On his primetime series “The Profit,” Marcus Lemonis rescues struggling small businesses – but there’s no free ride. When asked about the biggest obstacle facing small businesses, the CEO, inventor, and reality TV personality doesn’t hesitate.
“The No. 1 problem is that you have two different sectors in small business,” Lemonis said. “those that understand the importance of numbers and having their people focused and having a good product, and those that decided to get into business because they thought it was cool and hip and forgot they needed to bring money to the table and have a business plan.”
According to Lemonis, the Small Business Administration should provide financial literacy tools to people before they apply for loans, so they can appear knowledgeable about their businesses when dealing with an investor or bank. This includes the basics, such as understanding the difference between a credit and a debit, and being able to create a balance sheet.
“We’re not putting any sort of resources behind teaching people and we’re not giving any sort of education about the process,” Lemonis said.
So what does Lemonis look for when making an investment in a small business?
“I obviously have to be comfortable with the people I’m investing in,” he said. “You have to believe in their work ethic and their knowledge of their business. You want people who actually understand their craft.”
Lemonis adds that the key to a good partnership isn’t about how much an entrepreneur has in the bank but rather the relationships that are formed. Honesty and transparency make for good business.
“I want to hear humility from people, that they understand what they’re good at, and what they’re not good at,” he said. “I want them to acknowledge where their weaknesses are, and be willing to ask for help and be willing to change. “Owning a small business is a serious thing. You’re employing people. You are taking care of customers. You have to have your act together.”
The secret to success
Lemonis cautions against relying solely on friends and family when raising capital.
“If you really believe you have something that works, you should put a plan together and pitch it to everyone possible,” he said. “Another possible way to raise money is to put some of your personal assets at risk, so that you’re showing a true commitment to the lender. If you want to find a traditional lender, then you have to have some collateral. If you want to find a non-traditional lender, then you have to be willing to give up some equity, or pay a higher interest rate.”
As for new episodes of “The Profit,” Lemonis refuses to let the past determine how he handles the next transaction.
“I don’t let things that worked well or didn’t work well cloud my judgment,” he said. “You have to go into it with a fresh mindset every time. You have to look at each individual with a clean slate.
“You’ve got to find ways to make the deal work, not look for reasons the deal can’t happen.”