Business Advice From a Man Who’s Poured $35 Million Into Struggling Companies

By this point, he’s an expert at quickly diagnosing a business’s health and, if the prognosis is not good, determining whether or not he can save, grow and ultimately scale the operation. To date, he says he’s invested around $35 million in companies featured on the show.

His bets don’t always pay off, of course. Lemonis, in partnership with Dippin’ Dots parent Fischer Enterprises, famously resurrected Crumbs Bake Shop from bankruptcy in 2014, but sold his share at a “sizable loss” just over a year after the purchase.

This, however, is the reality of entrepreneurship. “If you don’t have an appetite for failure, judgement and mistakes, it’s not the right business for you,” he says.

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According to a new survey by the UPS Store, business owners rank marketing, finding the time to effectively run their business and a lack of financial resources as their biggest challenges. In honor of National Small Business Week, we spoke with Lemonis about the ways all bad businesses are alike, the gory reality of being your own boss and why money is a poor motivator.

This interview has been edited for clarity and length.

On The Profit, you’ve evaluated and worked with failing small businesses in a variety of industries. Are there any through-lines you can draw between these companies?

Typically, there are some basic fundamental problems that exist. First and foremost: Not understanding the importance of people in your business. You get these small-business owners who really believe they’re the face and engine behind the business, when in fact they’re nothing more than the conductor or the coach. Their job is to recruit good people, train them, support them and hold them accountable.

Another common problem: People don’t have a plan. Maybe they open up a business because they lost their job, or because they want to be their own boss — whatever that means — and so they go in without a plan and they wonder why it fails. Or they think it’s going to be successful from the get-go, and when they lose a bunch of money and don’t have enough cash to make payroll they sort of scratch their head and wonder why it didn’t work. You want to get those fundamentals down. Not everyone is meant to be a small-business owner, but if you are going to do it you have to start with a good plan.

‘Entrepreneur’ has become an aspirational occupation. What does it take to actually build and run a company?

It takes a lot of guts. There’s not a lot of glory, but it takes a lot of guts to be a small–business owner.

Listen, years ago when all of us were in grade school, we thought it was cool to be an NBA player, or a lawyer or a singer or an actor but today, it seems like what young people are ultimately looking to do is become small business owners. There’s no doubt about it — entrepreneurs are being put in the same light as superstars. BUT. The important piece is, I don’t want people to become small business owners because they think it’s sexy.

What’s underrated is the amount of risk appetite you have to have. It’s a very scary proposition to put your reputation and your bank account and your family on the line. If you work for a large company, you are doing it on someone else’s dime. If you are the owner of a small business, you are determining whether your family is going to have a roof over their head.

Are there any misconceptions about running a small business that you’re tired of hearing?

People who think opening a small business is going to make them a millionaire tomorrow. When I meet business owners who open up a business solely for the purpose of making money, usually their success rates are a lot lower.

What are the factors you look at when evaluating the health of a company?

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I have a cheat sheet with three distinct principles: people, profits and product. What are the people like who work there and own the place and are they committed to the business, are they about team or are they about them? What kind of process does the business have — is it customer–friendly, is it dynamic? Is the product they’re selling relevant to the consumer and is it priced properly? Too often small businesses try to make a profit by creating a margin that the marketplace isn’t going to sell. You aren’t going to sell a slice of pizza for $10 no matter what, so you have to be aware of what the competition’s doing.

How can small-business owners test whether their people, product and price measure up?

When you go to your dry cleaner or florist, I want you to go into that business like a consumer. We’ve all gone into a business and we think to ourselves, ‘If I owned this business, I would never greet my customers this way, I would never price this way.’ It’s not like you have to be a rocket science to understand this! It’s about, do you think the people who work in your business are taking care of your customers and are they working hard. Is the product or service you’re offering actually something people want?

I never ask my friends what they think about my business, because typically they have this fear that if they want to stay my friend, they’re not going to tell me my business sucks.

So where can entrepreneurs turn for constructive criticism?

Go to colleges, universities and business schools — they’re always looking for case studies. It’s a great place for feedback, because business school students are looking to run analytics on a company and they’re going to be brutal because they have nothing to lose.

Or you can grab a list of your existing customers. Give them something for coming in and then, in an anonymous way — don’t ask for their names or addresses — ask for their feedback on your company.