This week’s The Profit season 8 episode featured Marcus Lemonis trying to reel in an entrepreneur who was aiming for the stars—but didn’t want to do the work for that kind of success.
The CNBC series brought Marcus Lemonis back to Utah for “Sweet Dreams Are Made of This,” where Marcus worked with James’ Gourmet Pies. Owner James Edwards wanted to take his pie business from local to being a nationwide powerhouse, dropping brand names left and right, but this self-proclaimed businessman didn’t know nearly enough about either baking or business.
With some backup from previous businesses B Sweet and Key West Key Lime Pie Company, Marcus educated James on both topics and left him standing in a new facility that would help him reach those lofty goals. But would James utilize the tools Marcus was giving him?
SPOILER ALERT: This article contains spoilers from Tuesday’s latest The Profit season 8 episode.
Here are the business lessons we learned from this week’s installment of The Profit:
001. One product does not make a business.
It doesn’t matter how good your one product is—no business is sustainable with just one offering. The major topic that was hammered home again and again in this episode of The Profit was that James had to make more than just sweet potato pie. He could make other sweet potato-themed products or different kinds of pies, but he had to have other options if he wanted to maximize his profits and scale his business.
This was different from many past installments, where Marcus often has to get entrepreneurs to cut down their product lines and eliminate SKUs that aren’t selling. In this case he had to get James to stop talking about going in all directions with pallets full of sweet potato pies and point out that one product wasn’t going to keep James’ Gourmet Pies profitable year-round. (Especially not if everything was sold out on their website and if James had issues remembering the recipe for said pie, both of which happened in this episode.)
According to the company’s website, it’s diversified but not by much. James’ Gourmet Pies now offers the sweet potato bread and buttermilk pie seen in the episode in addition to the original sweet potato pie. The sweet potato cookies James had Marcus try during the episode are not available, so it’ll be interesting to see if James keeps working on ideas and adds more products in the future. Or will he stick to his perspective of just being a business owner and stay with a fairly limited product line?
002. Know your valuation.
The negotiation in “Sweet Dreams Are Made of This” was a head-scratcher. Marcus laid out $50,000 as an initial investment, but James said he originally wanted $1,000,000. He wanted to know that Marcus was “all in” and the look that Marcus got on his face at that said everything. It’s always strange when people question Marcus’ sincerity after they’re the ones who applied to The Profit and asked for his help.
The math here made it even more surprising. James was willing to give up 30% of his equity for that million dollars. Anyone who’s watched Shark Tank knows that means he valued James’ Gourmet Pies at over $3,000,000! That’s a hefty price tag for a local company with one product and no functional website.
But valuations say a lot about how people view themselves and their business. Of course they’re attached to the ideas and think that they’re great, so they want to get a lot of money for the business. That money is almost like a kind of validation. Getting a lot makes you feel like your business is awesome; getting too little feels as if it’s an insult. Ultimately, the best thing to do is detach from the emotional component, look at the profit and loss statements (P&Ls), and make a decision based on what those numbers (the facts) say. But that’s always going to be easier said than done.
003. And also know your fundamentals.
It was honestly shocking how little James knew in the kitchen and that he initially refused to educate himself. When Marcus suggested the idea of going to a basic cooking school, James told him “I wouldn’t like to go,” despite being unable to make anything other than his one recipe.
This is a lesson that is not unique to The Profit. Jon Taffer has said it on Bar Rescue and Gordon Ramsay has said it on Kitchen Nightmares. Owners have a responsibility to know the basics of their business, whether it’s getting behind the bar to mix drinks or working the line in the kitchen. This is because if you can’t do all of the little things, you’re less prepared when it comes to doing the big things… like overseeing the business.
James later reiterated to Marcus that his passion was “shaking hands and making deals,” and that he expected The Profit was going to help him get in the door with big companies. He came off as another individual who wanted to just cash checks without doing the real work, and that’s a hard road to walk. Luckily with some help from Barb Batiste, Marcus got James to go to that cooking school for five whole weeks and he graduated!
But the episode ended without a clear idea of if James is going to stay the course. The postscript said that he’s received an additional $100,000 as a line of credit (whether from Marcus or another source was not specified). So he’s got a little more money and added two new products, but that doesn’t say anything about how James looks at the business or what he’s specifically doing.
The Profit airs Tuesdays at 10:00 p.m. ET/PT on CNBC.
Article content is (c)2020-2021 Brittany Frederick and may not be excerpted or reproduced without express written permission by the author. Follow me on Twitter at @BFTVTwtr, on Instagram at @BFTVGram.