back.” That sounds about right.
  • “We also did not film for 4 weeks, the filming process started at the beginning of June and ended in September! We were strung along for 4 months. They don’t add that my mom had a contractor at the house painting bc we are fixing it up right now to SELL and put it on the market. We never even did a building deal with him, where he said he would buy It for one million. We did not see a penny for the entire 4 months.” This was not clear at all on the episode. In terms of timing Lemonis mentioned that he went back four weeks later, and that’s when he discovered the property was in foreclosure. More on that…
  • “On August 26th I was served papers by a sheriff on the building for kasowitz (the guy who did a mortgage for it)  I notified Marcus immediately via text..we were not aware that a foreclosure process even started. Our building is fine now and we are taking care of it. Our building also had a contractor Lien put on it 3 years ago and we had the lien removal paper but our mortgager never brought it to city hall to be taken care of and of course they never aired that either!” It’s starting to sound like a he said-she said thing, but ultimately if Swanson’s was even close to foreclosure Gary shouldn’t have said it was “in good shape.” Or was that creative editing, too?
  • “When the boat happened he moved it from the marina and put it in someone’s backyard before hurricane Sandy hit and the motors became ruined and it turned into a salvaged project. He bought that boat 15 years ago.” The fact remains that he’s apparently paying marina fees on a boat, but Marcus made it out to be a luxury yacht.
  • “Marcus even asked me to negotiate with people and had me promise to pay them the next day certified check and never even came through. Those people are so angry now that they are sueing us.” Um…
  • “They also didn’t add how my little brother has a serious mental illness that he was diagnosed with 3 years ago of schizophrenia and it’s so severe that we are constantly in and out of hospitals and have paid over 100k in medical,hospital,ambulance bills and medications.” The show easily could have gone the other way with this and played up this angle, a la Restaurant Impossible, but they chose to go in the direction of villainizing the Swansons instead.
  • Sue had three deaths in her family around the time of the taping, explaining her disconnected, erratic behavior.
  • “Halfway through filming [Sue] agreed to sell the BMW and we filmed a cute scene where we taped for sale signs on her car windows to show we would sacrifice for the deal but they didnt show that either of course.” It’s starting to sound like the producers made the call to cut this into one episode’s worth of content, even though they clearly needed more time to tell the story completely.
  • “I also wanted to touch base on our employees chipping in for product- that i agree was not right but it was a total of only two times and they got their money back right at the end of the day only because we had vendors who wanted cashiers checks in the morning for product and my mother or father were not there to get to the bank and there was not enough to cover it with cash in the register.” Again, they really played up this angle as if it was all the time. That said, it’s no way to run a business.
  • Larissa addresses the circumstances around the fires that destroyed their property and imputes them to a former employee with a drug problem. I’m not sure this is relevant except that it casts doubt for those who may have thought the Swansons may have set the fires themselves for the insurance money.
  • There are also some images on the site including Larissa’s text to Lemonis about the foreclosure and some other critical documents that the show glossed over.

So, what are we as fans of The Profit to make of all this? Well, we all know reality shows edit their footage in order to tell a succinct, compelling story in their allotted amount of time, usually about 44 minutes for an hour-long program. Some edits don’t matter as much, like the exact phrasing of a quote, but others can be specious, like some of what Larissa alleges above.

While I’ve enjoyed what I’ve seen of Lemonis and The Profit so far, at this point I’ll really need to take what he and the show are saying with a grain of salt. And I won’t be so quick to write a blog post that paints these small businesses featured on these shows in such a negative light, at least not until hearing both sides of the story.

As for you, I suggest you watch at your own risk.

Read Full Post »

%d bloggers like this: