Transcripts For CNBC The Profit 20151230

When they quit, theyre basically saying, youre fired. Kota longboards will come up short. My name is marcus lemonis, and i risk my own money to save struggling businesses. Were not gonna wake up every morning wondering if we have a job. Were gonna wake up every morning wondering how many jobs we have to do. Its not always pretty. Everythings gonna change. Everything. But i do it to save jobs, and i do it to make money. This is the profit. Lets go to work. Mike i want to go over the shape. We may have to do new tab work. Lemonis in 2012, navy veteran mike malone started handmaking quality longboards in his garage in denver, colorado. Mike do you have tape running underneath there to there . Lemonis naming his company kota, an acronym for knights of the air, Mike Incorporated his devotion for the armed forces in his products signature look. Mike personalized it with the squadron. Lemonis riders love the longboards beautiful finish, and before long, kota was gaining national attention. But the companys limited selection of longboards coupled with a very high price point put a ceiling on sales. Mike i think weve only sold maybe two units. Lemonis and now mike is losing money fast. Nikki i dont know what to do, mike. Lemonis i see a real opportunity here to market these to the masses. With bigger wheels and a longer deck than a normal skateboard, theyre used for commuting or downhill racing as opposed to jumping ramps in a skate park. The skateboard industry generates over 6 billion annually. Im confident that if i can help mike broaden his customer base, kota will be cruising to success in no time. Im headed to kotas manufacturing plant in denver, colorado. And what im most excited about is any time i can find a product that gets people outdoors, well, thats a product that i have interest in. Mike marcus. Mike maloney. Nice to meet you. Lemonis hey, mike, how are you . Nice to meet you. Mike real honor. Lemonis you guys all longboard . Man we all do. Lemonis lot of people working here. Mike yeah. [ chuckles ] lemonis so, what is the primary product . Can i see it . Mike primary product is the is right here. Lemonis and so, this is considered a longboard . Mike yeah. Lemonis do you have other shapes and sizes . Mike no. Lemonis no. Mike no. We just we just have this length. Lemonis like, this would be hard to stick in my backpack. Mike [ chuckles ] lemonis dont these kids they kind of stick them in their mike well, yeah. Lemonis whats the typical age of your buyer of your product . Mike the meat of our market is age 30 to 70. Lemonis really . Mike oh, absolutely. Lemonis im gonna challenge early on that you dont know your demographic. The bulk of the skateboard market is 9 to 15. And kids need a shorter, smaller option. Mike so, what we thought is the shorter of a board we get, were directly competing and clawing market share away from very established players in the market. Lemonis yeah. Mike we were not gonna succeed at doing that. This is like handtohand combat. Kind of the art of war. Go where your enemy isnt. Lemonis theyve kind of limited themselves to one length. Basically what youre telling me is youre gonna do the opposite of where the market is. I dont think that sounds like a good idea. Has sort of a rubbery feel to it. Mike yeah. Exactly. You can feel the grip on that finish, so you dont need grip tape. Lemonis so, nobody else has this sort of finish. Mike nobody else in the industry has this. Lemonis what does it cost to make . Mike well, were right at about 116, complete. Lemonis all in. Mike yeah. Lemonis including all the loaded labor. Mike exactly. Lemonis and the average retail price of a product like this . Mike theyre all the same. 329. Were moving to 349 next year. Uh, thats reasonable for this product. Lemonis for who . Mike certainly for that actionsports, activelifestyle person between 35 to 55. Lemonis yeah. If their board costs 116 to make and theyre pricing it for 329, on paper, thats great margin at 65 . But somebody has to be willing to pay 329 to actually realize those margins. Now, maybe a 50yearold is, but i dont think 15yearolds can pay that much. And what do you pay in rent . Mike 3,250 a month. Lemonis oh. Thats not bad. Mike no. Not bad. Lemonis this whole factory is yours . Mike no. We share this with the Furniture Company over here. Lemonis okay. Mike its owned by our landlord. Lemonis how much space do you actually have . Mike we have 3,000 square feet. Weve been out looking at properties. They said, were not gonna extend your lease. Lemonis when is the lease up . Mike march. Lemonis so, you dont have much time left. Mike not that long. This is my wife, nikki. Lemonis how are you . Nikki hi. Mike and sandy. Lemonis how are you . Sandy nice to meet you. Lemonis nice to meet you. And how long have you guys been married . Nikki 19 years. Lemonis 19 years . Very cool. Nikki yeah. Yeah. Lemonis what do you do here . Nikki everything from customer contact, getting the orders in process, coming down here, assisting with board assembly. Lemonis looks like youre putting stuff together. Nikki shipment. Lemonis what did you do before this . Mike i flew f14s, and im a top gun graduate. Lemonis were you a Fighter Pilot . Mike i was. Lemonis thank you for your service. Mike thank you. Lemonis who comes up with all the artwork . Mike thats me. Lemonis you draw yourself . Mike oh, i do all the design work. I got to get out of that side of the business. Mike why . Im blown away. I would buy one and stick it in my office just so i could act cool. Id like to see the process, cause im honestly blown away by the quality. How are you doing . Im marcus. Nate nathan. Nice to meet you. Lemonis nice to meet you. Josh im josh. Lemonis hey, josh. Nice to meet you. Josh nice to meet you. Lemonis and so, who oversees production . Man chris. Lemonis youre chris . Chris im chris. Lemonis and so, walk me through the process, cause i want to have a better appreciation for how beautiful the product is. Chris so, this is basically where it starts. I mean, this comes directly from the mill in wisconsin. Its hardrock maple. Its perfect wood for a skateboard. Lemonis okay. Chris your first ply is a long ply. Lemonis okay. Chris what you have is the fibers running the long way, which gives you that longitudinal stiffness. Lemonis so, it sits in here for how long . Chris 45 minutes. They come out looking like this. Lemonis so, this comes out of there. Chris correct. Lemonis where does it go from here . Chris we throw the truck holes in, and this is our drill press right here. Mike this piece of metal im holding onto is the truck. We assemble this. Lemonis amount of detail that goes into this is unbelievable. Sandy yeah. Have to be very careful, cause you dont want to dig into the wood. And i can shape the boards, i can cut them, i can decal them. Tracy is, like, the best stainer ever. She is like our master stain person. Lemonis and everybody here has been here a while . Sandy tracy shes been here the longest. Everybody else is a little bit less than nine months. Lemonis im impressed by the people that are working at kota. They all seem to be hardworking, they seem really committed to the business, but its odd to me that this companys been in business for three years but everybody that works here has been here less than nine months. Chris josh joined us recently. Josh im an investor. Lemonis youre an investor, too . Chris he sure is. Lemonis and you work here full time . Josh for free. Lemonis seriously . Josh seriously. Lemonis how much do you have invested here . Josh 50,000. Lemonis did you hit, like, a gold mine or something . Josh i had a restaurant, and i sold it. And i ran into mike. And he said, hey, i have an opportunity, and i jumped on board. Lemonis i hope mike realizes how lucky he is. Not only does josh put 50,000 of his own money into the business, but then he shows up to work every day and works for free. Ive never seen anything like this. Okay, so, where does it go from here . Chris and then we sand. This is how they come out. That nice, smooth finish. Lemonis well, thats kind of killer. Now that ive gotten really comfortable with the product, i want to dig into the financials. Because, obviously, thats gonna give me the real picture of whats happening here. What were the sales in year one . Mike the first full year of operation, which was 2013 48,000. Lemonis okay. Year two . Mike 150,000. Lemonis year three . Mike thatd be now. So, were at 190,000 right now. Lemonis youre selling less than 600 boards a year. Mike yeah. Lemonis how much have you raised over time . Mike 650,000. We have a lot of investors. Lemonis that includes your investment . Mike no, it does not. Lemonis okay, so how much has yours been . Mike a half million. Lemonis and the grant that you won for Small Business for 150,000. Mike mmhmm. Lemonis so, 1. 3 million has come into this company. Theres about 200,000 of cash as of right now . Mike mmhmm. Lemonis in 2 1 2 years, 1. 1 million burned. Yikes. Mike well, when you think of all of the infrastructure that weve built, the equipment that weve purchased, we were funding payroll for a while. Lemonis okay, but youve burned more money than youve generated in revenue. Mike oh, absolutely. Lemonis it looks like youre heading for a 200,000 to 225,000 loss for the year. Mike its frightening. Lemonis these financials are in bad shape. Mike yeah. Lemonis how much pressure is this putting on you . Nikki its the hardest thing ive ever been through. Lemonis yall have kids . Nikki yeah. We dont get to go do fun things as a family the way we did. Lemonis so, how do you pay the bills . Nikki luckily, we had saved. We were frugal. Lemonis and theres still a lot of savings around . Nikki no. Lemonis all the reserves are gone . Nikki yeah. Mike i got to the point where we were living off my 401 k . Nikki the thing that scares me is that we have the first kid going to college in a few years. Lemonis has it put pressure on your relationship . Nikki i mean, how could it not . Lemonis yeah. Nikki mike is able to shut things off easier than i am. [ chuckles ] im just really tired, you know . Lemonis you dont get days off, really, do you . Nikki mnhmnh. Lemonis and has it affected the kids . Nikki yeah. They feel it. Mike we have to deploy every ounce of our energy and our resources into seeing this through and making this company a success. Lemonis a lot of sacrifice youve made. Nikki it is a lot. Lemonis mike is stoic in the face of all this pressure, but nikki you can see its taking its toll on her. Mike whats the fastest way to get to profitability and how can we scale . Lemonis sales. Mike sales. Exactly. Lemonis you dont have a product problem. Theres nothing wrong with that product. Nikki right. Mike right. Lemonis other than the fact that its too onedimensional. Lemonis hello. Nikki hi. Lemonis how are you . Nikki good. Good to see you. Lemonis good to see you. Mike good morning. Lemonis how are you . So, did anything change since we looked at the financials . According to this, youve put 20,000 of cash into the business. Mike i put 20,000 of my own capital. Lemonis so, why did you why did i have the impression that you put in a half a million yesterday . Mike because if you look from the time we started the company to the time that we are today, i was noncompensated, so lemonis so, basically, the way you got to your equity is waived compensation and the idea. Mike yes. Lemonis okay. I didnt like the fact that mike gave me the impression that he put a half a Million Dollars of his own money into the business. I understand that they put everything aside and taken a lot of personal sacrifice, but lets get the facts right here. I worry about the fact that the products very nichey. But for what you do make, its spectacular. Between sandy and chris and josh, i was inspired by their level of dedication to a business that isnt making money. I was blown away by someone like josh, who not only is an employee working for free but put 50,000 of his own, hardearned savings in. Nikki right. Lemonis i love the product. I think i could help market the crap out of it. So, my offer is 300,000 for 40 of the business. That 300,000 would be used to pay josh back his 50,000 and leave the rest in the account for working capital. Nikki mmhmm. Lemonis that 40 of the business would be divided up. Ill get 25 . Chris will get 5 . Sandy will get 5 . Josh will get 5 . Im trying to buy the opportunity for the other three key members of this organization to have equity. Nikki [ sighs ] mike there is one worry that i have. Lemonis youre kind of smiling at me like you dont really give a [bleep] about what im saying. Mike no, im frustrated. Lemonis im not gonna allow you to be frustrated. Are you okay . Yeah, i just got charged for my credit monitoring. Thats how i know its working. Ah. You know you can go on creditkarma. Com and check it out there. Its completely free. Really . Yeah oh, that didnt hurt at all. Yeah, completely painless. Credit karma. Give yourself some credit. Were always looking for ways to speed up your Car Insurance search. Heres the latest. Problem is, we havent figured out how to reverse it. For now, just log on to compare. Com. Plug in some simple info and get up to 50 free quotes. Choose the lowest and hit purchase. Now. If youll excuse me, im late for an important function. Compare. Com. Saving humanity from high insurance rates. Lemonis im trying to buy the opportunity for the other three key members of this organization to have equity. Mike there is one worry that i have. And thats that anyone that we allocate equity to as an employee, theres got to be something on the hook that says you have to work here for x number of years. Lemonis um. What you have to accept is did it make sense for us to give up 15 of the business to three people that we need . And if you dont agree with that, then you guys dont need me. Nikki would you not agree . Mike well, ii think so. Lemonis do you agree with that . Mike i do. Lemonis its important for me that the Key Employees here feel vested in this company so they not only collect a paycheck but they really participate in the upside over the series of years. And i want to give josh his money back so that it levels the Playing Field with the other employees. So, do we have a deal . Mike i want to do this deal. Lemonis okay. And you understand that, with that check, im 100 in charge. Nikki yes. Lemonis of everything. Mike absolutely. Nikki yes. Lemonis okay. Mike nothing rights this ship like revenue. Lemonis lets go get to work. Nikki okay. Lemonis mike and nikki and i met. We made a deal for me to invest 300,000 into the business, and we talked about all of the issues that exist here. Does everybody know why i was asked to come here . Why, sandy . Sandy to hopefully give us the resources to go further. Lemonis where i got hung up is this notion of how some people dont get paid but they write checks and they invest. And so, out of that 300,000, 50,000 is gonna go towards giving josh his money back. Out of everybody in this room, including them, youve written the biggest check in the room. Did you know that . Josh i didnt know. Lemonis and you work here and you dont get paid. And so, i think that level of dedication is the reason that i came back today. Sandy, i feel like you should have some equity in the business. Sandy thank you. Lemonis youre full time. Youre a department manager. And so is chris. Youre also a department manager. And so, the idea was 300,000 for 40 . Out of that 40 , youre getting 5 , youre getting 5 , and youre getting 5 . Thats out of my pocket. Josh sounds great. Thats really cool of you to give me that sort of deal, and i appreciate it. Lemonis you guys do great work. The products legit. I mean, its good. Every single one of you contributes to that. And we need to offer more options to our customers and offer lower price points and target a younger demographic. But were gonna change as a group, so were all making some money. All right, guys. Thank you. Chris thank you, marcus. Lemonis its been a week since i shook hands with mike and nikki, and ive arranged for them to meet me in los angeles. All ive told them is that were gonna do some market research. Nikki hi. Lemonis hi, guys. Nice to see you again. Mike marcus, good to see you. Lemonis how are you . Mike doing well. Nikki good. Lemonis so, im friends with this guy by the name of rob dyrdek. Does that ring a bell to you . Mike oh, yeah. [ chuckles ] lemonis rob dyrdek is an entrepreneur whos also a professional skateboard rider. Hes one of the best out there. Man all right, guys. Welcome to the fantasy factory. Nikki thank you. Oh, cool. Very cool. Mike holy [bleep] lemonis i think robs gonna shed a lot of light on what the right price points are in the marketplace. He knows the industry. I also think hes gonna give us great feedback on the demographic. Mike rob, mike maloney. Nice to meet you. Rob good to meet you. Rob dyrdek. Lemonis whats happening, my man . Rob appreciate you, man. How you been, man . I would have never thought the day you show up at my office with a skateboard. I mean, im im just im so happy right now. Lemonis im carrying it. Im not riding it. Rob okay. Sit down. Show me what you guys got going here. Lemonis well, rob, im gonna have them give you a little background on who kota is. Rob sure. Mike kota stands for knights of the air, a moniker that was given to the earliest Fighter Pilots. So, thats the essence of the brand. I flew f14s in the navy out of san diego, actually. Rob ive been in one. Mike have you really . Rob threw up a little bit. Mike nice. Rob the gs got me. Nikki [ chuckles ] yes. Lemonis [ laughs ] the gs got you. Rob and so, what happened . You made the skateboards and and mike people started buying them right out of my driveway. Then we developed this clear, nonporous grip finish so that we could move the primary art surface to the top of the board. So, you can feel that. And you dont need any grip tape on it. Rob which in itself is a pretty unique technology that i dont i dont fully i havent seen much in longboards. Mike oh, no. Rob you know, when i when i look at the longboard market, theres one key player sector 9. They probably sell just under a million boards globally, right . So, youre fighting for a space. And it seems like you probably have a pretty tough time finding distribution. Mike yeah, and actually, our market is well outside, agewise, of the traditional skateboard market. Rob which is what age . Mike were looking at the young professional to the retiree. That span of 30 to 70. Rob but do you just want to not do well . cause, unfortunately, that level of income and that age the market doesnt exist. Its literally youre making up the market. Lemonis what do you think of this board, rob . Rob i think the board is pure quality, right, in the sense of what youd expect out of a longboard. Mike its 329 retail for the complete. Rob thats pretty brutal, man. If you look at sector 9s premium stuff, its like 279. Youre shooting at nowhere. This is a simple business. Mike yeah. Rob there are a Million People that are gonna buy these boards this year. You are trying to carve out a percentage of that. But i think, no matter what, the smaller and cheaper is just more volume naturally. Lemonis im glad that rob liked the board and he set mike straight. We need to target the young skateboarders that actually buy these products, not the rich 50yearold skateboarders mike made up in his head. And that means we need to offer more options at more affordable price points. Rob but the question is, is how does it fly, man . Lets represent america and some Fighter Pilots and get to flying. Whoo mike [ laughs ] lemonis that was awesome, brother. Rob thats legit fighter spirit. Lemonis do you like the board . Rob i love the board. Okay. Okay. Okay. Stay with it. Mike there you go. Rob stay with it. Yes yeah [ laughs ] see, there you go. Look at that, man. Born to ride. Come down to the fantasy factory. Were rolling down some ramps. You are part of the skateboarding culture forever nikki [ chuckles ] rob you rode down a ramp. You rode down a ramp. Lemonis hey, mike. We wanted to grab a traditional longboard product and break it down from the raw material all the way to the end to understand cost. Mike sure. Lemonis to sell these boards for less and still maintain a healthy margin, we need to make them for less. And in order to do that, i need to understand what every component that goes into this board actually costs mike. So, it essentially starts out as this. What is the right price point that this product should really sell at to get true velocity . Josh i hate to say, but probably 200 bucks. Lemonis 199 . Sandy thats what i was thinking. 199. Lemonis okay. Mike wow. Lemonis new Companies Make this mistake. Instead of pricing the product into the market or right underneath the market to take market share from the competitors, they look at their costs and then they price it out here. Mike thats what we did. Lemonis and then they wonder why they dont get any volume. Mike thats what we did. Lemonis what mike does is he takes all of the costs of manufacturing, and then he determines what he wants his margin to be, and it marks it up from there. Thats called costplus marketing. You want to price your product at a marketminus strategy. And marketminus means that you understand who your competition is and what the product is, and you price the product below the market. If you believe that the right retail price is 199 and you need to have a margin of call it 50 your cost has to be 100. What about the wheels . At 27. 92. If you give them a 50,000 order, what would this number drop to . Mike you know, 40 . Lemonis what could you possibly get your raw wood down to . Mike lets say 25 discount. Lemonis say you can get 2. 50 out of it. This sealer grip. Mike 25 , 30 discount if we went lemonis so, thats 1 on the sealer grip. Mike yeah. Lemonis the trucks this could go from 26. 90 to what . Mike 16, 17 bucks. Lemonis so, thats 10 bucks. If you could accomplish that, youre now making this board, including labor, for 100 bucks. Now, if you went into the marketplace and you sold this for 199, what would happen in the marketplace . Mike well, i think that it would explode. Lemonis what would happen to your volume . Nikki it would go. It would go. Lemonis guys, let me spend a minute with mike for a second. So, mike, how did you not know that you were missing the market on price, you had to lower the price . How did you not see that sort of break in the bridge . Mike i dont know. Ive been learning on the job. Lemonis but as you were going out and raising money, didnt people ask you that question . You shook my hand. Mike as the deals structured today, i would like some clarification on a few things. Lemonis have you changed your mind . Mike i. Karl, dont you have fryeah, so . Ng over . It stinks in here. Youve got to wash this whole room are you kidding . Wash it . Lets wash it with febreze. For all the things you cant wash, use. Febreze fabric refresher whoa hey mrs. Webber inhales hey, it smells nice in here and try pluggable febreze. To continuously eliminate odors for. Up to 45 days of freshness pluggable febreze and fabric refresher. [inhale exhale mnemonic]. Two more ways to breathe happy singing alougetting to know you. Getting to know all about you. Getting to like you. Getting to hope you like me. Is someone getting to know your credit . Not without your say so. Credit lock lets you lock and unlock your transunion Credit Report with the swipe of a finger. Getting to know you. Getting to know all about you. Get onetouch credit lock, plus your score and report at transunion. Com. Get in the know. Lemonis how did you not know that you were missing the market on price, you had to lower the price . How did you not see that break in the bridge . Mike i dont know. Ive been learning on the job. Lemonis but as you were going out and raising money, didnt people ask you that question . What bothers me is that, in the last three years, mike really never questioned his Pricing Strategy or even listened to anybody else that did question it. And what i think bothers me even more is that he seems complacent about it, the sort of complacency that, quite frankly, scares me. And dont even get me started on the shorter board. Where is the product that actually sits as the junior to this . If you started to figure out how to make a smaller piece of wood with the same trucks and the same wheels, and you make 30 of those, as well, a day, then, all of a sudden, youve driving everything down even more. Mike well. Kerry hi. Nice to meet you. Im kerry. Nikki nice to meet you. Mike mike maloney. Nice to meet you. Kerry nice to meet you. Lemonis one of the things that concerns me about this deal is the fact that their lease is running out in a couple months. To solve that problem, i want to take them around denver to look at a couple spaces. And i found one that i really like. Kerry its, like, definitely a new and upandcoming. Its called the rino district. Lots of new retail, lots of breweries. Lemonis is this an old building renovated . Kerry it is. Nikki oh, very cool. Mike [ chuckles ] kerry its a bigger space. Its about 4,100 square feet. Lemonis your Current Space is. Nikki 3,000. Mike 3,000. Lemonis so, this is bigger. And so, this gives you the ability to have a nice retail space, to be close to the street. Mike well, obviously we need compressed air. I dont see any lines existing that would accommodate that. Lemonis i think the pluses to being in this neighborhood are that theres a lot of people. Mike are we gonna be interrupted by residents that move into these buildings for noise or for odor or for traffic . Lemonis but it gives you the ability to put in a couple of offices, set up your manufacturing line, and you can have your retail space right here. Mike with the equipment that were planning on getting, i mean, we couldnt even get our press in here right now. Lemonis i got to be honest. Im getting frustrated with mike. Im here trying to help him, and hes fighting me every step of the way. And he wont commit to anything. Mike i think the only thing that would work for the commercial door is cut a hole through there. Looks like a pretty narrow alley, though. Lemonis mike, seriously . Mike yeah. Lemonis i came back to denver after a week to get started on the new longboard. And i wanted to share with mike some work that ive been doing on my end to help the business. Hey, bud. Josh hey. Lemonis but i ran into josh outside before going in. Did you share the news with your wife . Josh i did. Lemonis howd she feel . Josh excited. We were on cloud nine. Lemonis what do you mean were . Josh well, what ive heard is that were not taking that deal. He wants to renegotiate with you. Lemonis what was the point of the handshake, then . Josh i dont know. Iim a big handshaker, too, and i know from the deals you do that, uh, you do it all in the handshake. Lemonis [ sighs ] ay, ay, ay. Ive been operating under this impression that mike and i have a deal. We shook hands. And now im hearing that he wants to renegotiate with me. Whats this bull[bleep] about . Has anything changed here since i left . Josh well, besides chris quitting, um lemonis chris quit . Josh yeah. A lot of stuff was said. I guess the gist of it was chris no longer felt comfortable working here anymore, and this is as much as i know is that him and mike sat down and had a conversation, and chris put in his two weeks. And then, uh lemonis so, is he still here . Josh no. Lemonis so, whos making the product right now . Josh nate and i. Tracy and kris are still here. Its been a lot of emotions, you know . We we want this to happen. A lot of the staff wants it to happen, and i even told mike, if i didnt get that deal, i still want marcus to be part of the team. Lemonis yeah. Josh i believe in you, and i believe in our product. And i believe in mike, too. Lemonis yeah, me, too. I mean, ii came back to work today to work on some ideas. Josh yeah. Lemonis was mike here this morning . Josh hes here this morning. Lemonis is he here every day from the opening to closing . Josh um, in the short time ive been here, no. Lemonis does that frustrate everybody a little . Josh it might have frustrated chris. Lemonis one of the key components of investing in kota was people like chris, sandy, and josh. Now chris is gone. I was coming back to move the business along, not deal with this [bleep] all right. Ill catch up with you inside. Josh thanks, marcus. I appreciate you coming back. I really do. Lemonis ill see you in a little bit. Okay. Thanks. Mike welcome back. Good to see you. Lemonis good to see you. So, ive learned that chris is gone. Mike you know, chris decided that he wanted to move on. You know, it was unfortunate. But this is not a complex operation. Lemonis i can tell that mikes trying to shut down any conversation that we have about chris before it even starts. And im concerned. But for now, i want to find out if we even have a deal in place. So, whats happened since i left . Mike uh. Theres some things i regret saying about the deal. Lemonis you shook my hand. Mike as the deals structured today, i would like some clarification on a few things. Lemonis have you changed your mind . Mike i. Lemonis if your business is in trouble and you need my help, log on to. Youre down with crestor. Alright now theres a way you can get crestor for 3. Adding crestor, along with diet, lowers bad cholesterol. Crestor is not for people with liver disease, or women who are nursing,pregnant, or may become pregnant. Tell your doctor all medicines you take. Call your doctor if you have muscle pain or weakness; feel unusually tired; have loss of appetite, upper belly pain, dark urine or yellowing of skin or eyes. These could be signs of serious side effects. Ask for the crestor 3 card. Ask your doctor about crestor. Ed today, i would like some clarification on a few things. Lemonis have you changed your mind . Mike i. Lemonis as long as everybody agrees that were gonna lock up 15 for the employees mike we think 10 would be a little more reasonable. Lemonis so, you want to renegotiate, then. Mike theres one other issue. Lemonis whats the other issue . Mike and thats using the proceeds to buy out josh. Lemonis so, now you dont want to give josh his money . Mike well, for 50,000 of the companys money to leave, buying out one investor lemonis cause his ass is working here on the floor for no pay. He thinks hes getting a raw deal because im trying to do right by the people that do all the work and make this place go . If it wasnt for them, i may walk out that door and never look back. Im disappointed. Id be lying to you if i told you i wasnt. Either that deal that we made is a good deal or its not a good deal. Mike if chris is gone, we would like to see 10 . And were willing to make that carve out lemonis so, your counteroffer is 300,000 and the employees only have 10 . Mike mmhmm. Lemonis and so, my counteroffer is 300,000 and i want 35 for myself. Mike youre adding instead of 5 , youre adding another 10 . Lemonis yeah. cause i want more of it, then. I have licensing deals lined up already and i have distribution lined up. And im not working for free. Mike we definitely would like to have a more indepth look at who really is deserving of this incentive. Lemonis are we in agreement at 15 of the equity of this business would stay with the Employee Base . Mike uh, to have you in the deal, i think i can i can sign up for that. Lemonis so, thats a yes . Mike it is. Lemonis so, youre back to the original deal, which is ill have 25 , and the employees will have 15 . We landed in the exact same place. You understand that . Mike i understand that, but you know what . Lemonis like, the exact same place. Id like to just erase today from my mind. I wanted to get everybody together to talk about making a shorter, smaller, less expensive board. Weve already figured out how to sell the traditional longboard for 199 as opposed to 329 by getting the cost down. But what we now have to figure out is how to make smaller boards that we can even sell for lower price points. Who has replaced chris . Josh dave. Lemonis okay. Who else is missing . And wheres nate at . Josh nates no longer here. Mike nate left, too. He just walked out, never called, never came back. Lemonis seriously, or are you guys just messing with me . Josh no. Its serious. Lemonis have you tried to get him back . Mike yeah. Nikki yeah. Mike he wont communicate with us. Nikki he wont return our phone calls. Lemonis i hope you guys can appreciate to have two people leave chris and nate in a short period of time its kind of unsettling. I guess im concerned that im alarmed and mike isnt. Every time i turn my back, someones leaving. We should have three sizes. Im looking to take our current longboard and drive the retail price down closer to 200 and then come up with a smaller board that also gets us in that 150 price range. Same trucks, same wheels, same concept, just shorter and smaller. And were gonna make a youth board. Since were gonna be buying our materials with much greater volume today, were gonna be able to make the boards and still get close to 50 margins. The 44inch traditional longboard will cost us 100 to make and retail for 199. The medium version, 34 inches, will cost us 75 to make and will retail for 149. The smallest version, the 28inch, will cost us 60 to make and will retail for 100. Well cut down some boards, and then you guys come up with some designs that are basic. Look at the difference in size. Thats a big difference. Mike lets give her a whirl. Lemonis how is it . Mike this turns way tighter than the longboard. Lemonis the shorter wheelbase does, right . Mike oh, absolutely. Lemonis let me get up. Mike there you go. Lemonis to make the prototype was fun in itself, but to ride something that youre a part of making is even more fun. You did a nice job with this, dave. And so, youve picked up a new audience. Youve given a retailer a lower price point. Youve created volume in your shop. And now kotas starting to look like mike a real company. Lemonis you could massmarket the crap out of that. Tracy lift the lid off of that one. Lemonis here . Tracy yeah. Come this way. Lemonis the team left the prototypes to dry overnight. Now were all reconvening this morning to put on the finishing touches. What do you love about it here . Tracy this. Lemonis doing this work . Tracy instant result. I like painting and vacuuming. Lemonis oh, yeah hey, dave, do you know where mike is . Dave mike was at a breakfast meeting, i think. Lemonis okay. Dave hes on the way. Lemonis when we agree on a plan to launch a prototype, i expect mike to be there and fully engaged and immersed in the problem, not off doing some other sort of project that they have that doesnt help us sell boards. Is mike here . Nikki hes not here yet. Lemonis so, one board was supposed to be sprayed. Why dont you and i pick the one we want to spray, cause i definitely want to have one. Nikki okay. Lemonis hey, tracy, do you feel like this is ready to be sprayed . Tracy my only concern is the flex of the board is gonna pop out that medallion. Lemonis this is why having mike here matters. Nikki let me find out what, uh, the status of him is. Lemonis okay. Lemonis josh, how come mike is never here . Josh iim hoping that hes out there making contacts and approaching the right people. Lemonis what blows my mind is that he pushes back with me on incentivizing the employees who actually do the work and then he doesnt even come in in the morning because he goes to some breakfast meeting. Whats with this guy . Mike, how are you . Mike good morning. How are you . Lemonis where were you, buddy . Mike huh . Lemonis where were you this morning . Mike i had this breakfast that i had to go to, so. Lemonis i get here this morning, and they dont know what to do. Mike it bothers me, because thats why i have a production manager. If im in here, then people are confused as to whos in charge. Lemonis im not asking you to come in here and undermine his authority. You admitted yourself that turnovers been a big problem. Mike it has been. Lemonis why wouldnt you dive into the business so that you can inspect where is the breakdown happening, why are these people leaving . See, its an overall philosophy that im asking you to rethink. And i can see that youre resistant to it, because youre kind of smiling at me like you dont really give a [bleep] about what im saying. Mike no, im frustrated. Lemonis im not gonna allow you to be frustrated. Thats the job that you signed up for. When they quit, theyre basically saying, youre fired. Why arent you totally floored by the fact that you got fired by your employees . cell phone rings where are you . Well the squirrels are back in the attic. Mom . Your dad wont call an exterminator. Can i call you back, mom . He says its personal this time. If youre a mom, you call at the worst time. Its what you do. If you want to save fifteen percent or more on Car Insurance, you switch to geico. Its what you do. Where are you . Its very loud there. Are you taking a zumba class . Rma. Checking your credit score is for chumps. I have great credit. How do you know . Duh. You know those change, right . Tattoos dont change. Try credit karma. Its free and you can see what your score is right now. Arent you a little bit curious . I just got my free credit score credit karma. Really free credit scores. Really free. I have got to update my ink. Lemonis im not gonna allow you to be frustrated. Thats the job that you signed up for. Mike i have to figure out how to stabilize this team and get the team functioning. Lemonis what im telling you is, mike, youll have a greater success rate if you do it from inside. Mike well. Lemonis whats going on, brother . How you doing . Nate good. Thanks. Lemonis i got a call from nate because he told me that he wanted to explain why he left kota. Is there something that happened that upset you . Nate yeah, just bringing bringing that dave guy in, you know . And they didnt even tell me until a couple hours before that they for sure are hiring this guy and theyre bringing him in. Lemonis i mean, youre here. Youre working. Chris leaves. Youre now bummed your buddys gone. Nate right. Lemonis and then mike probably told you, when chris left, oh, im gonna. Nate he said, you might have to take the responsibility, in a meeting. And then, after that, there was no word said about that. Lemonis you create a culture of instability and insecurity, people arent gonna want to stay. Nate i dont know why chris would ever leave is the thing. Lemonis do you think that, ultimately, mike just ran chris off . Nate maybe. Lemonis damn. All right, my man. Thank you, brother. Be good. Ill be in touch. Nate thank you. Lemonis so, nate stopped by. Mike hows he doing . Lemonis i think he was under the impression that he was gonna get extra responsibility from you. Mike well, i told everybody, we all have to backfill in. Lemonis you know, ive never seen a business ever where its this new in its infancy theres this few of employees and youve turned over as many as you have. Mike i think it was the leadership atmosphere on the shop floor. Lemonis but thats you. Nikki yeah. Mike no, we hired Chris Lemonis youre saying yes. Nikki yeah. You need to be. Lemonis present. Nikki . Fully present and engaged in the daytoday actions of this business. Mike i have obligations that lemonis well, what are they, other than your business . You need to pick the priorities that sell longboards, cause if the longboards dont get sold, everybody loses their money. I lose my money. Nikki loses mike i look at it that if im in here, i dont have exposure to our clients or the people that are potentially gonna buy our boards. Lemonis right, but going and speaking at a luncheon or collecting an award is not selling longboards. Mike but its visibility in the marketplace. Lemonis nobody gives a [bleep] mike [ chuckling ] i think theres an under appreciation of what i have to do, though. Nikki no. We we totally appreciate everything that you do, but we want you to be doing it here with us. Mike yeah, and ii cant. When you say, hey, mike, you know, its 3 00 in the afternoon and we have 15 pieces of vinyl that we need to cut to spray tomorrow, guess what i cant do that here. Nikki right, but the future is going to be mike and im the only one that knows how to do it. Lemonis mike, you should teach somebody else how to do it. Mike yeah, well, theyd have to do it in our house. Lemonis well, bring the printer in here. Whatever it takes to make it work. Your wife, whos a partner, the other employees who have left here, and the people here are saying to you, you have to be here more. You have to make the decision. Are you gonna be committed to this business on a daily basis or do we need to restructure the way this place functions . So, you need to really think about that. Mike yeah. Lemonis its been a couple of weeks, and im back in denver to finally nail down a location for kota to move to. But i also want to make sure that mikes been present and that josh and the other employees are doing okay. I got to be honest i walk in, and i dont see anybody i recognize. And theres hardly anybody here. How are you . Mike im doing well. Lemonis whats going on . Where is everybody . Mike well, weve had nearly 100 turnover in staff in the last month. Kris wells he just came in one day, picked up his stuff, put his key on the table, and walked out without telling anybody. And tracy sent us a Resignation Letter citing health issues. Lemonis those are the two main stainers, werent they . Mike yeah, they were. Lemonis and what about josh . Mike he wanted us to pay him. He came to me with an offer for fulltime employment, but i cant do that. Lemonis im not gonna lie to you. Im shocked. I came one time, one person was gone. Then i came a second time, and nate was gone. And now everybodys gone. Its been five weeks since ive known this company, and almost every single employee that was here when i started is gone. Thats not a good sign. When they quit, theyre basically saying, youre fired. Why arent you totally floored by the fact that you got fired by your employees . Just prepping for my boss party in a couple weeks. What are those . Crest whitestrips. They whiten way better than paste. Crest 3d white whitestrips. Whiten 25 times better than the leading whitening toothpaste. Id say. Someones making quite an impression. Crest 3d white whitestrips. The way to whiten. [martha and mildred are good to. Go. Heres your invoice, ladies. A few stops later, and it looks like big ollie is on the mend. It might not seem that glamorous having an old pickup truck for an office. Or filling your days looking down the south end of a heifer, but. I wouldnt have it any other way. Look at that, i had my best month ever. And earned a shiny new office upgrade. I run on quickbooks. Thats how i own it. Try align for a nonstop,ive sweettreatgoodness holdontoyourtiara, kindofday. Live 24 7 with 24 7 digestive support. Try align, the undisputed 1 ge recommended probiotic. Lemonis when they quit, theyre basically saying, youre fired. Why arent you totally floored by the fact that you got fired by your employees . I think it would be helpful for the company and for you to get everybody that left together and really hear from them why they left so that you can learn and grow from it. Im gonna get to the bottom of this right now. Its obvious to me that mike is at the center of all of this, and it goes way beyond him just not being in the office enough. Its alarming to me that people quit this place at the rate, but i want mike to hear why you guys left. Tracy my Health Concerns fell on deaf ears. Seeing the airfiltration systems hanging by a thread you guys should have been, like, wanting to protect me. Mike i guess that i was not explicit enough in my direction to certain people to support tracy in that effort. Lemonis what i took out of it is i have certain feelings and emotions about things, and i dont feel like youre considerate of them. Tracy being told by multiple people that you guys say bad things behind my back, um, im not cutting it, im never here. That is crap. Its just its horrible. Lemonis seriously . You got to be kidding me. Mike tracy, do you really think that i didnt care for your wellbeing . Tracy no. Mike wow. Kris, id really like to know why you left. Kris cause of all this, man. I had seen so much stuff. I had heard stuff. Ive heard you make snide comments about like, well, if people would show up for work. Ive heard snide comments made about josh. Josh volunteers his time. Josh you told me, you know, hes offering you this deal, and its this great deal, but its not gonna happen under my watch. Your exact words you said youd throw the whole deal away if i got what marcus was offering me. I approached you, though, with a resolution, and i thought 15 an hour was more than a fair offer. But i called you two times, left you two voicemails saying, please call me. Please call me. Didnt get a text from you or anything. Youve given me the runaround. Lemonis i mean, the man did put in 50 grand into the business. Mike yeah. Chris ive heard you say a few times, and i know this was the goal when i was here, that you needed a longterm, stable team. And if you look out right here, youre not accomplishing that goal. How many people are you going to go through before you change your tactics . Lemonis what do you think, mike . Mike hurts. Lemonis how do you move this Company Forward . cause the recipe that you have now is just not working. You have difficulty honoring your word with people. I saw examples of it. You had difficulty honoring your arrangement with josh and feeling good about him getting his money back. You had difficulty honoring your agreement with tracy. You had difficulty honoring your deal with me cause you wanted to change it all the time. And i honestly i mean, i hate to say this to you, but i dont feel like 1 of my money is safe here because i dont know what im gonna find the next time i come. I told you when we negotiated, this is gambling for me, but im comfortable with the people that work here. And then i followed that up by saying, 15 of the business has to go to people that work here. And so, little by little, that sort of crumbled and it just it shattered my confidence a lot. Im im terribly, terribly, terribly disappointed that it came to this really terribly disappointed um, but i cant invest with you. Okay . I wish you luck. Mike thank you. Lemonis thanks. Good luck to you. Good luck to you. Thank you, my man. Josh good luck, marcus. Chris good luck to you, sir. Lemonis see you, my man. Chris yes, sir. Lemonis be good. Thanks. Its never a good thing when deals fall apart, but when i invest in businesses, what im ultimately investing in is the people that work there, not just the owner. And this particular owner has no regard for his people, and there is no way that im gonna invest in a place or leave my money in a place where the owner basically treats his employees like garbage. Im sorry, but my moneys not staying here. Mike want to help me out here . What are you thinking . Nikki i think we need to take everything that was said to you and really learn from this. People are important. Youre steven, also . Tosteven yes. Profit. Lemonis three generations right here. Steven right here. Lemonis a multigenerational customfurniture business. Do you and your dad have blowups here . Steven all the time. Lemonis . Struggles to stay up with the times. [ screeching noise ] steve some of the machinery here are 50 years old. Lemonis . And a father who wont give up control. Steve do you have a packing list . Steven are you really gonna micro me again right now . Steve please. Lemonis . Leaves a son struggling to make his mark. Steven oh, my god. Lemonis if i cant bring these two together. Steven when its done, it has a sticker. If this doesnt have a sticker, is it done . Steve no, its not done. Steven okay. Lemonis if he cant do the job, you fire him. There may not be a next generation of grafton furniture. Your grandfather was here. Now your father is here