One of the highlights of last week’s Xerocon event, put on by cloud accounting platform Xero, was meeting Marcus Lemonis – businessman, investor and star of CNBC’s The Profit. And before he took the stage for his conference ending keynote, I had the pleasure of sitting down with him for a great conversation. Marcus shares how the impetus for the show was more social experiment than small business, how vulnerability is key to business success and fixing people, and how he won’t do business with someone, even as a customer, unless he knows that they understand their business.
Below is an edited transcript of our conversation. To hear the full interview click on the video or embedded SoundCloud player below.
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Marcus Lemonis: Well, just kind of going with that question or that comment alone, I always tell people in business that even if you think that people know who you are, it’s always good to introduce yourself again. Because there’s new players and so if you think about yourself as a business owner, you want to always be reintroducing yourself to somebody that may have forgotten, that may have been mad at you.
So I’m Marcus Lemonis and I am a … I don’t even know how I would describe myself. I would say I’m just a normal guy like everybody else that decided that small business was the most important thing in my life. And when we’re all growing up, our mothers will ask us, “What are you going to make of yourself? What are you going to do with yourself?” And I struggled for years to answer that question. And as I got a little bit older and I started to understand who I was, I realized that my purpose in life was to stick up for the little guy, and that was sort of me when I was younger.
I spend really the bulk of my time investing in small business. It is my hobby, it is my passion, it is the thing I love to do more than anything else. Yeah.
Small Business Trends: When did you decide that you wanted to go into the small business and help them out?
Marcus Lemonis: You know what? It really came right outside of the 2008, 2009 market collapse. We were all watching the news and it was … Fortune 100 companies and their stock is down, and the banks are closing. And I felt the news was very one-sided as it related to big business. And then nobody was talking about mainstream, and nobody was talking about small town businesses. And over 90% of this country is involved in small business, one way or the other, and I didn’t think anybody was talking about it. And I think it was in that moment where I said, “Somebody’s got to actually be a champion for this in a different way.”
The secret behind what I do today, and it’s something that I don’t talk about a lot, is that the reason I decided to do the show was one giant social experiment. It really isn’t about small business, it is about people and how business can transform, good or bad, people. And the social experiment … And I said when I got to 100 episodes I would talk about it a little more, I’m at 78. The social experiment really is how do people deal with opportunity. And how do they deal with their past and how does opportunity and their past sort of intersect.
You go into businesses today and they’ll all tell you, “I can’t get a loan and I can’t do this, and I can’t do that.” And it’s a little bit of … I don’t want to call it a sob story but I’ll call it a excuse. Right? And I buy off on these excuses because I make them the same way. And so what I wanted to do is really understand how people function. And if you’ve ever seen the show “The Profit”, it really is about people more than it’s about business.
Small Business Trends: Some of the really interesting episodes always have the family dynamic. So when you have business … It’s tough enough when you try to go into business, stay in a business, but how does the family dynamic play a role in the success? And how difficult is it to get the family dynamic back on track once it’s kind of gotten off track?
Marcus Lemonis: I’ve long told people that the reason that small businesses are largely family businesses, because there’s this weird kind of combination, is that when you and I or anybody else starts a small business, we don’t have any money. We can’t hire any employees so we’re asking our mom, our dad, our aunt, our uncle, our sister, our kids, “Hey. I need you to pitch in. You handle marketing. Your handle the inventory.” And by definition, it sort of becomes a family business, even if it’s a part-time job for most of the people that work there. And I think what ends up happening is … Families are interesting because whether anybody wants to admit it or not, there is still a pecking order in a family. Right? At least in my family, my mom’s in charge, there’s no question about it. There’s not any confusion about it-
Small Business Trends: Not up for debate or anything.
Marcus Lemonis: … But then you start getting brother-in-laws, sister-in-laws, kids, son, and you have your life on the line on this business and not everybody’s necessarily performing. It’s very difficult to tell your son, your daughter or your wife, or your husband, “Hey. I think you need to go.”
Small Business Trends: But that’s the job that you kind of help them do.
Marcus Lemonis: That’s why I think people call me. I was laughing the other day, I said, “Do people call me because they want me to do the dirty work?” It’s like, “I really want my wife to be fired but I don’t want to do it, so you do it.” It’s like, “No. I’m not doing it.”
Small Business Trends: Well think about the joy of having them succeed after all the things they go through? How does that make you feel? I know it’s got to make them feel good, but how does it help make you feel?
Marcus Lemonis: Success for me in my journey is really about people’s personal transformation. And if they have personal transformation, the business usually will succeed. Most people, when they watch a television show about business investing, it’s like, “Okay. How much did you invest? How much money did we make? What was the return? What are the percentages?” And yeah, there’s a moment where that’s relevant, but the real moment is how do you take somebody who doesn’t have confidence in themselves, who doesn’t have a process in place, who doesn’t clearly see where they want to go but they have good ideas and get them to just discover themselves. In more cases than not, I’m not telling people what to do, I’m telling them how I want them to think differently. And then what they do with that is up to them, but it’s satisfying for me.
Small Business Trends: Are you surprised when you … They know your track record, they know you have this level of success. When you suggest things and recommend things and then they kind of fight you?
Marcus Lemonis: I’m not surprised and I’ll tell you why. If any of us had some guy come into their business after we’ve been in business for 15 years and tell us how wrong we were, that we’re doing something wrong, we wouldn’t be that crazy about it either, right? And so it’s very easy for all of us to sit and watch people who have taken a huge risk by making themselves vulnerable, putting themselves on television, having the error of their ways or the error of their character be exposed. And that’s why I’m usually a lot nicer about it, at least early on. Because I think to myself, if that was me I wouldn’t want somebody telling me how dumb I was.
And it’s funny because I love to compare our show to other shows where people invest in small businesses, and point out that you don’t have to tell somebody how dumb they are to get the point across. You don’t have to tell somebody that it’s the stupidest idea you’ve ever seen. You’re better off telling people, “Okay. Why did you have this idea? And why’d you think it was going to work? Ma’am I just have to tell you they’re not going to work. But I understand. But tell me why you did it?” And you’ve got to get inside their head to understand what their logic was. “Well, I really like music.” Okay, let’s keep going. And so for me, I think the key is how do you get people to actually think differently. That’s the key for me.
Small Business Trends: Let’s talk a little bit about technology and businesses, particularly small business. We’re at a small business technology conference. Do you see small businesses leveraging technology as well as they can?
Marcus Lemonis: I think that … I’ll include myself in this answer. I think that technology is an intimidating thing, and I think that in order for companies to be successful in selling their technology, they have to make the user friendliness of it and the humanity of it seem real.
We just had a brief conversation about this [Mevo] camera. I’m fascinated by it, I’m intimidated by it. I think when you’re talking about systems, and process, and technology, and accounting, you have to really make it seem simpler than it is. And more importantly, more affordable. So most small businesses do not venture into technology because they think I either A, can’t afford the initial investment or B, I can’t afford the recurring investment. And I think as entrepreneurs, all of us included, we have to make the technology, and the process of accounting, and systems seem manageable and affordable. And I think that’s why conferences like this do that is they’re trying to communicate to people that isn’t have to be … It isn’t all Dell, it isn’t all Oracle and it isn’t all Salesforce, which all usually equate to big capital expenditures, big monthly fees. There are systems and solutions for small businesses and if they want to become a big business, they better get after it.
Small Business Trends: You’re about to go on stage and speak to hundreds of small business advisors, accounting advisors, what do you plan to tell these folks?
Marcus Lemonis: Well I think the biggest advice that I would give small business advisors and accounting advisors is understand their audience, and get to know their clients better, and understand why their clients do what they do, and build a relationship with them. And we’ll talk about it during my presentation, but vulnerability for me is the absolute Holy Grail, key to fixing people. And if you’re selling a product or service and you’re really just selling the product or service, then I think your penetration success is going to be low. But if we can connect on a human level about our lives, about our hardships, about things that have happened to us … Just about anything.
What you’re essentially building is you’re building trust. And then once you build that trust, you’re saying, “Look man. I’m sorry to have to tell you this but you kind of don’t know your numbers, and there’s no system in place, and you have no strategy. And I really want you to be successful and I’m in this weird spot because we have a relationship and I have this product. So you tell me how you want this relationship to go. If you want me to just be your friend and that’s it, I’m open to that. If you want me to try to help you improve your business as your friend, I’m open to that as well.” And I think that that vulnerability, and that full disclosure, and that transparency would make me open up.
If you said to me, “I can help make your businesses better.” I’d be like, “All right. I don’t know everything.”
I think the last piece of advice that I would give people is small business owners don’t want to feel like they’re dumb, and they don’t want to feel insecure, and they don’t want to feel like they’ve made a bunch of mistakes. And so you have to go on this journey with them where they understand that every decision they made had a plus and a minus, and we’re going to celebrate the pluses and we’re going to learn from the minuses, and we’re not going to point out your frailties. If you can get on the level with them, then it changes. If you go in there like, “You don’t know what you’re doing. You don’t have this right and you don’t have that right.” It’s like, “Look. I don’t need to know that I’m in trouble, I knew I was in trouble before you came.” And so that’s I think the key. And that’s what I would tell anybody.
Small Business Trends: So what big companies that are doing things successfully in your mind are companies that small businesses should really look at, emulate and take lessons from?
Marcus Lemonis: Rather than picking a specific business, I’ll pick companies that understand two fundamental things. One, the importance of customer data, and how to accumulate it, and how to mine it, and how to use it, and how to understand it to improve your ROI on marketing, to improve the retention of those customers. But before any of that happens, you have to understand your business.
So many businesses fail to put their numbers, and their cash flow, and their balance sheet into systems where they truly have this dashboard. For me, financial statements are a necessary evil. You don’t go to the doctor without all sorts of information, and your doctor doesn’t give you a diagnosis without running a bunch of tests. And he doesn’t’ give you a new diet or a new regiment without having all the information. And I apply that to business. You can’t understand where to go in your business, who to hire, who to fire, what to do, how to change things, what to improve, how to change your prices, what products to drop, what products to launch. You don’t understand any of that if you don’t have the footprint of what your business is live. And so, I know people hate accounting, I really do. I know they hate it, but then you shouldn’t be in business. It really is one of those things where you’re just like, “I don’t like broccoli, but my mummy is making me eat it.” It’ll make you smarter. And if you own your company 100%, you’re obligated to yourself. If you have other investors, it’s a mandate. I won’t do business with people, not even as a customer. If I have a big retail business and there’s small businesses that sell products. Unless I know that they understand their business and they have the accounting systems in place. Because if I start doing business with you and I buy your product and I put it on my shelves, and then all of a sudden, you don’t have your act together and you go out of business, I’m in trouble.
This is part of the One-on-One Interview series with thought leaders. The transcript has been edited for publication. If it’s an audio or video interview, click on the embedded player above, or subscribe via iTunes or via Stitcher.