3 Lessons Small Business Can Learn From “The Profit” Jonathan Herrick Running a small business is no easy feat – it’s a truth that Marcus Lemonis knows all too well. If you don’t know who Marcus Lemonis is or haven’t watched the show “The Profit” on CNBC, you are missing out. Marcus, the CEO of Camping World and Good Sam Enterprises is a successful entrepreneur who has invested over $35 million of his own money and expertise back into struggling small businesses to help them grow. Along with catching some great TV, small businesses can learn a lot from the way Marcus helps fellow owners and entrepreneurs get unstuck and clear the daily hurdles of running a business. Here are 3 lessons your small business can learn from The Profit: Stick to the Formula A tried and true formula for success that Marcus subscribes to is investing in people, process and product to accelerate small business growth. Focusing on these three areas of your business sheds light on what you can improve to create a repeatable, sustainable business model that attracts, wows and delights customers. People There isn’t a single episode of The Profit that Marcus doesn’t drive home the importance of people in small business. After all people are your most important asset. Think strategically about what key team members you need to drive the business forward. As a small business, it is easy to look at the bottom line and make decisions based on expenses or salaries. On episode 17 Vision Quest Lighting– a manufacturer of custom lighting- was struggling financially so they let go of one of their most experienced welders due to high salary/wage costs. But as Marcus points out cheaper isn’t always better: The More Experience Employee Delivers a 16% Savings In this example, the more experienced employee made $30 per hour and his replacement only made $18 per hour. On the surface you would think that is a huge savings to the business. However, when the more experienced employee is more productive. delivering the same or better results in ½ the time, the math drastically changes. They key here is to measure the right value metric when it comes to hiring and retaining your employees. While cost is a factor, it shouldn’t be the only factor. If you want to build a great business, surround yourself with great people. Another important aspect when it comes to your people is creating a culture of engagement. Your people are more likely to love their work, perform at a high level and deliver an amazing customer experience when you support their needs first. Just take a look at the episode with the boutique business, 240 Sweet. They are a gourmet marshmallow company and their toxic approach to running their business and lack of leadership forced Marcus to walk out on the deal and their best employee to quit. Sam-Co-Owner of 240 Sweet By supporting your people and proving them with the tools, training and resources to grow personally and professionally, you’ll keep them long term and they will be in a better position to help your business succeed. Marcus couldn’t be more accurate when he says: “The customer is not number one – they’re number two – right behind the employee.” Product You can’t run a healthy small business without great product strategy and execution. It isn’t just about creating cool, innovative products. It’s all about narrowing the focus and delivering the right product to your ideal buyer, at the right price point, in the right place. A great example of this is Inkkas shoes. Dan, the founder of this hip footwear business was inspired by his travels to brings unusual fabrics and designs from other countries into his own shoe line. Dan-Founder of INKKAS Shoes Dan and his team were facing slowing sales and brought Marcus in to turn around their small business. The majority of their sales came from online sales, followed by retailers and a retail shop they were running locally. While customers and retailers loved some of their core products, Dan was investing a lot of his time in designing new models from his own insights to try and fuel sales – with limited success. So, with Marcus’s help, Innkkas went into research mode to get feedback from their customers and retailers on which shoes were actually driving the most sales. The response was overwhelming. There were 5 core models that made up the majority of their sales. The 80/20 rule. So they created 5 basic products to meet the needs of their customers: 5 Core Products of INKKAS Shoes Also, the decision was made to shut down the retail store which had sluggish sales, inconsistent inventory, and an overall poor customer experience. Without the distraction of the retail store, Dan and his team could focus their entire efforts on online and wholesale business where their business was making the most impact. The next thing they focused on was the quality of the product. While their customers liked the look of the shoes, there were opportunities to improve comfort and quality. They switched vendors to deliver a more quality shoe. Although the new vendors where more expensive, addressing the quality issue would enable Inkkas to create repeat buyers and drive a higher price point. Dan and his team took the new, more focused product strategy to retailers and landed new accounts and revamped their website. The end result was a boost in sales, higher profit margins and a reduction in expenses from unused inventory. As a small business owner, you often end up making product or marketing decisions from your gut instead of finding out what customers really think. The greatest lessons to be learned from Inkkas shoes is to stay close to your customers and potential customers, understand their needs and interests and get as much real-time feedback as you can. Work tirelessly for a great product customer fit and narrow your focus so you can deliver “One Thing” exceptionally well, versus trying to serve “Everything” to everyone unsuccessfully. Process Having a consistent, repeatable process is the foundation of scaling any small business or franchise. Just ask Mike and Kathleen of “My Big Fat Greek Gyro.” They are the owners and operators of a franchise with multiple locations that struggled mightily with consistency and a lack of process. Because each location looked and operated differently and delivered an inconsistent customer experience, Mike and Kathleen faced profit losses month after month. “My Big Fat Greek Gyro” owners, Kathleen and Mike Marcus met with the franchise owners to streamline the customer ordering process, simplify the menu options to include fresh, easy to prepare ingredients, and branded the franchises consistently across every location. Marcus even changed the name to “Simple Greek: to better align with their new simpler process. “My Big Fat Greek Gyro” rebranded to “The Simple Greek” When the franchise lacked a process, the business struggled to communicate with employees and locations, resulting in misalignments – like serving off-message and off-brand foods, like frozen cheese sticks. By putting the proper process in place throughout all aspects of the business, Mike and Kathleen now have the foundation to scale up their small business. So what about your small business? How do you consistently attract new customers to your business? How do you ensure quality at each touch-point of the customer journey? Do you have a repeatable, scalable and measurable process that your employees can follow and deliver on? By instilling smart processes into your small business, your people will be more efficient, productive and your bottom line will see a big benefit too. Know Your Numbers If you have watched The Profit long enough you have undoubtedly heard Marcus say: At the end of the day, the numbers don’t lie. He consistently highlights the importance knowing your numbers and profit and loss statements to his small business owners and partners. I am amazed on how few owners on the show actually know their metrics. Like the old saying goes, You can’t manage what you can’t measure. Before Marcus is willing to invest, he does a deep dive into the financials to understand the health of the business and also the valuation. In the episode 10: Bentley’s Corner Barkery, Marcus sits down with Giovani, one of the owners and goes through the balance sheet and financials. Then he asks him: “Do you know that you are losing money?” Giovani, Co-Owner of Bentley’s Corner Barkery Giovani was surprised and mentioned that he doesn’t run the business off of the balance sheet but by the checking account. The sad thing is, Giovani and his wife had an unbelievable passion for the business and truly put everything they had into making it successful. But they were running blind, the business expanded too fast to 7 stores, and they were underperforming. Their small business didn’t know their numbers and thus didn’t understand when to scale up or when to pull back. If you find yourself needing help on the financial side of the business don’t fret, as owners we all have strengths and weaknesses. Make the investment to bring in the right help whether it’s a financially focused team member or even a financial consultant. No one can do everything well, which brings us to our next lesson… Don’t Go at it Alone So why do businesses flourish after Marcus Lemonis walks through their doors? Is it his vision to see what the business could be? Is it his methodical process he implements? Is it his capital invested strategically in the right areas of the business? The answer is yes, all of the above. There is a big difference between starting a business and growing a business. In every case, when Marcus walks into a small business he brings more than just capital to the table. He brings a fresh perspective and a complimentary skill-set that is provided when someone outside the business enters as a trusted business partner. Marcus partnering with Miranda, Owner of Lano Company But none of it would be possible if the businesses didn’t acknowledge they needed help and decided to look for a partner. In your own business, it’s healthy to step back from the day-to-day tactical elements of the business to think strategically. Inventory your strengths and weaknesses, and consider the possibility of looking for a partner to help you take your business to the next level. It can definitely be tough to let go of control, but the key is finding the right partner who holds integrity, the right skills, and shared values. By bringing in a trusted partner, you can focus on what you do best and let your partner excel at their core strengths, giving your small business a greater ability to grow and succeed. Running a small business is a roller coaster – that’s why it makes for such great TV. But, if you want to cut out the drama and build a sustainable, scalable business, take a page from The Profit. Stick to a formula, know your numbers, and don’t try to go at it alone.