This detroit rebuilding story will come to an end. My name is marcus lemonis, and i risk my own money to save struggling businesses. We are not going to wake up every morning wondering if we have a job. We are going to wake up every morning wondering how many jobs we have to do. Its not always pretty. Everything is going to change. Everything. But i do it to save jobs and i do it to make money. This. Lets go to work . Is the profit. Id really like to do a manufactured by detroit denim. In 2010, eric yelsma founded detroit denim, a maker of highend mens jeans. Theyre unhemmed. So we will mark them and get you the fit that you want. Every component from the buttons to the thread is sourced in the u. S. And every pair is sewn right here in the heart of motor city. Danke. Tired of the corporate rat race, eric noticed an opportunity to help revitalize his city by tapping into local designers and fabricators. When you are done with those leather straps, marguerite, i want to get started on these jeans. Soon after he launched, he partnered with a production manager, brenna lane. And from there, they slowly grew, reaching almost a quarter of a Million Dollars of business in 2016. But now, the business has hit a snag. We dont have any sales online or obviously in store. Sales have sputtered out and profits are meager. Its terrible. Yeah. Its stressful as hell. But eric and brenna cant figure out why. I dont want this to fail. For the last several years, ive invested over 15 million in the fashion business, and ive had my eye on the manufacturing renaissance happening in detroit. When i put those two things together, im confident this could be huge. Hello . Hello oh, hi. Marcus, its nice to meet you im marcus. Im brenna. Welcome. Brenna . Brenna. Yeah. Nice to meet you welcome to our shop this is really cool oh, thanks i wouldnt have really expected to find a retail store. Yeah. It was important to us that our manufacturing and our retail kind of be connected. We make everything thats denim. The aprons. The jeans. The bags. First and foremost, we make jeans, right . This is our standard jean. We have it in five cuts. Im eric. Im marcus. How are you . Nice to meet you. Good to meet you. Thank you. Welcome. So im learning a little bit about your business. Okay. Fantastic. When did you start it . 2010. And so the two of you, youre a partner in the business . What is your actual role here . A production manager. So i do a bit design and sales. We should probably tell you that were also romantically involved. It can lead to some conflict. Im very organized and he is like, lets jump right in. Lets do it. Theres a lot of friction. Daytoday, she will have lists of lists. Okay. Leave your passive aggressive grumpy bear outside. Yeah. Thats an interesting dynamic between you two. Oh, it is. And this would be considered raw denim. Right . And so what makes this raw . Its kind of denim in its original state. So it hasnt been stone washed or anything like that. Okay. Yeah. Can you maybe try to sell me a pair of jeans . I think youre probably a 36, im guessing. Youve got some booty to work with. Yeah. So you are basically analyzing peoples asses for a living. I do. We look everybodys butt. Yeah. All right. Thats good. My god why dont just try on sandpaper i feel like this is up in my crotch. Okay. Hey, there we go. Yeah. Youve got to do the walk. There you go. The frankenstein walk . Oh, man there is a breaking in process. All of our denim is u. S. Sourced and made to last and get better with age. They are getting more comfortable as i stand here. Yes. Absolutely. And why would people want this versus the traditional jean that you would buy thats got markings and colorings and washes. The experience that you get of actually, that mark, is a memory when we did this thing. You kind of earn it. Yeah. When i started the whole idea was, i want to make a jean in a way that i would want to buy it. So theres no womens jeans here . Right. Why is that . Eric didnt want us to go into womens jeans. Do you agree with that . No. Not really. Going to womens is kind of the next natural step. Who makes the final call . You do . Definitely. In my Business Plan i wrote, i will not do womens jean. Eric only makes one type of jean. The kind of jean he likes. No womens. No washes. No embellishment. No distressing. If you dont like dark blue denim thats stiff, dont shop at detroit denim. Whats the total revenue that the business will generate . Last year we were about 250. Okay. And so what percentage of your business is jeans . So id say 90 percent. Were a Jeans Company first and foremost. So how much are these . 250. Thats double what my jeans cost. That denim is probably four times more. Material cost is probably 35. And how many hours does it take one person to make these . Three and a half. Really . I own other companies that manufacture products in the fashion business. It doesnt take three hours to make a simple pair of jeans. Three hours is a really long and boring movie. How you doing sir . Hey. How are you doing . Im marcus. Kevin. Kevin, nice to meet you. Nice to meet you too. What do you do here . Repairs. Leather work. Do you design things as well . Yeah. I would like to do a little more. You would . What i did, i had brought some bags that i made. Showed them some of my work. Heres the one he brought in that really won me over. That was like one of the first bags i made. And why dont you guys sell these . I mean, at least feature them out front. I am the designer. It cant just be anything that kevin makes and has denim on is detroit denim. So i will personally handle any bags. Uhhuh. So. Eric seems alarmingly rigid about the way he runs his business. And the fact that other people have Creative Products and hes not even willing to offer them, hes constricting, strangling, the ability of the business to grow. How are you . Im marcus. Pleasure. Marguerite. Yes. Marguerite . Yes. And so what do you do here . Im a production stitcher. Do you have ideas of things you would make here . I would really love for us to get into womens wear basically. But right now it feels like we make one piece of clothing. I would love to learn about your skill. Because ultimately, i have to get my head around, is this artisan craftsmanship . Or is it manufacturing . Is this a fashion business . Now that is a bad word around here. I dont know if youve heard. Why is that . Fashion is really focused on what is trendy. We make a product that is not a fashionable product. Denim jeans are a workwear uniform of the people. So you dont think that designing things that you put on your body are fashion . I think before fashion is utility. Its about what people live in to do what they need to do. I feel like when im talking to marguerite im talking to the antifashion police. Taking things so seriously, i think Everybody Needs to just calm down. Its denim. Its supposed to be fun. Id like to go through the process from the Raw Materials to the finished goods. Yeah. There are 67 steps. Wow number one, we are going to do a front packet assembly. Coin pocket. Coin pocket. Yep. Left pocket. Right pocket. Then were going to, step two, mark. Awesome. With a guide. Now we are going to double needle the coin pocket to the pocket facing. This is step three. I felt like i was inside of a pinball machine. Moving from pointtopoint all over the place with no rhyme or reason. You started here. You came here. You went there. You went there. You went back there. Then you went over there. And now were back here. Right. Now i know why it takes 31 2 hours to make the jeans, because you spend an hour and a half Walking Around to get to the different places. Ive spent hours researching and making excel spreadsheets about exactly how to account for every half second and i made that flow chart to kind of understand what we need to go through before we make a new product. So you made this. Okay, i love white boards. I use white boards in every business that i go to. But this looks like the formula to launch a rocket. Brenna overthinks a lot of the things that we do. You are not prioritizing whats important. I sometimes wish that we could just stop time. It really comes down to efficiency in my mind. And if you spend all of this time inside of your head thinking about white boards and [bleep], nothing is going to get done. Maybe you and i can just go for a walk. Okay. Is that all right . Yeah. Yeah. I dont know that you and brenna are on the same page. If you havent picked up yet, shes exceptionally smart. I think the thing thats a challenge that i dont like is the hesitation on things. Like, we should just be plowing through stuff. Theres just fear of moving forward. Shes always like, we cant do that. What if. What if all of these wrong things. I think it can slow down our progress. And why did you start the business . Growing up, i just had this curiosity, this appreciation for jeans and how theyre made. And its got such a fun history to it too. I mean, you think of blue jeans, you think of america. You know, here we are in detroit and like, here we have this huge city. It declared bankruptcy. Its trying to get back on its feet. And i think each thing we do brings a new opportunity into a pretty devastated area. Its about the idea of hiring and training detroiters. I feel this is kind of a calling for me. My initial impression of eric was that he was really all about himself and his own style. But the more i talk to him, i learn that his real motivation is to be part of the rebuilding of detroit. Thats the motivation that i need to want to push things forward. How are you . Steve, this is marcus. Im marcus. Hes our partner, steve. Very nice to meet you. How are you . Nice to meet you too. So what is your role here . I would say my role is on the accounting side of things. Im a partner at a cpa firm. So this is kind of my parttime gig. How did you guys all meet . Steve came and bought a pair of jeans. We just started talking and five seconds into this im like, this is a dynamite idea here. So i invested in the company. And i donate my accounting work about every couple of weeks. What is the equity between the three of you . Im 65. Brenna is 25. Steve is 10. How much money has been invested in the business overall . Ive put in 250. Steve bought in with 50 and then also put in a 50 loan. And is there any other debt other than your 50 . Nope. Do you have the financials where we can sit down, the four of us, and look at them . So ive got two things here. This is actual 13 to 16. Okay. 17 is a projection number. It has not been updated since february. The fact that this isnt updated since february. Right. Its alarming. Financials should be updated at all times. Because youre making purchasing, pricing, hiring, firing. Youre making all of those decisions based on what your Financial Statement is telling you. But if its six months old, what are you making decisions based on . 2015, 210,000 of sales. 2016, 247,000 of sales. Your gross profit in 2015 was 72,000, 34 percent. In 2016, its 63,000, 25 percent. So a 10 percent drop in margins. Your margins should be 50 percent, not 25 percent. I know these financials arent right. Because theres no way that the margins are 25 percent if hes selling jeans for 250 and the cost is 35. And whats more frustrating is, their partner, hes a cpa. I still have questions on the books, the financials, the Balance Sheet. Thats very scary for me. I have to go here in a minute. Im the partner whos the accountant. The financials arent uptodate. They havent been done for six months, and, oh, by the way, i have to go. Im going to digest these numbers, and well chat tomorrow, okay . Thank you. Sounds good. Oh, marcus. Thank you very much. Im late. Thanks, marcus. Thanks. Thank you. Good morning. Good morning. How are you . Good, how are you . Good morning, marcus. How are you . Thanks. Nice to see you again. Nice to see you. I left yesterday a little concerned. It was puzzling to me. The margins say 25 percent. I know theyre not. Steve, why are the financials incomplete . You know, ive got a fulltime job, so spending the time to do that hasnt been a prime focus. You know, ultimately, if youre going to be a partner in the deal, i like partners that i know can contribute. My expectation is that you would be more active. And for me, the whole asset of this business is the talented people that design. I love that. I want the challenge of building a business in detroit by peoples hands from detroit. Mmhmm. So my offer is 300,000 for 51 percent. I think needs 100,000 for building out efficiencies in the shop. It needs to have some rhyme or reason to it. Right. Things that allow us to lower cost and increase output. In addition to that, 150,000 for working capital, Raw Materials, and then, 50,000 specifically for research and development and the creation of new products, buying textiles, trying new things and turning them into real highmargin moneymakers. So youd want to see a wider assortment or something . I think we have to work collectively with the team to allow creativity to breathe. Thats a bit of a shift. Is it . Whats so shifty about it . Jeans arent going to be our primary focus. This company will not survive as a mens denim jean company. 300,000 sounds like a reasonable dollar amount. On the personal part of it, i have put money in, and im a 10 percent owner. Giving up 50 percent of my investment, how do i get my return on my investment . I would like to be able to, you know, give up 30 percent. I really struggle with giving up so much equity. Well, this is control. 51 percent is control. Were each giving up half. Were ceding control of the company. I think 300 for 35 percent. I cant do it. What do you mean . Coming up. Im just feeling emotional. You want to talk about it . I dont do well with unknown. I like certainty. I like structure. I feel really up in the air. when it comes to holiday shopping, my wife loves style, my son is all about technology and my daughter . She just loves horses. Dont you just love onestop shopping . I do. Ring in the holidays with buick. Get up to 20 below msrp on most 2017 luxury suv models. Thats over 7,100 on this Buick Envision essence. Experience the new buick this holiday season. 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Im putting money in at the same valuation you guys are. 250 and 50 is 300. Mmhmm. Im putting up the same amount you guys put up, and im asking for half. What do we want to do. Yes, is my decision. Okay, so we have a deal . We have a deal. Okay, we have a deal . We have a deal. Okay, and you know when you take this check, im 100 percent in charge . Ill see you guys back at the shop, okay . Okay. Sounds good. So yesterday, id made an investment with eric and brenna and steve to invest 300,000 into the business. We need to make sure that we fill this floor with people that can bring ideas that we dont have today. Were going to need to understand what the assortment is for the company. We will continue to make jeans, but i dont believe that, if youre in the apparel business, you should make things just for guys because thats not where the meat of the market is. We are going to create a womens jeans line. So i do not want to get into being a womens store. Its something i never wouldve done. This just puts us in a much bigger environment of competitors. Difference of opinion, thats why its good to have lots of different people with different ideas. My plan with this business is to increase sales and to improve the margins, and were going to do that by diversifying the product assortment, offering womens jeans and adding other products, like bags, belts, leather, and denim jackets, but what i know will really accelerate the profitability is adding products that have 70 and 80 percent margins, one of a kind pieces that you cant find anywhere else. Once you do all of those things, youll grow the revenue, and the overall margin of the company will grow to north of 50 percent. So, steve, were going to need to actually adjust the Financial Statement to properly reflect whats actually here. So if i am not only investing the dollars that i have put in so for, but if i am investing my time into it, you know, the company has got to be profitable. I feel like a Financial Statement is totally inaccurate. I want to have the books be updated. I want to have the inventory be properly stated on the Balance Sheet, if you could just help with that. Yeah, right, yeah. All right . We ready to get to work . Yeah. So im taking detroit denim to a thrift store, probably the last place they would expect me to take them. Everybody pick out 10 items. Were going to buy used denim for our other garments, and were going to embellish it, and were going to make unbelievable margins, go. All right. Watch out, im going to the menswear. Shocking. So i want to source product at a very low rate, so they can take them back to their shop, utilize the talent, the creativity and the denim they have to come up with redone products that we can sell for an explosive margin. How we doing . This is a little bit stressful. I mean, this isnt just browsing. This is doing something with a different mindset to it. Okay. So, youre. Try to have fun. Dont give a [bleep] eric doesnt have fun or enjoy any process or any idea that is outside of his framework. Eric, i think this is. What do you think . This make you laugh . Whats the f stand for . Farmington . Fun. Oh, fun, thats fun. Brenna, what are you finding to be the hardest thing . Im trying to find stuff. When i start to think about how im going to embellish them, i kind of froze up because thats really hard to do. If you pick 10 things, and seven of them are mistakes, its okay. Its okay to. Right. Ive got 10, but im a fast shopper. Nice job. I love a good thrift store. Okay. I was looking for denim in nice fades. I like the color, yeah. No. No . No from eric . Why . The pocket, the color, i think it must come up to here on a woman, the rise. Oh, i love that. Id rock these. Id rock the hell out of those. Like it or dont like it . I like it. Yikes. I really love this pattern. No, and no. Why not . The color, the size, the shape, the material. Really . No, no, no, no. Check th