Marcus Lemonis Develops a Growth Strategy for Grafton Furniture

Grafton is a third generation family-owned furniture maker launched in 1964. The company is located in Marcus’s home town of Miami. Unfortunately it’s been suffering since the recession of 2008 and if Marcus doesn’t turn it around it may fold.

Marcus presented some interesting stats on family-owned businesses:

-2nd generation businesses fail about 60% of the time

-3rd generation businesses fail about 90% of the time.

Products

The company designs for and sells exclusively to interior designers. It does not sell to the public.

Process

The business is plagued by ancient and inefficient machinery that adds significantly to production time. The workflow system also has many problems due mainly to the W-I-P or Work in Process reports which provide very little information on how much of each order has been completed.

In any manufacturing business, the most important document is the Work in Process report.  – Marcus Lemonis

Stevie and Steve put on their game faces for the big pitch to Direct Buy.

Stevie and Steve put on their game faces for the big pitch to Direct Buy.

People

Grafton appears to have good people in place. The workforce and factory foreman are dedicated and know their jobs well. The only stumbling block personnel-wise is that third generation owner Stevie is being driven crazy by his dad Steve who “micros” him.

Financials

The company has sales of $2.448 million with a gross margin under 50% compared to the industry average of 70%. Marcus, as always, digs into how and where the 20% is leaking out in order to plug the holes. There’s also about a million in debt.

The Offer

As always, Marcus arranges to meet with the owners at a restaurant to present his offer since nothing creates a cordial atmosphere like breaking bread. The offer is $1.5 million for 45% of Grafton. This will pay off the mortgage and other debts, upgrade equipment, and provide working capital. In addition, Marcus will have full financial control and the right to groom Stevie for the day he assumes control.

The family accepts without any hesitation.

Growth Strategy

Marcus will diversify the company’s offerings to hit two different types of customers initially. This will help  to reduce its vulnerability to economic downturns.

– The custom design line for interior designers will continue as before.

– The new Quick Ship Line will offer buyers three options each for wood and fabric. This will allow delivery within 10 to 14 days.

Marcus also mentioned a third ready-to-go line early on in the episode whose launch he’s probably postponed until all the bugs with the QSL have been ironed out.

In addition, the company will implement a strict quality control system so that shoddily made products are no longer shipped.

Marcus also got rid of the showroom because it was large chunk of space that made no money.  By now you have no doubt picked up on how Marcus is quick to drop anything that’s not achieving a certain level of sales per sq. ft.

Finally, Marcus introduced Steve and Stevie to a major national buying group where he introduced a new branding theme for the chairs, The American Dream.

What a refreshing change this episode was from last week’s about the weight loss meals company Fuel Foods. It reminded me of that other family business Mr. Green Tea. I like to see nice people succeed.

Best of luck to Grafton Furniture and our man Marcus.

Grafton’s website.

One Response to The Profit: Marcus and Grafton Furniture

  • Finally an episode with a real business and real lessons. Please Marcus enough with the twinkies and cupcakes, give us manufacturing businesses!

    I too like to see nice normal people with a business that is worth saving and minimum drama. That roid rage meathead from last week was a waste of an hour.

    Come on Marcus. give us more like this business!

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