Inkkas Worldwear is a Brooklyn-based shoe company launched in 2012 by three partners, Dan Ben-Nun, his older brother Dave, and childhood friend David Molino. The company appears to cater to environmentally concerned hipsters.

We use global textiles and global inspiration.- Dan the CEO of Inkkas

The Situation

When Marcus arrives the company is in deep trouble because nine out of ten shoe designs fail in the market place. The responsibility for this rests mainly on the shoulders of Dan who doesn’t listen to input from his partners and also doesn’t really understand what it takes to design a well-fitting shoe.

Inkkas also has a dysfunctional organizational structure because it tries to be a manufacturer, online retailer, and bricks and mortar retailer all at the same time. The physical store consists of retail space that looks to be about 10X10 feet. There is additional room behind a barrier that is taken up by a mysterious boiler room operation. Who the people on the phones are is never explained and leaves the audience wondering. Moreover, the tiny storefront is basically useless since all the displayed shoes are not-in-stock.

This was another episode that was on the light side when it came to business information. This is the result of the editing making the primary focus Dan’s inability to stay focused and do what Marcus asked him to.

From L to R: Brother Dave, Dan, and best bro David.

Finance

The company has been financed with about $500K in equity and another $500k in debt. All of this capital is now gone and there’s only $5K left in the bank account. Marcus suspects that all the money was blown on endless new shoe designs which never panned out.

In 2013 Inkkas did $1.1 million in sales which is pretty good considering it was launched the year before. In 2014, it was $1.8 million. However, the corrected late year projections (Sept 30th) for 2015 are just $1.5 million instead of the originally forecast $3 million.

The Offer

Marcus first offers $750K for 51% of the company. He demands this much because there are no assets and the deal “feels like a bit of  crap shoot.” I’ll say.The money will be used to pay off the company’s debt, supply working capital, and pay each of the three partners a $60K salary.

Long story short, the guys balk at this. Dave is the one to raise the objections. Marcus then comes back with a reduced $600K for 40% plus a guaranteed 10% return on his capital or $60K annually. (He should look at using a Revenue Royalty Certificate.) He also insists that the partners split the remaining 60% in equity equally. Dan will no longer hold 47%.  The second offer is accepted.

The Drama

We then move onto the now almost obligatory drama phase. This time around it involves Dan not being able to follow simple instructions from Marcus. Marcus tells him to come up with four designs which will replace the 100 plus designs that are not selling. Dan comes up with forty. Marcus is furious. Rinse. Repeat. Recycle.

Frankly, I was wondering if this would be another episode in which our man walks at the end. However, Dan finally learned to listen at the end.

Growth Strategy

As mentioned above the episode comes up a tad short on business data, but we know this about Marcus’s growth strategy for Inkka:

-Improve the quality of the shoes. He begins this process by switching to a better last which will provide arch support and therefore result in a more comfortable show. The new designs also incorporate the crossed needles on the back of the shoes which boost perceived value.

-The 100 plus SKUs of losing designs are tossed out and replaced by four new ones all fitting into the new global marketing theme.

-The tiny pointless store is shuttered and the company moved to very nice professional quality digs in New York City.

-And as usual, Marcus gets the company’s product’s into some new distribution channels to help kickstart the turnaround.

Best of luck to Inkka.

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