How to Buy a Business
Where our hero Marcus works his magic in record time.
Link to Video.
Amazing Grapes is an Orange County, CA wine bar and shop started by a successful real estate developer. It was launched 9 years ago but has never shown a profit despite current sales of $3.5 million. It also owes $570K to its vendors. The main problem is that all of the owners are distracted by other business interests and personal activities. The most active of them, Greg Schroeder, only drops by once or twice a month, according to staff. Another invisible owner, Bill, had to be shamed by Marcus into meeting with him. Greg and Bill have invested $750K. There are five other investors who invested another $500K but they are only mentioned once in passing.
This particular episode is an example of the tycoon game at its finest. Captain Marvelous (aka Marcus Lemonis) comes across a very nice business with great potential that can be turned around quickly. The business is already in an affluent area packed with the right type of customer. It just needs to do a better job of catering to them and utilizing its expensive floor space which costs $14K per month.
Poor, poor, pitiful me. – Linda Ronstadt
We finally got a really good episode from a business lessons perspective! I really liked this one, folks, even though it was infuriating in some ways. (More on that later.)
Sweet Pete’s is a Jacksonville, Florida based candy artisan owned and operated by married couple, Allison and Pete Behringer.
Watch Sweet Pete’s here.
It’s the best episode of the year so far because it has everything: a great little business with strong potential for growth, passionate owners who you want to see succeed, and, unfortunately, a troublesome hanger-oner. You simply can’t cram more drama than that into 43 minutes. Watching the episode you really get the sense that this thing is ready to explode from potential. All that’s been holding the partners back is a lack of resources and a ball & chain around their ankles.
Let’s do a quick Marcus Lemonis-style assessment:
Marcus Lemonis talks openly about he makes his money with Michael Burt. Marcus’s goals are to make money and save jobs.
This is very good!
Please start at min 16 when the fashionably late Marcus finally arrives.
The Profit Returns for a Second Season
I have some really great news.
Season 2 of The Profit with Marcus Lemonis starts on Tuesday Feb 25th, 2014.
Marcus has become a sort of unofficial poster boy for The Tycoon Playbook in that he is an exemplary practitioner of one of the three main ways that tycoons create value in acquisitions. While I enjoy most shows about experts who go into ailing or failing businesses to fix or save them, Marcus’s is the best of the lot in my book.
Hedge Funder vs. Tycoon
It often seems as if everybody wants to be a hedge fund guy these days. If you then ask the wannabes what hedge funders do, you invariably get a vague answer along the lines of “they invest in stuff” or worse, a simple blank stare. Now to be honest, it took me a while to get a handle on what they do. (Note that I didn’t use the word “understand.”) As far as I can make out a hedge fund is basically an unregulated mutual fund for sophisticated high net worth individuals and institutions. This is another way of saying that a hedge fund can invest in almost anything that its management believes it can earn a high “alpha” in. (The alpha is a rate of return above and beyond what one might expect from trading in stocks and bonds the way mere mortals do.)
So basically almost anything goes so long as there is potential for the high returns necessary to attract and keep sophisticated investor capital.