weakness. this wasn't a charity. this was a business deal, and he shook my hand. so i'm gonna put a lien on the building, and i'm gonna do whatever it takes to get my money back, make no mistake about it. lemonis: you guys ready to get started? so tonight we're gonna give you an inside look at murchison-hume, the cleaning products company. now i have a special guest that i brought on, kathy ireland is here, and she joined me on this interesting episode. we'll call it interesting. kathy: interesting. lemonis: kathy is the c.e.o. and founder of kathy ireland worldwide, which is a multidimensional holding company that has everything from fashion to furniture to socks to technology. did i miss anything? kathy: yes. amber: yeah, several things. lemonis: i probably missed several things. kathy: we actually were inspired after doing the show with you. we started a cleaning product line. lemonis: what? kathy: kathy ireland clean by naturezway.

it'll be launching later this year. lemonis: can we hold, please? pause, hold. if you were inspired, does that mean... kathy: i was inspired. lemonis: does that mean that i... kathy: we'll talk. lemonis: oh, thanks, kathy. that makes me... kathy: but you inspired. lemonis: now i feel... oh, yeah, that's... i'm here to make money, not inspire people only, but... in the last seven years of doing "the profit," i've visited nearly 100 businesses. let's go make some money! [ horn honking ] and i've traveled the country trying to fix the people... and you do $1 million a year? you should be proud of that. man: but we don't know how to keep any of it. lemonis: ...fix the process... you see? it flimsy. don't ever make these again. you don't sell them. ...and create a few products. juli: it reduces anxiety and depression. lemonis: i kind of like it. i spent countless days working on these companies. how much money did you burn through? parker: $650,000. lemonis: but we can't always fit everything i'm thinking into the show. so tonight we're gonna give you an inside look at an episode from season four. it's murchison-hume.

over the next hour, i'm gonna take you behind the scenes to share with you what i was actually thinking during filming... i did like the fact that she started her business out of a need to solve a problem. kathy: mmm. lemonis: ....share some secrets... pluses and minuses for the change? max: i mean, i see all minus. lemonis: all minus? max: yeah, because the name, obviously, it's insipid. kathy: seemed like there wasn't an openness to even discuss it. let's do a focus group. let's see how people respond to it. lemonis: ...and give you an honest assessment of my decisions. how much money do you think the business needs? max: about $1 million. what? why are you laughing? lemonis: my name is marcus lemonis, and this is an inside look at "the profit." kathy, what is the actual business name? kathy: our company name is kathy ireland worldwide... lemonis: worldwide. kathy: ....and our brand includes everything from fashion, apparel, home furnishings, lighting,

and i have a book that just came out this last month. lemonis: high five, yeah. kathy: thank you. it's a novel. it's fictional, so... amber: what's the name of it? kathy: it's "fashion jungle." i mean, it's such... it's been such a journey. lemonis: billion-dollar company? kathy: we're really grateful. we've been... amber: i love you, kathy. lemonis: it's a big business. kathy: we're -- we're grateful. lemonis: okay. amber: let's do it, bang. lemonis: cleaning products are a $50 billion industry, and apparently kathy knew that. so she just basically said, "i'm gonna do it myself." hello? lillian: hi, i'm lillian. lemonis: nice to meet you. lillian: yeah. peter. peter: hi, marcus. i'm peter. lemonis: nice to meet you. peter: nice to meet you. lemonis: i'm marcus. lemonis: how are you? hannah: hi, hannah. lemonis: nice to meet you. taylor: i'm taylor. lemonis: nice to meet you. max: who's for tea? i'm making some. oh, you're here! lemonis: hi. taylor: this is max. amber: "oh, you're here." lemonis: she's like, "oh, you're here." i was meeting the company mascots.

max: oh, yes, our fur babies. lemonis: they normally have this kind of disposition? max: yes, they're very calm. lemonis: do they take on their owner's disposition? max: probably not. lemonis: okay, and so why did you start this business? max: i had a young 18-month-old who was born with eczema, asthma and allergies and allergic sensitivity. so when i was cleaning the house, it would exacerbate them, and i thought, "i'm just gonna make my own." i would get, like, plant-based cleaners. it was absolutely non-toxic. lemonis: and that's the cleaning agent? max: yes. lemonis: wow. i did like the fact that she started her business out of a need to solve a problem, and i think oftentimes business owners don't do that. kathy: i love that about max, too. it was a need for her child and that she recognized, you know, surely there's got to be other families who are struggling with this and really seeking to find something that would work. lemonis: solve it. amber: max had good intentions. lemonis: yep. kathy: mm-hmm. lemonis: where'd the name come from? max: it's peter's father's two middle names,

roderick murchison hume kater. he's on the wall over there. lemonis: have you had any headwind in the states with the name? max: oh, i've had resistance, yes. lemonis: merchant-sin, i just... max: yeah, it's murchison. lemonis: murchison? max: yeah. lemonis: not merch... max: there's no chin. peter: there's no "n." lemonis: murchison-hume. max: i just thought it sounded like it had gravitas. lemonis: when you name your brand, you want it to be something memorable, and it has real clarity to it, not something with gravitas like a law firm. are these the products right here? max: yes. lemonis: what are the price points? max: so the triggers are all $9 at retail. lemonis: $9? max: i know. lemonis: who can afford that? max: yeah. amber: kathy, you know, with your, let's say furniture, a lot of the products that you deal with, you're almost the complete opposite of someone like max because you're selling more of this relatable product and price point. it's in wal-mart. it's all through wayfair. kathy: we do have our luxury brands, but we started with our opening price points, and people said you couldn't do that. you can't start at mass and move up, but nobody had a good reason why,

but you have to build that trusted relationship with a customer. once you build the trust you have to earn, then they'll grow with you, and they'll say, "okay, i grew up as a little girl sleeping in this princess bouquet bed. i'm getting married now. i'm gonna spend a little bit more money on this gown, on these diamonds," whatever it is, but you've got to build that trust. and when you're starting, it's so important that you really know who you are serving. our customer, that's my boss, and if i don't listen to my boss... lemonis: they'll fire you. kathy: we're all in trouble. amber: bang. lemonis: where do you manufacture it? max: we manufacture it in skokie, and we ship it to dallas. lemonis: third-party logistics business? max: correct, 3pl, yeah, yeah. lemonis: that seems inefficient. so for a typical bottle like this, what does it cost? kathleen: 37 cents for the bottle. lemonis: okay. kathleen: closure is 14 cents. lemonis: okay, and then how much is the label? kathleen: the label is 18 cents. lemonis: okay, so now we're at 69. kathleen: the filling is 35 cents. the box is 6 cents. the partitions are 7 cents.

lemonis: okay. kathleen: and... lemonis: ingredients. kathleen: ...is 12 cents. lemonis: so at $1.29, it's still sitting in chicago. where's the next place it goes? max: dallas. lemonis: okay. what does it cost to get it to dallas? kathleen: 50 cents. max: 50 cents a bottle. lemonis: murchison products are made in chicago, then transported to dallas, and then shipped out from there. to get them to dallas adds another 50 cents of cost to each individual unit, but keep in mind murchison-hume, like any wholesaler, sells to retailers at twice its cost, meaning that the 50 cents turns into $1 by the time it gets to the retailer. then the retailer adds its markup, and that $1 becomes $2, and now an extra $2 have been tacked on to the retail price just because of dallas. and what do customers do when they see that inflated price? well, you take a guess. they walk away. amber: why would max do something like this? it seems basic to have it in the same state.

lemonis: it seems basic when we explain it that way, but they forget that the multiplier effect from them to distributor, distributor to retailer, retailer to consumer. it just gets lost, and so you start peeling that thing back. you can end up actually being more profitable as a company because as your price goes down, your velocity of sales should go up. kathy: when you're in it, it can be difficult to see it. lemonis: yeah, right. walk me through this. max: so we used to have a text-heavy label. i wanted to make it easy for the customer to identify, so we made some icons. lemonis: alright. i'm gonna challenge you on that. max: oh, no. lemonis: i feel like it's, like, buying products for my castle or something. taylor: the chair is kind of like a chair that would be in a castle. max: easy to identify, stylish, chic. lemonis: anybody have a chair like that in your house? kathleen: no. max: i do. lemonis: of course you do, lady. do you think they're too fancy? taylor: the bun is pretty tight. max: it's a chignon. lemonis: what is that? max: it's french. lemonis: it's probably french for tight-ass product.

look, forget about the fact that these icons alienate regular people. the bigger problem with them is they don't actually describe what the product is. like this lady with the bun, you would think that's hair-care product. right? nope, it's bathroom cleaner. taylor: we don't look like a cleaning product. that's royalist. it looks, like, you know, the queen of england would have it, and i don't think it should. we make toilet cleaner. lemonis: what is the best in show trademark? taylor: we own that. that's registered. lemonis: oh, really? taylor: yeah, we bought that. lemonis: look, i have a pretty big investment in the pet industry. huge. it's a chain of pet stores called bentley's. now, i don't know much about max's pet-cleaning products. but the brand best in show? well, that trademark is worth something. i'd like to actually go over the financials with everybody. kathleen: okay, okay. lemonis: when i look at 2015, $900,000 of revenue, $489,000 of cost of goods, and all the expenses is $888,000.

kathleen: mm-hmm. lemonis: so last year, the company lost $477,000. kathleen: under the c.e.o.'s watching. lemonis: is the c.e.o. here today? lilliana: the c.e.o. left. she got pinched by "playboy." max: she's doing their digital marketing. lemonis: why was there a c.e.o.? max: i don't feel qualified to be a c.e.o. lemonis: cost, sale, gross profit. max: it's not hard. lemonis: yeah. max: to minimize our 3pl cost, we're gonna try to bring in-house our direct-to-consumer shipping. so we're gonna fulfill downstairs. lemonis: so you're gonna get in the distribution business in an office plaza? max: kind of, yes. kathleen: we're really not hoping to do so. lemonis: it's not a distribution center. it's a little office in a strip mall. secondly, i don't think it's ever a good idea to distribute products from one coast to the other when you know that your buyers are all over the country. you own approximately 80% of the business, and the assets that are left inside the company are $289,000 of inventory sitting in the warehouse.

so on the balance sheets, $80,000 in payables. there's $53,000 in cash. your past two payables exceed your cash. kathy: her brand could be tea. she could do a great tea brand. amber: next year, kathy's gonna launch hume tea. lemonis: oh, if that [bleep] happens... you're sort of out of gas. kathleen: definitely. max: marcus, some tea? even when i mention the numbers and the fact that they were really bad, i felt like i was at afternoon tea. can i spend a minute with max, just her and i? max: sure, definitely. lemonis: at what point are you gonna worry that your doors are about to close? i think she is actually in denial. max, it feels like you guys are slightly delusional about what's happening. it's like it doesn't feel like a company in crisis to me. it feels more like appearances than reality. max: we should have been out of, by all rights, we should have been out of business three months ago. lemonis: so then why are you continuing? max: i just can't give up because i don't want to let everyone down,

and i will have moved my family away from our beautiful house to come out here and live in a little house, that's too small for us, on a highway. i owe it to my family to not give up and stay and figure it out. lemonis: okay. let me pore over these numbers, and you and i will connect a little bit more. max: i'll repair my lipstick. lemonis: how did you feel during that moment? kathy: it made me really sad because i want her to step up and be strong. lemonis: you think it was a tactic, or do you think it was real emotion? kathy: i don't want to make that judgment on her. lemonis: it felt sincere to me. amber: i actually think in that moment, she was really embarrassed. i think you were telling her what was wrong with her business and her finances, and someone who everything had to be perfect, getting real is hard for her. i think she wants to look and be perfect. i mean, that's her, in my opinion.

♪ lemonis: good seeing you. good to see you. peter: good evening. lemonis: so how's the process been for you guys so far? max: very good. lemonis: how much money do you think the business needs? max: i think it needs about $1 million. lemonis: i was like, "how'd you come up with that number?" i don't think you need $1 million because i'm not the person to give you $1 million. max: okay. lemonis: i'm not even the person to give you a half a million dollars. it's too big of a crap shoot for me, and so i'm not willing to invest more than $250,000 in the business, and i feel like i'm gonna have to do more leg work than i typically would, and so my offer has to be for at least 50%, at least. max: that's gonna be a problem.

i'm sorry. ♪ okay, get it together, max. kathy: she's walking away, and i didn't like that. when things get tough, you don't walk away. amber: yeah, stay at the table. kathy: yeah. amber: i think as a woman... i don't know how you feel, kathy, but when i see that, i get so angry. kathy: i do, too, because we work so hard. like, don't do that. lemonis: what's so weird is, as the non-female, i felt really bad for her. amber: i just... i would like to see a woman be stronger than that. lemonis: i think for me, what i was more bothered by, i wanted to have that open debate of, like, how you arrived at that and what you're gonna do with it. kathy: emotions or not, she could have continued the conversation and moved forward. lemonis: the fact that taylor came here with your direction and had her manipulate products was wrong.

it was back to that, "what sort of impression and image am i creating?"

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that's simple. easy. awesome. go to xfinitymobile.com today. you ever launched in the market? kathy: socks, a single pair of socks made from recycled soda-pop bottles, and i was an aging pregnant model at my kitchen table. i mean, doors slammed in our faces. we made some big mistakes along the way, and there were times when we slept in airports to save money.

it's not a sacrifice. it's a bold investment. lemonis: part of the process. kathy: it's part of it, and it, you know, made it possible for us to sell our 100 millionth pair of socks, but what... lemonis: how many pairs? amber: oh, my gosh. kathy: 100...well, that... we had a celebration when we sold our 100 millionth pair. it was like, "yay!" lemonis: and how long ago was that? kathy: that was many years ago. lemonis: and how many do you think you're up to now? kathy: i don't know. lemonis: oh! amber: a hundred million. lemonis: and i love the fact that you're modest about it. a hundred million. ♪ ♪ max: i'm sorry. i needed to compose myself. lemonis: yes, you do. max: the lowest we would go would be $500,000 for 30%. lemonis: i'm willing to go $250,000 for 30%, and i want to own 75% of the best in show trademark.

max: can i have 30% of best in show, since i came up with it, and i will work my butt off for you, and i have ideas. lemonis: yes. oddly enough, i probably would have paid $250,000 for the best in show trademark. even if i never wanted to manufacture anything, i could license the crap out of it. kathy: right. max: i'm down with that. should we shake? lemonis: we have a deal? max: we do. lemonis: okay, thank you. peter: well done. lemonis: thank you. max: thank you, marcus. wow. ♪ lemonis: the deal that we made is for me to invest $250,000 into the business. to drive down the actual cost of goods, these products cannot cost $1.79 for a bottle, and it's my opinion that the brand feels disconnected from the average american. max, i think you struggle with your ability

to be a good c.e.o., and my goal is to give max the tools and the resources and the contacts and let her run her company. max: that's all i need. lemonis: yeah, great. good, good. amber: you used to tell me, like, off-camera that it bothered you when max would say that she didn't think she was qualified to be a c.e.o. why is that? lemonis: well, because i don't think a c.e.o. is a title. i think it's a philosophy, and if you have deficiencies in certain skills, then you can surround yourself with people. but why would you not want to be the leader, set the tone, set the tempo, set the culture for your organization? because, if not, then just -- just be an employee. kathy: it feels like a lack of confidence. amber: are you the c.e.o. of your business, kathy? kathy: yes. lemonis: even though she doesn't know how many pairs of socks she's sold, at least publicly... amber: even though she's up to, like, a billion pairs of socks. lemonis: four billion socks. i'm gonna google that number. i'm gonna find out by the end of today how many billions of socks you've sold. ♪

max told me that she sold her products at the container store. so i wanted to head over and see what it looked like. what i'm ultimately looking for is to see the company's positioning on the shelf. they're giving you a pretty significant... max: they always give us great real estate. lemonis: it normally looks this good? max: always on endcap. lemonis: wow. max: they're very good. lemonis: does it typically look this plentiful? alana: it's usually just one row that we've got down toward the bottom. lemonis: which shelf would it typically be on? alana: it actually would go right along this line here. lemonis: this one here? alana: yes. lemonis: and so when did we get a better space? alana: we just moved it yesterday. we were asked to move it up to the top. lemonis: okay, by the regional manager or... alana: no, that was something that i think someone from murchison-hume who had asked us to do that. max: taylor came and did a tidy up. lemonis: a tidy up. to find out that employees came in and moved it around and restocked it, it was back to that, "what sort of impression and image am i creating?"

and i don't know if i would have been angry if i would have gotten there and it would have been on the bottom. i would have been like, "okay, great job getting in the container store. it's an amazing company, congratulations. now what do we need to do to move up, instead of trying to trick everybody?" amber: right. lemonis: that's a little weird that this got staged. it's a little weird. max: well, you know, it's like putting lipstick on when you know you're going to be on television. lemonis: you know that you got busted, right? the fact that taylor came here with your direction and had her manipulate products, i do not agree with it at all, and it's wrong. max: you know i hate clean evolution. taylor: i think it could be interesting, yeah. max: there's no way in hell. [ groans ] kathy: walking away again. lemonis: if you're looking to take your business to the next level, log on to...

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lemonis: okay, they've dedicated to merch one shelf,

and so what we need to make sure is that we narrow the products down to whatever is gonna give them the fastest turn and the greatest margin. what i learned is that max's product isn't doing that well. it's not up to the standards that container store would like it to be to be in an "a" position, and that's a function of price, the branding, the messaging, all the things we need to fix. i also want to drill deep into the numbers so that we know what products sell and what products don't. doesn't it baffle you that people don't do that on a regular basis? kathy: yeah, yeah, yeah, absolutely. lemonis: have you had products not sell or businesses not make it? kathy: oh, yes, we've had -- i mean, it's getting in solution mode and asking the tough questions and being willing to really... lemonis: even if you don't like the answer. kathy: even if you don't like it. but you know what? it's a lot better getting a tough answer than it is not making your numbers, not making payroll. lemonis: yeah. amber: yeah. lemonis: so, kathleen, what i need you to do is to build one sheet of paper that takes all of the skus,

puts the margin, and then we'll take our top skus, and we'll push those products. max: alright. lemonis: she's like, "whatever." lemonis: i want to work on the label so that it maybe is a little more relatable. let's sit with taylor and work on some ideas. max: alright. lemonis: alright? when you think about the soap, what would you change visually? taylor: visually? when we went to the icon, i felt we were more approachable. max: the other idea was that people that might have help in the house, it doesn't necessarily speak english, it's easily identifiable what it is and what its purpose is. ♪ lemonis: when she said, "oh, yeah, you know, like, for people that have help," i was like, "um..." and the fact that she says it without even, like... kathy: no, yeah. amber: skipping a beat, like... lemonis: "yeah, like the fact that my maid can't speak english," which is so relatable for people across america. amber: absolutely. lemonis: so relatable.

you change that to clean evolution? taylor: yeah. max: you know i hate clean evolution. what do you think of the name clean evolution? taylor: i think it could be interesting. lemonis: how about that forward-looking tub? taylor: yeah, yeah. lemonis: it was a pedestal tub, but it wasn't so stuffy. so we can print this and mock it. this is just a mock-up, just an idea. so pluses and minuses for the change? max: i mean, i see all minus. lemonis: all minus? max: yeah, because the name, obviously, and the bathtub straight on looks like a muppet. it's insipid. taylor: that's a little confusing. a bathroom-related icon makes a lot more sense to me. max: i just can't get past the icon. so to me, this would be, like, a mies van der rohe chair in a castle in scotland. lemonis: a what? max: it doesn't... it looks weird. lemonis: a mies van der rohe chair in a castle in scotland? i don't know what that is. amber: in scotland.

kathy, what did you think of clean evolution? kathy: i liked it. i liked the tub. i just liked the clarity of it. it's like, "okay, now i get... now i know what i would use this for." it seemed like there wasn't an openness to even discuss it. let's do a focus group. let's see how people respond to it, and let's ask, you know, customers out there what they like. amber: so we do have a deleted scene where people did sort of look at max's products, and they didn't like the name, and they didn't love the products. lemonis: i just wanted her to hear other people say the name or not be able to say the name, and it didn't go well. watch. ♪ max: hi, darling. would you like a sample? lemonis: what do you think of the packaging? woman: high-end. lemonis: high-end, okay. max: would you like to try some hand cream? woman: how much is this for? max: hand cream is $26. woman: [ laughs ] lemonis: what would you pay for this if you saw this at a grocery store? man: floor cleaner? lemonis: yes. man: 5 bucks. lemonis: when you look at this packaging, what type of products do you think it is?

man #2: like, hair products? lemonis: hi, folks. would you pronounce the name for me? woman #2: um...merkison-humey? max: murchison-hume, close. woman #2: i could never spell it. i could never say it. i could never search for it. kathy: my old job description when i worked as a model was, "shut up and pose." i had an opportunity to speak publicly, and a critic said i had a voice that could kill small animals. really mean. lemonis: somebody said that? kathy: somebody said that. i was 25 years old. i had a really high voice, but my response is, "thank you." criticism can be a gift, and sometimes it's wrapped in a nasty package, but you got to open it to discern, "is it just trash, or is there something i can glean from it? is there a gift in there?" and i think sometimes entrepreneurs can miss that. lemonis: i agree. you need to be able to deliver something clear and understandable for everybody. so i'd like to keep moving forward on this.

max: but what about a different iteration of the name, like m. hume or m. home or... lemonis: no thanks. as the c.e.o. of the business, this is one of those challenges, tough decisions, got to pick a name, got to pick the icons. taylor: yeah. max: there's no way in hell. [ groans ] kathy: walking away again. max: bye-bye, pretty, little, fancy labels. we're gonna be separated from each other. ♪ that can't happen. it's wrong. ♪ [ cellphone rings ] lemonis: i remember this. amber: oh, this brings back bad memories. max: hello? lemonis: max? max: marcus, that was bananas. frankly, i'm not gonna be hokey-dokey kaboom! i am not down with that. lemonis: but i don't think you think

i'm hokey-dokey kaboom! either. kathy: what does that mean? lemonis: i don't think your vision is wrong. i think your vision just needs refining. with that being said, i wanted to find out how we ultimately solve the problem that you told me you wanted my help with. i'm more reasonable than you think right now. max: that is fabulous, marcus. if only it were true because... lemonis: what do you mean, "only if it was true"? are you telling me that i'm lying to you? max: you asked me. i let you talk. so i think you... lemonis: no, but you just accused me of lying to you. max: oh, my god, marcus, you say that you're such a down-home, down-to-earth, everyday joe, but that's a lot of bull [bleep] this is not how i do business. lemonis: then it sounds like you're making a decision to not want to move forward. kathy: i'm sorry. lemonis: coming up... you need to cut the [bleep] max: um... you shook my hand. you can't honor that deal. kathy: what is the reason for staying? i mean... lemonis: the reason that i don't run...

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a new samsung galaxy s20 ultra. that's simple. easy. awesome. go to xfinitymobile.com today. alarm bells going off. it's a very high-pressure, uncomfortable situation. lemonis: every company that i've ever been involved with will all tell you the same thing. my intensity level in the beginning is a lot higher because i need to get down to find out what the real issues are.

if i didn't think you were built for this, and i didn't think you could run the distance... max: i don't know that i am. lemonis: i can see how anybody that goes through this process has that fear and anxiety. you have to really trust that i came here to genuinely work and help your business. max: that does make sense to me, and i can believe that. kathy: what is the reason for staying? i mean, she just accused you of lying. lemonis: mm-hmm. kathy: people typically reveal who they are. listen to them. lemonis: the reason that i don't run is because i understand what it takes for somebody to reach out for help. i also don't want young people who watch the show to think that when things don't go perfectly, you just pick up and go home. it's too easy in our society to get frustrated, to get annoyed, to get angry and walk away. so let's watch. ♪

i'm meeting with max today so i can follow up with her on what progress she's had with the labels, but i also wanted to introduce her to a friend of mine, someone that could serve as real inspiration. most people know her as a supermodel, but i know her as a phenomenal businessperson. and a super mom. kathy: thank you. hi, max, kathy. max: i know who you are. kathy: how are you? max: it's very nice to meet you. lemonis: so i was like, "we're taking max to roscoe's," and she was like, "why in the world are we here?" i remember she walked in. she was like, "why'd you bring me here?" i was like, "well, i love fried chicken." max would not be comfortable at roscoe's. amber: right. did you feel that you needed max to meet with another female entrepreneur? lemonis: she wasn't listening to me, and i was like, "i need max to hear from an entrepreneur who had built a multibillion dollar -- i'm gonna use a "b" -- multibillion dollar worldwide brand coming out of an environment where people were judging you and criticizing you and making it difficult for you,

and you had to push through all of that. kathy: yeah, absolutely. max: i'm a bit of a fangirl. so i'm a bit... kathy: you've got a great product. now we've got to get people connected to it. max: yeah. lemonis: but let's see some new packaging. max: okay, so this is our current bathroom cleaner. this is what it looks like. we came up with a new name called may home. it's easy to say. the second one, we went with m&h. no? okay. lemonis: last week, we talked about moving away from the name murchison-hume, but the first thing she brings out is a murchison-hume product. max: and i brought you a wild card, clean evolution. lemonis: kathy was like, "what am i doing here? why am i here?" where's the clean evolution with the bathtub? max: well, we didn't put it with the bathtub. kathy: i like the idea of the bathtub. lemonis: i'm hoping over time that all of this advice will start to sink in. please let it sink in. you struggled with acknowledging

that you're capable of being a c.e.o. max: okay, yes. lemonis: right? max: yes. i guess to me, a c.e.o. is a person that has been to business school, yeah. kathy: my formal education ended when i finished high school by the skin of my teeth. you're qualified. my hope for you is, throw away the facade. lemonis: kathy, thank you for coming. kathy: thank you so much. lemonis: it was so awesome. ♪ i'm excited about the best in show trademark, and so i thought we could work together doing some research. this is it. max: this looks cute, and it says natural, but i can tell it's not natural right now. woman: mm-hmm. lemonis: the principles behind this particular store are no by-products, no corn, wheat, no soy. everything is natural. nothing is from china. max: okay, the pearlized texture tells me there's something more going on than aloe vera and lavender oil. woman: okay. max: that's just me. lemonis: you're inside of my business, and you're criticizing vendors that are on my shelf. if anybody would be creating some fake illusion, it wouldn't be those folks.

it would be max. that's what she does best. we could create a whole line of products that would be great-smelling and natural. max: i would like to have a quiet word. do you mind if we have a quick chat? lemonis: suddenly, max said she had something she wanted to talk about, which i thought was a little bizarre. let me just grab a seat over here. max: my concern is that your focus is solely on best in show, and that you're not that interested in murchison-hume because of the low valuation that you gave it. lemonis: excuse me, did i miss something? did she just tell me that i'm too focused on the best in show brand while i've been revamping and busting my butt trying to fix the murchison-hume brand? am i missing something? so when you agreed to the deal, you agreed to it and then changed your mind after? max: if you want 30% of this company, we feel like we deserve more because we're worth more. lemonis: so what's the counter? max: you get 15% for your initial investment, and then another 15% when you execute

and actually drive that price down. lemonis: so it would be like a report card, and therefore i would be granted, like an employee, my extra options? excuse me, but i'm not on audition. this is not a tryout. maybe you'll think about giving me an extra 15%? i'm not your employee. this isn't a bonus program. max: you don't feel like you need to prove yourself? lemonis: no, i don't feel like i need to prove myself. i shook your hand. max: do you know what it is? i guess because we don't know you... lemonis: i hate being a generous, nice person and then feeling like people don't think that that was a fair offer. max: i don't see why it's a big deal. lemonis: you need to cut the [bleep] max: um... lemonis: you shook my hand. you can't honor that deal. max: that was a lot. lemonis: that was a lot? max: yeah. will you excuse me? lemonis: sure. kathy: what i find difficult is if somebody is not hearing, and they're not receiving help, it's hard to know how to get through and how to...

until they're willing to really have a real conversation, which involves listening as well as talking. i just... lemonis: she didn't want that. kathy: i want to feel... i want that, yeah. lemonis: you're telling me you don't have $280,000 of inventory? max: no. lemonis: but i made a deal based on this information. max: sorry? lemonis: i was like, "i live a mile from here. i got to go."

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i am offended that you feel like i need to earn equity. max: i'm sorry that you're offended. lemonis: so where i am now is that the counter proposal is not acceptable. i'd like to help you get your warehouse moved. i'd like to help you get the packaging redone because i think it would help you, so... max: but you know what i'm gonna say right now, right? lemonis: you're gonna say you have to go talk to peter. max: that's right. i do. lemonis: max needs to go back and talk to peter, and quite frankly, i don't care what they talk about. we had a very clear understanding of what the deal is, and next time i go to l.a., we're gonna make sure we get it settled. i'll see you. max: goodbye. oh, my god, what a dick! amber: [ laughs ] we didn't have to bleep that? lemonis: no, that's not a word you have to bleep. dick van dyke? that's what she was saying. i'm just like dick van dyke. amber: right, such a current reference.

♪ max: should we look at our factory? we're shipping all direct-to-consumer. lemonis: out of right here? max: downstairs. lemonis: that's a bad idea. i walked in there thinking that max and peter and i were gonna sit down and iron things out, but what i walked into was a mini distribution center, something that i originally said no to. oh, that she set up while we were gone. part of the reason that you did this space here as a contingency plan because you didn't know what was ultimately going to happen with our deal. max: yes. i mean, this is not a big deal. honestly... lemonis: it's not a big deal to you. this is, like, the moment of truth. if we want to move forward, we're gonna shake on it again, and it's got to mean something. what would you like to do, peter? peter: the value that you can bring to the business, we'd be willing to accept the original deal. lemonis: what would you like to do? max: i would like to honor the original deal.

let's do it. lemonis: nice warehouse. max: it could be. lemonis: after our little hiccup, we're back to work. we were finally able to move all of the product to visual pack in chicago. the product is made in chicago and then shipped from chicago. that'll now save us 50 cents on every product we make. so how much is actually here? max: it's about 33 pallets, so not the 120 that we thought. lemonis: so you're telling me you don't have $280,000 of inventory? max: no. lemonis: how much is actually in inventory? max: like, $70,000. lemonis: but i made a deal based on this information. max: sorry? amber: were you shocked by this, kathy? kathy: yeah, really, i mean... lemonis: and she was very nonchalant about it. kathy: right. lemonis: it was as if it was, like, not a big deal.

amber: that's what you based your deal on. lemonis: well, if i buy 50% of a business for 100 grand, i still own 50% of the 100 grand. and so if i'm putting $150,000 or $200,000 in, and it has $280,000 of inventory, i already have $140,000 of the $280,000, not $35,000 of the $70,000. amber: right. lemonis: so i don't know what i have. amber: right. lemonis: i don't know what the deal is. max: i want to eyeball it over there. lemonis: let's do that. max: let's do that first before we freak out. so it's 33 pallets. lemonis: so 130 times 33 is 4,290 boxes, and there's six items per box. max: yep. lemonis: it's 26,730 bottles. max: with an average cost... lemonis: and what's the average cost of goods? max: ...is about -- cost is about $1.79. lemonis: so 26,730 times 1.79 is $47,846.

that's even worse than $70,000. i was like, "i live a mile from here. i got to go." it's almost like she was looking for a breakup. what the hell is our inventory? a week later, the answer is kind of the same. max: yeah, i agree. lemonis: unbelievable.

lemo and it's just not okay with me. max: we are trying to figure it out. lemonis: look, this is obviously gonna be a problem, and something is gonna have to give. max: oh, this is from kathleen. lemonis: rather than making any rash decisions, i wanted to give max a chance to actually get her act together

and figure out where the inventory really was. i gave her a good solid week. so i headed back to l.a. to figure out if we're doing a deal or we're not. can we chat? kathy: that's a lot of grace. max: okay, so what are we doing today? lemonis: so where are we on the actual inventory balance? max: we haven't resolved it yet. we think that it was sold. lemonis: when? max: between the time that we first started talking and the time that we were in the warehouse. lemonis: hundreds of thousands of dollars more? max: we're not sure. lemonis: when i looked at the balance sheet and the numbers you provided, it was $280,000. i know that what we saw at the warehouse in chicago wasn't even $50,000 worth of stuff. max: right. lemonis: so that's a $230,000 difference. where's your cash? if you sold $230,000 of inventory at cost, then there would be $250,000 in the bank, and there's probably, like, $250 in the bank. max: you know i'm not the right person to discuss this with.

lemonis: well, you're the owner of the business. i don't know who the right woman is. max: i understand. lemonis: what the hell is our inventory? the reason that i let stuff sit for a week and didn't ask you about the inventory is because i wanted to give you a chance to, like, figure it out. i feel like a week later, the answer is kind of the same. max: yeah, i agree. lemonis: you agree that it's the same? max: i agree it's the same. lemonis: unbelievable. max still doesn't have any idea what the inventory is, and i think what bothers me more is it doesn't even look like she's made the effort to figure out what it is. so i asked you in the warehouse, "now that the inventory is different than both of us thought, what do we do?" max: i would wait and find out what the actual... lemonis: but i did wait. it's a week later. you could have hired somebody. it just didn't become important enough. max: i understand. lemonis: well, do you, though? max: yes, of course. lemonis: the inventory is not there, and she doesn't seem to be remorseful about it or apologetic about it. pause. i started to think at this point in time,

"you've said no to everything. you've tried to rework the deal." it's almost like she was looking for a breakup and couldn't figure out a way to do it. i felt like she just didn't want me to be there. it's so lost on me that the c.e.o. of a business isn't, like, five-alarm fire. max: i understand. lemonis: did the people that work here steal from her? max: i don't have a satisfactory answer for you. lemonis: yeah, obviously. i was able to deal with us learning how to adjust to each other, but i can't deal with the fact that the difference in inventory isn't a bigger deal to you. i just...i just don't see it as a fit. max: well, i appreciate your candor. lemonis: i'm very sorry. max: i am, too. lemonis: i wish you a lot of luck. max: thank you. lemonis: thank you. max: bye. come on, zeusy. lemonis: max wants to play the role of an upscale business owner, but she doesn't want to deal with all the things that it actually takes to be a business owner. i was exhausted from her illusions. i was exhausted from her facades.

i was exhausted from her flippant attitude. amber: you were exhausted. lemonis: i was. i was more disappointed. kathy: i mean, i'll forgive people for making a mistake. amber: yeah. kathy: but there's got to be remorse. lemonis: or at least own it. kathy: right, own it and apologize. amber: right. kathy: like, "you know what? i'm really sorry. will you forgive me?" lemonis: i would be like, "cool." kathy: "i'm sorry. can we move on?" yeah, and then we learn, and we grow. lemonis: you know what the biggest lesson for me was? when somebody doesn't like roscoe's, don't do business with them. kathy: that's a good... lemonis: that was it. that's our new filter. on our applications now for the next season, "do you like roscoe's chicken, yes or no?" no? sorry, i don't care if your business makes $100 million. that's it. kathy: yeah. lemonis: i'm out. kathy: great vetting process, i love it. lemonis: kathy, thank you for joining us. we really appreciate it. kathy: oh, marcus, thank you. amber: thank you, kathy. kathy: thank you, amber. lemonis: everybody learned a ton. kathy: thank you, everybody. what an awesome team you have. ♪

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