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tv   The Profit  CNBC  May 16, 2018 1:00am-2:00am EDT

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lemonis: keep in touch, okay? jessica: thank you. lemonis: but sometimes it's better to get out while you're ahead. ♪ -lemonis: tonight on -what's the "f" stand for? -farmington? -fun. -lemonis: at a denim apparel business based in detroit, the jeans are stiff... -yeah. you've got to do the walk. -...and so are the owners. -no. no. no. -one of them stamps out any idea that isn't his own... -i'm fearful of just letting anyone do anything. -...while another obsesses about the smallest of details. -i've spent hours researching about exactly how to account for every half second. -...and the third cares only about his own payout. -doing the books is not of interest to me. -even though your a cpa? -even though i'm a cpa. yeah. -if i can't get them to embrace new ideas... this company will not survive as a men's jean company.
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...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. it's not always pretty... everything is going to change. everything. ...but i do it to save jobs and i do it to make money. this... let's go to work! ...is "the profit." ♪ -i'd really like to do a manufactured by detroit denim. -in 2010, eric yelsma founded detroit denim, a maker of high-end men's jeans. -they're 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.
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-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 don't have any sales online or obviously in store. -sales have sputtered out and profits are meager. -it's terrible. -yeah. it's stressful as hell. -but eric and brenna can't figure out why. -i don't want this to fail. -for the last several years, i've invested over $15 million in the fashion business, and i've had my eye on the manufacturing renaissance happening in detroit.
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when i put those two things together, i'm confident this could be huge. -hello? -hello! -oh, hi. -marcus, it's nice to meet you! -i'm marcus. -i'm brenna. welcome... -brenna? -brenna. yeah. -nice to meet you! -welcome to our shop! -this is really cool! -oh, thanks! -i wouldn't 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 that's 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. -i'm eric. -i'm marcus. how are you? nice to meet you. -good to meet you. thank you. welcome. -so i'm learning a little bit about your business. -okay. fantastic. -when did you start it? -2010. -and so the two of you, you're 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 we're also romantically involved. it can lead to some conflict. i'm very organized and he is like, "let's jump right in. let's do it."
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-there's a lot of friction. day-to-day, she will have lists of lists. -okay. leave your passive aggressive grumpy bear outside. -yeah. -that's an interesting dynamic between you two. -oh, it is. -and this would be considered raw denim. right? and so what makes this raw? -it's kind of denim in its original state. so it hasn't been stone washed or anything like that. -okay. yeah. can you maybe try to sell me a pair of jeans? -i think you're probably a 36, i'm guessing. -you've got some booty to work with. yeah. -so you are basically analyzing people's asses for a living. -i do. we look everybody's butt. yeah. -all right. that's good. my god! why don't just try on sandpaper! i feel like this is up in my crotch. -okay. -hey, there we go. -yeah. you've 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.
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-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 that's 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 there's no women's jeans here? -right. -why is that? -eric didn't want us to go into women's jeans. -do you agree with that? -no. not really. going to women's 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 women's jean." -eric only makes one type of jean. the kind of jean he likes. no women's. no washes. no embellishment. no distressing. if you don't like dark blue denim that's stiff, don't shop at detroit denim. what's the total revenue that the business will generate? -last year we were about 250. -okay. and so what percentage of your business is jeans?
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-so i'd say 90 percent. we're a jeans company first and foremost. -so how much are these? -$250. -that's 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 doesn't 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? -i'm 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. -here's the one he brought in that really won me over. -that was like one of the first bags i made. -and why don't you guys sell these? i mean, at least feature them out front. -i am the designer. it can't just be anything that kevin makes and has denim on is detroit denim.
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so i will personally handle any bags. -uh-huh. -so... -eric seems alarmingly rigid about the way he runs his business. and the fact that other people have creative products and he's not even willing to offer them, he's constricting, strangling, the ability of the business to grow. how are you? i'm marcus. -pleasure. marguerite. yes. -marguerite? -yes. -and so what do you do here? -i'm a production stitcher. -do you have ideas of things you would make here? -i would really love for us to get into women's 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 don't know if you've 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 don't think that designing things
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that you put on your body are fashion? -i think before fashion is utility. it's about what people live in to do what they need to do. -i feel like when i'm talking to marguerite i'm talking to the anti-fashion police. taking things so seriously, i think everybody needs to just calm down. it's denim. it's supposed to be fun. i'd 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 we're 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 point-to-point 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.
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and now we're back here. -right. -now i know why it takes 3-1/2 hours to make the jeans, because you spend an hour and a half walking around to get to the different places. -i've 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 over-thinks a lot of the things that we do. you are not prioritizing what's 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?
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-yeah. yeah. -i don't know that you and brenna are on the same page. -if you haven't picked up yet, she's exceptionally smart. i think the thing that's a challenge that i don't like is the hesitation on things. like, we should just be plowing through stuff. there's just fear of moving forward. she's always like, "we can't 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 they're made. and it's 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. it's trying to get back on its feet. and i think each thing we do brings a new opportunity into a pretty devastated area. it's 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.
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but the more i talk to him, i learn that his real motivation is to be part of the rebuilding of detroit. that's the motivation that i need to want to push things forward. ♪ how are you? -steve, this is marcus. -i'm marcus. -he's 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. i'm a partner at a cpa firm. so this is kind of my part-time gig. -how did you guys all meet? -steve came and bought a pair of jeans. -we just started talking and five seconds into this i'm 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? -i'm 65. brenna is 25. steve is 10. -how much money has been invested in the business overall? -i've put in 250. -steve bought in with 50 and then also put in a 50 loan.
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-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 i've 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 isn't updated since february. -right. -it's alarming. financials should be updated at all times. because you're making purchasing, pricing, hiring, firing. you're making all of those decisions based on what your financial statement is telling you. but if it's 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, it's $63,000, 25 percent. so a 10 percent drop in margins. your margins should be 50 percent, not 25 percent. i know these financials aren't right. because there's no way that the margins are 25 percent
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if he's selling jeans for $250 and the cost is $35. and what's more frustrating is, their partner, he's a cpa. i still have questions on the books, the financials, the balance sheet. that's very scary for me. -i have to go here in a minute. -i'm the partner who's the accountant. the financials aren't up-to-date. they haven't been done for six months, and, oh, by the way, i have to go. i'm going to digest these numbers, and we'll chat tomorrow, okay? thank you. -sounds good. -oh, marcus. -thank you very much. -i'm 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 they're not. steve, why are the financials incomplete?
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you know, i've got a full-time job, so spending the time to do that hasn't been a prime focus. -you know, ultimately, if you're 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 people's hands from detroit. -mm-hmm. -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
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and the creation of new products, buying textiles, trying new things and turning them into real high-margin moneymakers. -so you'd want to see a wider assortment or something? -i think we have to work collectively with the team to allow creativity to breathe. -that's a bit of a shift. -is it? what's so shifty about it? -jeans aren't going to be our primary focus. -this company will not survive as a men's denim jean company. -$300,000 sounds like a reasonable dollar amount. on the personal part of it, i have put money in, and i'm 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. -we're each giving up half. -we're ceding control of the company.
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-i think 300 for 35 percent. -i can't do it. -what do you mean? -coming up... -i'm just feeling emotional. -you want to talk about it? -i don't do well with unknown. i like certainty. i like structure. i feel really up in the air. is it to carry cargo... greatness of an suv?
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-giving up 50 percent of my investment, how do i get my return on my investment? -i think 300 for 35 percent. -i can't do it. -what do you mean? i'm putting money in at the same valuation you guys are. 250 and 50 is 300. -mm-hmm. -i'm putting up the same amount you guys put up, and i'm 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, i'm 100 percent in charge? i'll see you guys back at the shop, okay? -okay. -sounds good. ♪ -so yesterday, i'd made an investment with eric and brenna and steve
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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 don't have today. we're going to need to understand what the assortment is for the company. we will continue to make jeans, but i don't believe that, if you're in the apparel business, you should make things just for guys because that's not where the meat of the market is. we are going to create a women's jeans line. -so i do not want to get into being a women's store. it's something i never would've done. -this just puts us in a much bigger environment of competitors. -difference of opinion, that's why it's 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 we're going to do that by diversifying the product assortment, offering women's 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 can't find anywhere else.
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once you do all of those things, you'll grow the revenue, and the overall margin of the company will grow to north of 50 percent. so, steve, we're going to need to actually adjust the financial statement to properly reflect what's 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 i'm taking detroit denim to a thrift store, probably the last place they would expect me to take them. everybody pick out 10 items. we're going to buy used denim for our other garments, and we're going to embellish it, and we're going to make unbelievable margins, go.
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-all right. -watch out, i'm 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 isn't just browsing. this is doing something with a different mindset to it. -okay. -so, you're... -try to have fun. don't give a [bleep] eric doesn't 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? what's the f stand for? -farmington? -fun. -oh, fun, that's fun.
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-brenna, what are you finding to be the hardest thing? -i'm trying to find stuff. when i start to think about how i'm going to embellish them, i kind of froze up because that's really hard to do. -if you pick 10 things, and seven of them are mistakes, it's okay. it's okay to... -right. -i've got 10, but i'm 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. i'd rock these. i'd rock the hell out of those. like it or don't 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.
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-check this bad boy out. -yes, it's awesome. -no. -i actually thought it was an interesting pick. where's the creativeness? where is the willingness to take a chance? if he's going to ultimately be the leader of this business, he has to learn how to motivate his people, and how to listen to them, especially their ideas. i think it's good to open up our mind. don't just make or buy things that you like for yourself. -good rule. -so i'm adding a new line of product. we will build a business off of collecting garments in detroit, and embellishing it with the talent that we have and reselling it. -i see a few potential pitfalls. -this is a million-dollar-a-year business. -i think this is a great idea. -yeah, i love the idea. -what i love about this vintage product idea is that it gives us the ability to hire more people, expand creativity and grow our margins. -are you ready? -yeah. -let's boogie. thank you.
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i thought it would be a good idea to have everybody get one thing out of this pile, and the goal is to spend an hour to embellish it using denim and any other textile that may be available to you, and i'm really looking for creativity. don't need to have a tight process about it, brenna. -okay. -it can literally be a total free-for-all. just have fun with it. that is so cool. -and then, because i have to include denim, i think this herringbone is interesting because it is a similar visual quality to this. -very cool. -we're... actually, we're putting a waistband onto the jacket. -as i look around the room, everybody seems to be having fun. kevin is working. eric is working. marguerite is working, and then, there's brenna. she doesn't know what to do. -i'm rushing, marcus, because i got a deadline, got to make the coat. -okay. let's try to finish in a half hour, okay? -oh, boy. -oh, boy, what?
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-that's... you're pushing it. i wish i had more time. i feel like i'm cutting corners on my... -this is just about inspiration and ideas. -right, right, right. -this isn't about, "you're going to hang this at the store." we got to somehow break her out of that mold and have her see things differently, or this business is never going to grow. she's the one driving production. she's also the one that can slow it all down. -i'm confused, and i don't know what i'm right now, but... -enjoy it, and don't take yourself so seriously. all right. almost done. -oh [bleep] -isn't that fun? -i think i messed up. i'm sorry. -what's wrong? are you okay? coming up... tell me a little bit about what your background is? -i went to fit in new york. actually, the jacket i'm wearing is from remnant leather pieces. -i'm fearful of just letting anyone do anything. -it makes me nervous. i don't want crappy looking pieces.
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ask your hep c specialist about harvoni. -i look over, and i see brenna actually crying. she's so distraught that it's literally broken her. how are you? -i'm just feeling emotional. -you want to talk about it? -i don't do well with unknown. i like certainty. i like structure. i don't know what is going to happen in 10 minutes, so i feel really up in air. -and the feeling that you're having, by the way, is not abnormal. some new person just walks, and all of the sudden, instead of driving right, you're driving left. -right. right. -but i'm going to push you against the wall until it's uncomfortable. -we're not ever doing this because we wanted some easy road. we're going to embrace this challenge. it's not easy, but it's worth it. -i never have a motivation to intentionally break people. i wanted to push her because i believe she's super talented, but i have to break her from her mold. ♪
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you almost ready? -i'm just going to pin some stuff on, so you can get the idea. -okay, hit it. i thought maybe everybody can just go through their items. -i had this gap jacket. i swapped out the collar for the herringbone. -can you throw it on? -sure. -i love it. -i would buy that jacket, and i wouldn't even think twice about it. i think it was simple but classic and clean. i think you did a great job. -thank you. -i added a piece of camo denim and an outside belt to it. -i love it. okay, kevin. -denim jacket, i put... -oh, on the... -i love that. yeah. -elbow patches. -oh, leather elbows, nice. -i love it. i took a beautiful khaki-colored jacket, and i replaced the capelet and the front pockets, and then, the side ties with the herringbone. -i think it's spectacular. -that's dope. -i had forgotten that i love to sew like that.
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it reminded me of sewing when i was just at my house making something for myself or my friends, and mistakes were okay, and it didn't have to be perfect, and it was really, really nice. -i could see a jacket like that in barney's and doing very well. -yeah. -what i'd like you guys to do is to continue to build an assortment, and continue to embellish these. -i don't think it can just be like, "anything that we put out here, and we feel that we're creative about it, is detroit denim." at that point, detroit denim is just a [bleep] show. -we can respectfully disagree, and that's what i want to work with you on is just getting comfortable, and just letting other people do things. maybe just reflect on it a little bit. -i will. i will. -good job, by the way, great job. -thank you. -so, steve, how we doing on the inventory? i really want to follow up on steve's completing the financials. my deal with him at negotiation is, "if you're going to be a partner here, you have to contribute."
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-so, in moving forward, doing the books is not of interest to me. -doing the books? -yes, on a monthly basis, on the monthly close, somebody else has got to be handling that. -you don't want to have anything to do with the numbers. -yeah, i don't want to have to... -even though you're a cpa? -even though i'm a cpa, yes. -i, personally, sense that you just don't want to be here. -yeah, i've thought about it, and i think it is time for me to move on from this. -okay. it's become obvious to me why steve wants to bail: because he knows he's going to have to contribute in a meaningful way to the company. yes, his equity was reduced, but a smaller amount of something big is better than nothing. i don't want him here just tagging along for a free ride, and if he wants to go, "bye." the $50,000 debt is easy, and i think with the $50,000 equity, one of the easier solutions could be to buy you out, and we just keep his equity. -right. -is that a fair statement?
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-i think there's a part of you that wants to be here, still. i have faith in what we will grow to. you've been with it through all of the struggle, and i want you to be with it through all of the... through the success. -why are you doing it? i mean, he's a smart guy. -oh, oh, yeah, go ahead. -yeah. -i don't know how much more clear steve has to make it to brenna that he doesn't want to be here. this is another example of how difficult change is for her. i want to have the books be updated. i want to have the inventory be properly stated on the balance sheet before that happens. if you could just help with that... -okay, yeah. -we'll go from there. -oh. all right. -we'll keep moving. -you guys understand? -yeah. -yeah. ♪ -creating one-of-a-kind pieces is one thing, but after you add women's jeans and other leather goods, we're going to need more help than this. could you guys handle 30,000 units? -yeah, we could. -so i'm taking eric and brenna to autograph, a local facility that specializes
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in high-volume cut and sew. -this is a no-brainer. i love it. -having our patterns precut will lower our production time, increasing efficiency and margins while keeping jobs in detroit. i'm also taking eric and brenna to the ford museum. in any efficiency process, the one thing that has to happen is what? -movement. -he knew it, good job! -like, on the first one, you nailed it! in order to be innovative, you have to be efficient about what you're making, or you'll never have time to do it, and so back at the shop, brenna has radically changed her process for making jeans. it went from 67 steps down to six steps. -cut, prep, front panel, back panel, marriage and finishing. -we're going to lower our manufacturing costs, and we're going to improve the output. everybody wins. ♪ hi, there. -hello. -how are you? i'm marcus. -marcus? rich wright. -nice to meet you, sir. -nice to meet you. -welcome to detroit denim. -hi, rich. brenna. -brenna? nice to meet you. -welcome. -and i'm eric.
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-one of my main missions at detroit denim was to put people to work. the way we're going to do that: we're going to interview people. the new skus that we're trying to create require more labor, and the fact that we're making one-of-a-kind pieces requires more creativity. -i brought a few samples of stuff that i've done with denim with denim and leather combined, so... -oh, right. -this is one pair, and this has got the racing stripe. these are actually my design. -got it, got it. -i see a few different things. you're not strong on the sewing, the production part. -i'm a local detroit designer. i created this jacket. -i love your style. -in terms of competency, that would not pass. i would want some things done to it. -the fact that eric is still trying to suppress creativity has got to stop. -tell me a little bit about what your background is. -i grew up in detroit, and i went to fit in new york, so i studied there for isaac mizrahi. i worked for rachel roy for a couple years. -we are going to hire new people.
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we are going to expand the business. we are going have other people's ideas other than just eric's. -i moved back to detroit in 2014, and really, it's been with the idea to pursue my own work, and even, actually, the jacket i'm wearing is from remnant leather pieces, so it was using... -you made that jacket? -mm-hmm. yeah. -wow. -i'm fearful of just letting anyone do anything. it makes me nervous. i don't want crappy looking pieces. -coming up... -we have to buy you out. -when you look at this, 50,000 of it is debt. 25,000 is equity. i thought it was more than that. -i always thought the original equity portion was 50.
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-i'm fearful of just letting anyone do anything. it makes me nervous. i don't want crappy looking pieces. i want this brand to mean something and stand for something. i want this to be a certain way. like, i want this to be something that i would want to buy from. -we all agree that it needs to have experience in the industry. they can't just, like, sit down at a sewing machine. this isn't, like, after-school class, but the demand that you're going to have you can't fulfill right now. if eric continues to put up a fight every time somebody else tries to contribute, this business is going to go nowhere.
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we are going to hire new people. congratulations for joining the team. we are going to expand the business. so that's a yes? -that's a yes. -we are going to have other people's ideas other than just eric's. i have to figure out how to get inside his head and change his mindset. you're very controlling as a designer. look, what we're trying to do, here, is, like, we're trying to employ people. -maybe i'm making that harder than it is. i will absolutely chill. someone said, "you got to have faith." -all right. i'll see you tomorrow. -thank you. -the goal in my mind of coming here is just to start to get feedback on the different categories to make sure we're heading in the right direction. -for each one. -right, got it. -it just so happens that i've gotten us a booth at the art, beats & eats festival in detroit. annually, it brings in about 400,000 people. the original goal was to just get the brand some exposure, but if we can bring some of the products, especially the ones that other people created here, and get some good feedback, maybe eric will actually loosen up.
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-we're just kind of here today to gauge interest and really get people's, like, objective feedback. -can i try on one? -yeah, sure. it looks great. -so i actually have a friend who collects denim jackets. -yeah? -she would love this. -yeah? -so do you do all, like, your own unique designs? -mm-hmm. we use all u.s.-sourced materials, and we pride ourselves on doing it here in detroit. -it feels good. -it's kind of a unique look, right? isn't that cool? -you got something good, here. i like it. -yeah, and just kind of a lighter, more beige, kind of cool-looking. -i love that type of stuff. -thanks for the feedback, guys. -thanks so much, guys. -i was shocked with how much people liked the one-of-a-kind pieces. clearly, there's a market for it. -these are insanely rare. -it's got the bs, yeah. -you see how it has the bb? that's a big deal. -and you can see eric really starting to dig, "hey, we actually have something legit here." -hey, everybody, let's make some noise, detroit! [ cheering ]
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-what we did, and what we started with, was making the best jeans that could be made anywhere, but made here in detroit with this whole purpose of hiring and training detroiters. -everything that we sell allows us to hire and train more detroiters because we are dedicated to being good detroit neighbors. [ cheering ] -i started, it was, like... it was only just salvage, and there's so much more beyond it than just to be this true heritage thing. -yeah. -people want more than that. -all right. so we're going to need to have a lot more one-of-a-kind pieces made. -yeah. -i'm going to take you to a giant denim festival in new york city. -ooh. -after all this work, i've decided to take the company to the largest denim festival in america. there will be thousands of people there. there will be denim-heads. there will be bloggers. it's going to allow them to expose themself to new customers and to really be considered one of the elite brands in america.
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-holy [bleep] -so you've got to bring a lot of stuff. -okay, okay. -we got this. we got this. -okay? -thank you. i'd like to look at our numbers, and see what that means in terms of what our margin is. -yeah. -i got a call from steve, and he said the financials are done, and he wants to talk about his deal. the margins, properly stated, are 44.3 percent. -yes. -i see this as an improvement, but it's still not where we need. -oh, yeah. you're still 10 points away. and so the balance sheet is also cleaned up, steve? -i think it's a good point for me to be able to kind of hand off. i feel like this is kind of a good, positive move for everybody. -we have to buy you out. -i look at it on a couple of different ways. i think, first, it's important to quantify that equity portion, which is 50,000. -when you look at this, 50,000 of it is debt. 25,000 is equity. 25? i thought it was more than that. steve has been consistent since i met him that he put in $50,000 in equity and $50,000 in loans,
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but once the financials are all cleaned up, and we can see where the money came in and where it went out, it looks like it's only 25,000 in equity and 50,000 in loans. what gives, here? what's the real story? -i always thought the original equity portion was 50. -i mean... -if your business is in trouble, and you need my help, log onto theprofitcasting.com.
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50,000 of it is debt. 25,000 is equity. 25? i thought it was more than that. -i always thought the original equity portion was 50. -that, i mean... -are you... -that's the... that was accounting work and... -now, wait. whoa, whoa, whoa, whoa. -25,000 in sweat equity? great, can i get my financials done and get a refund for my 25 grand? 25,000 in cash and 25,000 in sweat equity are very different than 50,000 in cash. so 25 in cash and another 25 in trade. -services and work and... yes. so maybe that's what you guys were thinking of. -understanding this now, i don't want you here when you don't want to be. having steve be on board feels like dead weight to me. -in this moment, with steve leaving, i feel like it's almost freeing for brenna, where she's starting to get comfortable with change and get comfortable with new ideas where before she would have a total meltdown,
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and now she's just rolling with the punches. it's part of life, it's part of business, and she's getting comfortable with it. so your total investment is at 75,000. 50,000 of it is debt, 25,000 is equity. -yes, yes, a good chunk of change. -we thought it was 100 before. -yeah, i did. -okay, so that's the correct number, and how much equity would you have for 25? -five percent. -right, if it's five percent, i'll write another check for 25,000, and i'll take his five percent. he's entitled to his debt back, so that money needs to be paid back. my total investment will be 325, i'll have 56 percent, and the company is debt-free. -does that work? -yep. -okay. -you going to buy us a beer? -[bleep] he better buy you dinner. -i mean, i'm a little tight. -okay? all right? we're good? -we're good. -all right. great. ♪ with the denim days festival just 2 weeks away,
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the team has been cranking out production, new women's jeans, new accessories and the new refashion line. with all the patterns being precut and autodrafted and the new process being more efficient, jeans are able to be made in 30 minutes instead of 3 hours. this will result in us having plenty of product for denim days, both women's and men's. ♪ as i'm walking into the denim days festival, i have this nervous energy because i know there are other really credible denim brands from around the country that are going to be there. how are we going to look next to them? what's our booth going to look like? if people don't like it, then i guess it's back to the drawing board. holy [bleep]. for exclusives, extras and business advice, visit theprofit.cnbc.com.
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-holy [bleep]. -hi, marcus. -hello. -how are you? -how are you? -i'm great. how are you doing? -look how cool this looks. -it looks good, huh? we're really excited to be here. hard at work. -how are you, man? -this looks unbelievable. what's the reception been from people? -tons of interest in this stuff, like, what's this detroit thing going on? so this is our refashioned stuff. -i love the tag. -yeah. eric designed that. -yeah. i think it helps a lot. -kenyetta, one of the gals that came in for the interview, she did a couple of these pieces, and then marguerite went to town in trench coat land. -oh, this one is cool. -that's the "hamilton" jacket.
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-this really came out good. -do you like our trenches? -i think this looks awesome. -these are a little bit more specialized. like, this is an old vintage piece, and it's all hand-stitched. so that's about as high-end as we go, and that would be a $600 piece. -and so the margin on the jackets are what? -i'd say 75. -which is what the target was? -yeah. -then we have a few things that kevin has done... -okay. -so a little bit smaller items. -i love this. it's so soft. this is beautiful. -yeah. he did an amazing job. -can you take me through the women's jeans? -yeah. sure. we came up with four cuts of jeans. the cuts are all about body type from the flattest to the curviest. -feels really good. feels really great. -is there a little stretch in them? -yep. -how do they feel? they feel really good because they, like, bring you in, but you feel sturdy, and then they support your butt. -this is all completely unique. -i'm getting this one. -look how cool those are. -they're very unique. i like them a lot.
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-jacob. -all right. -the progress of detroit denim has been somewhat amazing. historically, they generated about a quarter of a million dollars just on men's jeans. already, production and sales are up about 25 percent, and it wouldn't surprise me if the revenue at least quadrupled in the next 12 months. -i'm not so scared of failing anymore. it's not, like, if something goes wrong, that's the end of the world. it's like, "well, let's just keep pushing." -i couldn't believe that things were as calm and sensible as they were. -and i think the biggest difference for you, eric, is that you got out of the way, and you said, "you know what? eff it." -yeah. -we've hired about seven new people. we created new products, and people love them. and by the way, here is a newsflash. it's fashion. -i never would have done it without you. -well, i couldn't have done it without you. -i love you, baby. -you're awesome, baby. -all right. now go sell something. ♪
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