Lessons Learned from Marcus Lemonis on The Profit and 1800 Car Cash

If you’re looking for a entrepreneur-related TV show, I highly recommend checking out CNBC’s The Profit, starring Marcus Lemonis. It is based around Marcus investing in struggling businesses and implementing his proven process to turn them around.

While his approach for buying failing businesses can be controversial to some, there is plenty of sound business advice from the show. In this article, we’ll go analyze some of Marcus Lemonis’ best tips for improving business growth.

Who is Marcus Lemonis?

Marcus Lemonis is a businessman and television personality on CNBC’s The Profit. He is the CEO of Camping World, Gander Outdoors, and Good Same Enterprises. On top of that, he is an investor in dozens of other small businesses.

Marcus, originally named Ricardo, was born in 1973 in Beirut, Lebanon but was dropped at an orphanage by his biological parents at only 4 days old. He was adopted by Leo and Sophia Lemonis, who lived in Miami, Florida.

His grandfather, Anthony Abraham, owned two of the largest Chevrolet dealerships in the US, so he was exposed to the automobile industry early. After graduating from Marquette University in 1995 with a bachelor’s degree in political science, he focused on the automotive industry.

From there, he held managerial roles in his grandfather’s dealership before acquiring and becoming the CEO of Holiday RV Superstores. He continued to acquire and merge companies together under Camping World and Good Sam Enterprises.

On CNBC’s The Profit, the show focuses on Lemonis making deals with struggling businesses. He will put up cash for somewhere around 50% ownership of the company, and then take over management for a few weeks to get it back on track. At the end of the day, Marcus is looking to save jobs and make money.

1800 Car Cash

The first episode of The Profit featured the company 1800 Car Cash, which buys and sells used cars for cash. The owners, Andrew and Jonathon Baron, took over the business from their father after he died.

1800 Car Cash offers cash to people looking to sell their car on the spot. They would then sell those cars to a wholesaler for around $800 in profit per car.

During the recession in 2007, they hit tough times and racked up $200,000 in debt. That, coupled with low profit margins and large overhead costs, put the company in difficulty. Without something changing, they likely would not have survived much longer.

Marcus ended up investing $200,000 to clear their debt along with a $300,000 line of credit at 7.5% to take charge of the business. He immediately started to make changes that led to the company growing to over 70 locations nationwide and making millions of dollars per year.

Here are some of the actions Marcus took with 1800 Car Cash that can be applied to any business that is looking to grow.

People, Product & Process

One of Marcus’ mantras is that he believes in people, product, and process in successful businesses. If any of those are weak, the company will likely struggle and never reach their full potential.

People refers to the staff and employees that make up the company. They are the blood of the company and will make or break it. Look for people that have great attitudes, work hard, and are willing to learn and change.

Managers, CEOs, and owners need to be able to be effective leaders. They should be able to motivate their employees and be compassionate yet strong. Without a strong leader, companies will flounder and fail to move forward.

Product is the thing that the company sells, whether it is a service or actual product. Successful companies will have a unique product that is in demand and high quality.

Without a great product, the company will always struggle to make money because it is harder to sell. Marcus looks to invest in products that have huge potential, even if they are bit of a diamond in the rough to start.

Process is the system behind the scenes that makes the business work. It means having a way to simplify and automate operations as much as possible. It can include inventory, manufacturing, and delivery systems for the product.

It’s OK to Grow Into the 3 P’s

When Marcus looks to invest, he needs to see at least two of three P’s. If he thinks that he can improve the third attribute and they already have the first two, then it could be a great investment.

For example, he knew that 1800 Car Cash had good people and a solid product. The process, however, was broken and could be improved. By knowing what to tweak to improve profitability, Marcus knew it would be a good investment for him.

As a company looking to grow, evaluate your people, product, and process. Find out where your shortfalls are and how you can fix them. If you are a startup with significant problems in all three areas, you may want to reevaluate your plans.

Eliminate Debt First

Companies get in debt for a variety of reasons, from poor business decisions to unlucky circumstances. No matter the reason, too much debt can be crippling to business growth.

In the case of 1800 Car Cash, they had $200,000 in debt that just keeps growing with interest. At an average profit of $800 per car, they would have to sell 250 cars and put all of that profit towards their debt to pay it off!

That is a long time of working to sell cars without taking a pay check, paying any other bills, or reinvesting. When a company has too much debt, it ties up their working capital so that they can’t pay for inventory or reinvest in critical programs that spur growth.

Marcus knows this and stipulated that his money be used to pay off the debt first. By eliminating the debt, the company could avoid the 10%+ in interest they were paying and use profits to pay for money-making systems.

This same principle applies in your personal finance, if you want to grow your wealth. Focus on paying off your high-interest debt like credit cards and car loans first. Once those are out of the way, more of your paycheck can go towards savings and entertainment.

Cut out the Middleman

One of the challenges 1800 Car Cash faced was that they were only making $800 per car that they sold. When Marcus looked into this, he realized that they were selling to wholesalers, or middlemen. These wholesalers would then turn around and flip the car to dealers for additional profit.

By working with the wholesalers and not directly with the dealers, Car Cash was losing out on over a thousand dollars per car. The Baron brothers had always worked with the wholesalers because they were comfortable with them. By stretching their comfort zone and making new relationships, they were able to increase their profit.

Imagine being able to double your profit per sale by making one change to your supply chain. That’s powerful stuff that has a lasting impact on your revenue.

Take a look at your own business to see if there are ways to become more profitable in your relationships. Just because you’ve always used the same supplier in the past doesn’t mean you should continue to. Look for the best value and make decisions based on business, not friendship.

Give the Company a Facelift

Over time, your physical locations, websites, and equipment wear out and start to look old. Even if you take good care of your property, it will naturally start to look tired after a while. And, that directly impacts your brand’s image and profits.

In the case of 1800 Car Cash, their garage was dirty, run-down, and completely outdated. Their brand colors were bright orange and the sales office was uninviting, making it harder to make high-value sales.

Marcus helped to revamp the entire garage by repainting it, renovating the office, and rebranding it. With a clean new space, it was much easier to draw in more customers and get them comfortable selling their car for the best price.

Looks can go a long way to improve performance in physical companies. In this case, a dark and dirty garage would not make some people feel comfortable, especially women. After cleaning it up, Car Cash was able to draw in a larger customer base and attract people who otherwise may have avoided the place.

The lesson here is to periodically update your company’s assets so that they stay modern and relevant for your target customer base. Invest in renovations, when necessary, update your fleet of vehicles, and redesign your website on a regular basis.

The one catch: do enough research to know when and how to upgrade. Don’t rely on your gut to spend your money. Instead, use data to understand your customer and see when they are looking for a better experience.

Change Up Your Business Model

1800 Car Cash started as one location with a handful of employees. By the time Marcus Lemonis was done with is, they had pivoted into a franchise model with over 70 locations nation-wide.

Marcus’ idea was to use the New Jersey location as their flagship headquarters that all other locations could be modeled off of. They would develop and perfect the best processes to maximize profit. By building a strong brand at one location, it could then be sold and replicated across all other sites.

By franchising the brand, the Baron brothers could license their company and profit without doing any of the work. New franchise owners pay a startup fee along with an annual fee or a percentage of their profits. They are responsible for running their own business while the 1800 Car Cash has minimal risk, other than providing training and support.

While many businesses will not want to turn to the franchise model, it does make sense to see if there is a way to pivot your business plan to make more money. If you sell a product, see if there is a way to add a subscription plan to generate monthly income. If you sell a service, try packaging it up to sell more as a product.

Many companies can benefit from building affiliate relationships to help support your marketing. Expanding your partnerships and restructuring your operations are all ways to change up how you do business and potentially increase your profit.

Let Your Leaders Lead

The brothers Jonathan and Andrew were 50/50 owners of 1800 Car Cash yet Jonathan tended to make all the decisions. He thought he knew best for most decisions, so he took the lead while Andrew tended to sit back to avoid confrontation.

Technically, Andrew was responsible for marketing for the company since he had experience in the field. However, he ended up being handicapped by Jonathan’s controlling attitude and not being able to act on some of his ideas.

As soon as Andrew was given the freedom to make his own decisions, the company started to improve their marketing performance. Jonathan also realized his attitude with employees hurt their performance and that his management style was not effective.

All companies can learn from this by appointing the most qualified person for each role. Then, empower them to make decisions related to their role and allow them move forward as they see fit.

Too much oversight and micro-management will hurt your growth and create unnecessary friction between employees. If you hire the right people and trust that they will do the right thing, you’ll be able to grow your company much faster.