you wanna talk about streets of dreams? take a walk down harbor drive and check out the blue gold of san diego bay, because this city has trillion-dollar dreams for what's to come. lemonis: if this is not gonna work for you or for you, now is the time to know it. tonight on "the profit"... lulu: my name is lulu eschelman. my company is called lumillamingus. lemonis: when a mom entrepreneur tries to start a business to set a good example for her kids, her plan goes haywire when her manufacturer backs her into a corner. florence: i'm not changing any of my price. lulu: ah! lemonis: if i can push her to unlock her creativity... is everything black? lulu: i don't love color. lemonis: ...stabilize her supply chain... suuchi: this is designed to be a high-efficiency production house. lemonis: ...and increase the perceived value of her product... woman: i don't think it looks expensive. lemonis: ...she won't be able to cover her hide.

i don't know what i'm buying into. i'm marcus lemonis, and i risk my own money to help businesses. i love investing in american businesses. woman #2: i work here because i care. lemonis: it's not always easy, but i do it to create jobs, and i do it to make money. do we have a deal? let's rock and roll. man: yeah! lemonis: this is "the profit." ♪♪ i've always been interested in investing in the multi-billion-dollar leather industry because it allows for great margins and great sell-through. about a year ago, i received an application from a company called lumillamingus, which was started about 6 years ago and continues to struggle. how are you? lulu: hi! i'm great. how are you? lemonis: i'm marcus. lulu: oh, it's so nice to meet you. lemonis: are you lulu? lulu: thanks for coming. i am lulu. lemonis: nice to meet you. where are you from? lulu: guess. lemonis: wherever heidi klum is from. lulu: no, denmark. she's from germany. lemonis: okay. lulu: yeah. lemonis: it's not that far.

lulu: close enough, close enough. so this is actually the production facility, and they have a couple of different clients. i'm one of them. we have our leather sourcing next door. this is where we design, so we have everything made here and shipped out of here. lemonis: so this is the equivalent of a copacker. this is your manufacturing partner. lulu: that's exactly right. how we designed it up until now is, we actually have a core collection, and we really don't go with trends. we try not to follow trends. we're definitely more classic. lemonis: is that you or the business? lulu: me. lemonis: okay, because i'm going to keep asking you that. lulu: uh-oh, okay. lemonis: yeah, uh-oh is right. lulu: oh. lemonis: i find it odd that lulu tells me right out of the gate that she doesn't follow trends. now i know that there's this idea about being unique, and that's fine. but can you be unique and follow the trend? lulu: this is florence, our production manager. florence, this is marcus. lemonis: how are you? florence: hi, marcus. i'm florence. lemonis: nice to meet you. florence: nice to meet you, too. lulu: she's produced for us from day one, from 2013. she did my very first sample. lemonis: are you also a patternmaker?

florence: yes. lemonis: you and i are going to be really good friends. florence: oh, you think so? let's see that. lemonis: why did you get in this business? lulu: i was trained in haute couture from a designer in paris, actually, a danish designer. my whole life, i've always, like, sewn my own clothes and sketching and done art. lemonis: are these all yours? lulu: yeah, they are. this is... we've been working with goop for about 3 years and have done custom collections for them. this is one of theirs. lemonis: my first impression of the actual product is that it seems to be of good quality, and it doesn't look like lulu is skimping on the quality of the leather or the quality of the hardware. so where is your core collection? lulu: we have a core collection. lemonis: a shopper? lulu: yep. lemonis: the large pouch, clutch. lulu: mm-hmm. lemonis: the small clutch, the sack. lulu: and then we've got the jackies. these are the crossbody that also becomes a bum bag. lemonis: is everything black? lulu: we have to have the black always. lemonis: you don't like color, huh? lulu: i don't love color. i just don't like it. like, this has sold super well with us...

lemonis: so, lulu, what i would ask you to think about is, the bags that you design, you can't just do black on black on black on black. in order for lulu to ultimately grow her company, she's gonna have to establish a customer base and then get them to repeat their purchases. and in order to repeat purchases, she's gonna have to innovate with color, shape and size and materials. what are those price points? lulu: most expensive is around $400 retail. lemonis: i think that's dangerous. the consumer is gonna say, "for the same amount of money, i'm gonna buy a brand." lulu: that's our exact conversation all the time. lemonis: the number-one impediment to growing this business is getting the perceived value of the product right. i know it's a good-quality product, but she's not clearly telling me why the price is justified. can we see the sourcing? lulu: yes. you want to go next door? yes. lemonis: the kind of elements that i'm looking for are little items around hardware -- zippers, the lining on the inside, anything that you can think of that's a detail that somebody would notice and see value in.

this is awesome. shawn: as far as some of the higher ends, we have this product called atlantic. this is what we call as one of, you know, highest quality... lulu: we use this. shawn: on average, you're looking at about $7 to $7.50 per square foot. lemonis: lulu's resource, united leather, is over 20,000 square feet with 15,000 different types of leather. honestly, it proves that she knows how to surround herself with good people. how many square feet does it take you to make a typical bag for you? lulu: we'll probably use maybe 10 square feet. lemonis: maybe or for sure? lulu: i don't know the exact number. lemonis: lulu. lulu: i know. lemonis: every one of your patterns should have a material quantity. lulu: yes. it's not a really beautiful system, but we do have it. lemonis: it's an ugly system, but it's accurate. lulu: it's accurate. lemonis: who owns the business today? lulu: i own the majority. lemonis: okay.

how much money have you put into the business from the beginning? lulu: so, scott, my husband, we put roughly $175,000 in. lemonis: wow. lulu: this is really where i think i need a lot of help because we've lost a lot of money trying to promote the company. lemonis: do you have any financials with you? lulu: i do. we can go up here in the showroom. lemonis: okay. lulu: i'm gonna go grab them. lemonis: okay. lulu: alright. lemonis: so one compliment -- the preparation that you have ready. lulu: oh, thank you. lemonis: the fact that you have a folder. it has your name. it has my name. you put some thought into it. you put a brand presentation. lulu: i put a lot of thought into it. lemonis: well, you would be one of very few. lulu: well, this is very important to me. lemonis: this is the financials? lulu: yeah. lemonis: look at the revenue. 2016, $69,000 in revenue. i'm a little confused on why the cost of goods was higher than revenue, and you showed a negative gross profit. was that because you were building inventory? lulu: because you have inventory. yeah, you haven't sold everything.

lemonis: well, it's just the way you're accounting for it. lulu: yeah, and it's actually very confusing because also, at the end of the year, we show... lemonis: you're cash-based instead of accrual. lulu: that's right. lemonis: you got to fix that. cash-based accounting is when you actually record things as cash leaves the system, so if you buy inventory, you record it as an expense instead of recording as inventory and then recognizing it when it sells. accrual-based accounting is when you set up that cash on your balance sheet in the form of inventory, and you only recognize that inventory when the product sells. the irs doesn't like cash-based accounting because you can actually inflate your losses when you're actually making money by just building up inventory and expensing it. so in year 1, you lost $51,000 on $69,000 of revenue. in year 2, $117,000 of revenue, lost $55,000. in 2018, $58,000 of revenue, lost $26,000. i'm alarmed because the fact that she had nice growth in year 1 and 2

and then literally fell off the cliff in year 3 tells me that there's a possibility that lulu isn't designing products that will get customers to come back on a repetitive basis. lulu: it's hard to go back to the same customer, you know, several times a year and have her buy a handbag. lemonis: so black is core, no problem, but core isn't gonna get you to a million bucks. where are you sold today? are you in... lulu: mainly through us. lemonis: direct to consumer. lulu: direct to consumer. lemonis: and how about any department stores? lulu: no, we... lemonis: any boutiques? lulu: we're in goop, in their boutiques, and then we're in small boutiques. lemonis: can you explain the name to me? lulu: yeah. when i moved here, i had an idea of what my children were gonna be named one day when i had children. lemonis: okay. lulu: my girl... lemonis: do you have children now? lulu: i do. lemonis: oh, wonderful. how many? lulu: i have three. lemonis: wow. lulu: yeah. so my girl, my first girl was gonna be named lumilla, which is a danish girl's name, and my boy was going to be named mingus. the reason why they're not named this is because i married an american, and he goes, "there is absolutely no way,"

so this is why i named my company. that is one thing he couldn't decide. plus, it makes you think about it. lemonis: right, but not as it relates to handbags. lulu: but you're remembering it, though. lemonis: i'm gonna go ahead and take a hard pass on this, okay? when i hear the word mingus, i think about me as a kid, and when i was in school, they would call me mucus. that wasn't very fun. i can't imagine what mingus would be like. fungus? lulu: thanks, marcus. lemonis: take care. thank you. lulu: nice to meet you. lemonis: you, too. ♪♪ hello. lulu: hi. lemonis: how are you? lulu: good. how are you? lemonis: good to see you. lulu: nice to see you. lemonis: oh, my god. how are you? scott: great to meet you. lemonis: nice to meet you as well. scott: sorry, i can't get up. i'm trapped, trapped. lemonis: i like the fact that lulu and her husband are together on this idea for the business. they've put together $175,000 in it. because he's involved, i definitely want to meet.

what's your background? what do you do for a career? scott: pretty diverse professionally. i've worked at nike. it was manufacturing overseas, and then i started my own business. it's based out of london. lemonis: what kind of business was it? scott: a shipping business. had it for 10 years, sold it. i'm a real-estate developer now. lemonis: that's awesome, right? scott: growing my own business, and it's busy, which has sort of segued back into lumillamingus. lemonis: you had to, like, almost struggle to say it. scott: lm. lemonis: why are you rolling your eyes? scott: we're not going to go there, are we? lemonis: oh, we're definitely going there. lulu: oh, we'll be going there. we might as well just go there. let's, like, get it over with. lemonis: well, because it's hard to say. do you have an opinion about the name? scott: do i have an opinion about the name? lemonis: yep. scott: is it lunchtime? it's lunchtime. lemonis: you don't want to name your son mingus? scott: didn't happen. lemonis: one of the things that i wanted to do with the three of us is just to really understand how the business integrates into your guys' family life.

scott: she's a fantastic mom, but she wanted to keep her identity as a professional woman. lulu: we had, kind of, three kids shortly after each other. i love being a mom, but it's frustrating. you get...you feel defeated. you feel like you're not good enough. like, it's really hard, and i wanted to keep my fashion background and training, so that's kind of how handbags came about. and i love handbags myself. scott: i was supportive of that as long as we could handle the home front. lemonis: yeah. scott: and that's where... lemonis: finding that balance. that's hard for any parent. lulu: it's a hard balance. scott: i think it's really a testament to her not letting go of her passion, so... lemonis: any time i meet somebody that has their own skin in the game, that's a meaningful thing, and you guys did it as a family. you're definitely committed to it. lulu: i'm very committed. i'd rather not do it if it's half-ass. lemonis: it was awesome meeting you, by the way. scott: great to meet you as well. lemonis: really nice meeting you. see you in a little bit, okay? lulu: okay. ♪♪

lemonis: hey, guys. lulu: well, hey. lemonis: after really doing a little bit more research on lulu's financials and the leather goods industry and after meeting her husband, scott, i asked for the two of them to meet me at my office to really sit down and understand if there was a deal to be done here. if we're gonna make money, we want to start now. i want to invest is somebody who's good like you are, but i think you're allergic to math. lulu: that might be. i don't like math. lemonis: of all the things that people could say to me, they could call me names. they could tell me how ugly i am, how mean i am, but they can't tell me they don't like math. lulu: but we can't all love math. lemonis: then don't be in business if you don't like math. now we have to get down to the brass tacks of it all. what do you think your business is worth? lulu: i think it's worth around half a million dollars based on, you know, my revenue this year, my profit, but i think the major value is in me, my connections.

lemonis: it's got $25,000 of tangible net worth between cash, inventory minus the liability. so i'm having a difficult time putting a big value on it. what do you think, scott? scott: she's got a proven client base that continues to come back, so as long as she's designing, i think she can repeat that business model. lemonis: i think my only concern in investing in lulu is, she's been doing this for 6 years, and i have to try to figure out what she has done wrong that's going to change because i don't want to be part of losing $175,000 more over the next 6 years. lulu: what you're investing into is the launch of this new, amazing brand. lemonis: okay. how many bags do you think the company needs in stock? 500? lulu: i mean, that would be amazing. lemonis: so how much would be 500 be? lulu: $75,000. lemonis: so that's number one. what's the second thing the company needs?

lulu: well, then you need the research and development. it's between $500 and $1,000 for one sample. lemonis: so let's say $10,000. lulu: okay. then you need marketing. lemonis: let's put $25,000 in there. lulu: and then you also need photo shoots, right? lemonis: creative, artwork, digital video content. lulu: mm-hmm. lemonis: so another 5 grand? lulu: yes. lemonis: so to have plenty of inventory, plenty of research and development, plenty of marketing and plenty of creative stuff, that's 115 grand. the best deal that i could make is $115,000 for half of the business, and that's honestly more than i want to pay. i'm not doing anything with mingus in the name. lulu: that's probably where you're making the biggest mistake.

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killing the bad bacteria. so, make sure to have pepto® diarrhea on hand. i made a business out of my passion. i mean, who doesn't love obsessing over network security? all our techs are pros. they know exactly which parking lots have the strongest signal. i just don't have the bandwidth for more business. seriously, i don't have the bandwidth. glitchy video calls with regional offices? yeah, that's my thing. with at&t business, you do the things you love. our people and network will help do the things you don't. let's take care of business. at&t. condos. 150k. how are you, son? who's your friend? oh, um, this is erik. oh, the big e. [ chuckles ] great to meet you. people love my nicknames. it's a whole thing. that's wonderful, sir.

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day or night, indoors or out. something wonderful awaits. for half of the business. lulu: okay. lemonis: i would want to have a fully developed line in three styles. lulu: three styles, new silhouettes. lemonis: yes, a whole new offering. we should mandate that the quality and the process be right, which i'm sure they will be... lulu: okay. lemonis: ...a showroom that will rep the products... lulu: okay. lemonis: ...a new name. i'm not doing anything with mingus in the name. lulu: that's probably where you're making the biggest mistake. lemonis: so how does that sound to you?

lulu: it sounds very exciting. it's...i'm thrilled. this is fun. this was not fun. this is fun. lemonis: well, hopefully by the end of this, you'll say the opposite. lulu: by the end of it, i'll love math and colors. i'll love it all. lemonis: math and colors. lulu: yeah. lemonis: who am i making the check out to? do i have to actually... let me just see if i can... lulu: watch it. you will one day have a dog, and it will be named mingus. lemonis: i don't think the argument to convince me of the name is telling me that i'm going to have a dog named that. [ chuckles ] what do you say? lulu: i'm so excited. thank you so much. lemonis: do we have a deal? lulu: wow, we have a deal! lemonis: okay. lulu: yes! lemonis: i wanted to invest in lulu because i can tell that she's got a keen eye for fashion, but she also has a high standard for what quality she'll put her name on. i like that. and this is what i want to leave you with. i want you to give me a dozen bags. i want to see something different. you can't just do black on black on black on black.

lulu: darn it. lemonis: so i assigned her to create 12 bags, which is a ridiculous number. i wanted to created a pressure valve to see how she would use the resources that she had and what she would do to get the task done. lemonis: okay, guys. lulu: good stuff. lemonis: i'll see you a little later, okay? lulu: thank you so much. lemonis: bye. scott: alright. lulu: should we go shopping? scott: [ chuckles ] ♪♪ lulu: hi! lemonis: hi, guys. scott: hey, marcus. lulu: this is my dad, klaus. lemonis: how are you? klaus: hi. lemonis: i want to understand who i'm doing business with, and it's clear to me that this is a family business, and in order to be invested in a family business, you have to meet the family. so what do you think of the name lumillamingus? emma-noelle: mingus is cool, but i think it's cooler with just lumilla. xander: nothing should ever be named mingus. lemonis: what's the one thing you hope for your mom's business? what do you want to see happen? ava: i really want it just to be able to succeed,

and i really want to see my mom stays at home. lemonis: xander, how about you, buddy? xander: i hope, like, it grows enough so that she can hire people to do most of the stuff for her. lemonis: you think there's a lot on her shoulders today? xander: yeah. lemonis: it's got to be tough to figure out how to balance being a wife, a mom and a business owner, but it shows me that she's committed to following through on what's important to her. cheers to mommy! -cheers, cheers! klaus: skal! lulu: how do you think it should be? we want it round, but i do think we should make it a little more square, though? it's not gonna be the same silhouette. lemonis: how are you? i'm marcus. frank: i'm frank. lemonis: frank, how are you? frank: very good, how are you? lulu: alright. we're back at the drawing table. lemonis: so what i really want to understand is, number one, what's the capacity that you guys can produce at, and number two, how do we drive down costs? how do we simplify the process? you're gonna have a tech pack. tech pack has all the measurements, all the tools,

all the materials in one box that says, "make this." a tech pack is a template with all the necessary components such as material, hardware, measurements, labels and directions that a manufacturer uses when building and producing a product. what's the maximum number of bags that this workshop could produce on a monthly basis? florence: well, it depends how many... frank: 15 a day? 15, 16 a day? florence: if i do it fast and good, i can do 5 hours to do a bag. lemonis: and how much an hour in labor? frank: between $25 and $40 an hour. lemonis: how much? frank: $25 to $40 an hour. lemonis: $25 to $40. frank: yeah. lemonis: i'm not sure why frank and florence think that the range is okay to be $25 to $40. it costs a certain amount for an hour, whether you're making one thing or two things. this space isn't complicated. final products are labor and materials. i know what the leather costs. now, let's not play games on what the labor costs. and, obviously, if the size is smaller,

this doesn't take 5 hours. florence: it does take the same time. lemonis: it's the same. frank: yeah, the sewing and the amount of labor doesn't change much. florence: there is not much change. lemonis: so the efficiency is going to be in simple skus and high volume. florence: it depends. lemonis: i'm a little confused on florence's inability to tell me how we're going to improve the process, and what i'm starting to worry about is, how do we keep this company competitive in the marketplace if we don't have an open dialogue about price? what are the alternatives if we don't get to a real number here? you don't have a materials problem. lulu: nope. lemonis: it's labor. ♪♪ ♪♪ i'm anxious to see what's in here. lulu: i'm anxious for you to see it. lemonis: i asked lulu to meet me at one of my locations in chicago because i wanted her to show me the 12 bags that i asked her to create before i introduce her to a number of my buyers to get their feedback.

lulu: so i know you really... lemonis: i like the camo inside. lulu: right? i was very anxious about it just because there was so much color on it. lemonis: mm-hmm. lulu: so this one, just so much going on in one bag. lemonis: you mean three colors. lulu: yes, i strongly dislike it. lemonis: i do want to tell you that i am pleasantly surprised at how you executed the task. i feel like you've made progress. lulu: thank you. ♪♪ lemonis: now that i've gotten comfortable with what she's put together, i'm curious to see how my buyers are gonna react. if they don't like it, other boutique owners aren't gonna like it either. lulu: hi, guys. woman #3: hello. woman #4: hi. lulu: this is so exciting. i'm so happy to show you guys my collection. my name is lulu eschelman. my company is called lumillamingus. cathy: lumillamingus. becki: it's way too long. cathy: it's a mouthful. what about just lumilla? lulu: yeah, i thought about that, too. becki: lumilla's pretty. lemonis: why don't you guys jump in and touch and feel and... pam: that's cute.

♪♪ this is a great bag. i love this color combo, gorgeous. lulu: i hate that one. deserie: i like it. i think it'd be cute in patent, if you did a patent version. lulu: if you simplify it. deserie: yeah. lulu: i just don't like this much going on. for me, less is more. lemonis: so you're at a trade show. what are you writing an order on? yes or no? deserie: no. pam: no. becki: no. lemonis: yes or no? deserie: no. becki: no. pam: it's too unconstructed. no. lemonis: okay. i'm actually starting to get freaked out. none of them like what they see. if i can't convince them, i don't know if i just made a giant mistake or not. yes or no? ♪♪ do you have the patterns for all this? lulu: well, florence does. lemonis: all of your patterns for all of your bags are with florence? lulu: yep. lemonis: well, that's a problem. if you're looking to take your business to the next level,

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you never been in better hands allstate click or call for a quote today allstate ♪♪ pam: absolutely. it's a good travel bag. lemonis: i love the quality. i love the craftsmanship. i love your work ethic. lulu: mm-hmm. lemonis: you got these bags done in a short period of time. i didn't think it was possible, so in terms of effort, a. in terms of what your process is to bring something new to market, i think we just still have some work to do. lulu: yeah. lemonis: okay, ladies. thank you. lulu: thank you. lemonis: appreciate it. ♪♪ columbia college has been known for years as a place where designers can find out about trends, work with different textiles, and a lot of big fashion designers have actually come through here. one of the reasons that i wanted to take lulu to columbia college is that historically, she's only worked with florence. lulu: oh, how cool. hi, guys.

lemonis: i want to get her in front of a dozen different designers. lulu: yeah. lemonis: so just so you guys know, i'm trying to get lulu to think outside the box, but i asked her to start thinking about color because she hates it so much. and there's one other word that she hates. tell them that. lulu: i hate the word "trend." anthony: consumers look for trends, so there's no way to sell something that their grandma also had, and it hasn't changed at all. tristan: you can definitely always take from the trend. you can always work on it. you can always make it your own. lemonis: even if it's a small detail. some idea, some color, something. sean: have you thought at all about exterior pockets on the outer... lulu: i haven't, really. sean: retailers are able to charge 50-plus extra dollars for that exterior pocket. lulu: yeah, so you would have it here, like a quilted pocket on the back or something. sean: exactly. maria: i love the mixing of leather, and i love the colors in that bag, and i think with that, you can bring in kind of all those textures together, mixing the shearling with those leathers that you have. it'd just be something that's very interesting, that you can wear that with your black winter coat, with your brown, you know, with a shearling coat, whatever. lulu: in a million years, i would never dream this up

because it's so busy to my eye, but i do actually think it could be really cute in a stripe. lemonis: what i liked about what i saw at columbia college is her open-minded willingness to listen to people's ideas, which is the number-one key for a new entrepreneur. you guys were awesome. maria: thank you so much. ♪♪ lulu: so i just would like to hear what you think about creating, first of all, an order of 500 bags and kind of where you think we can get price-wise so that it's profitable for everyone. lemonis: so later in the week, i'm bringing lulu to new york to work on new projects, but before we do that, i want her to sit down with florence and have an honest discussion about how they were going to improve the cost and improve the relationship overall. florence: it's not because you coming with a big number that the bags is going to suddenly becomes, like, 2 hours to make it. lulu: yeah. florence: basically, you need 5 hours.

i'm not changing any of my price or anything. you never contest any of my price, never talked about money. lulu: nope. florence: so do you want me to work for free? lulu: no, i don't want you to work for free. florence: oh, okay, okay. you know? and if i give myself to this project, what is it that exactly i'm getting out of it? lulu: so you're uncomfortable continuing working on these samples without a guarantee. florence: that's it. that's it. so we stop the process. lulu: i need a cocktail. ♪♪ lemonis: tonight, i've asked lulu and florence to meet me so we can discuss how we're gonna grow the company more profitably so that it's a win-win for everybody. where's florence? lulu: she didn't show. lemonis: what do you mean? lulu: we had a meeting thursday.

she said, "i'm not moving forward, and we can't... there's nothing to really talk about until i get guarantees." she wants guarantees, of any kind of sample she's working on, she will be producing going forward. i mean, my entire line is put on hold. lemonis: when somebody asks for a guarantee, it always makes me nervous that the capitalism goes away. you're my vendor. you charge me a premium. i will continue to pay it until i feel like i can get better quality or better price somewhere else. lulu: yeah. lemonis: and honestly, i didn't think her quality was that good anyway. lulu: she says, "it doesn't matter if i do 10 or 1,000 bags, it's still takes me 4 to 6 hours per bag. so your labor cost doesn't go down just because you give me a 1,000-bag order." lemonis: florence essentially wants some absolute contract that says you're going to get the production for life. here's how production works in manufacturing -- make a good product with good quality at a good price, you can have my business forever. don't do one of those things, you're gonna lose my business forever. do you have the patterns for all this?

lulu: well, florence does. lemonis: for all your bags? lulu: mm-hmm. lemonis: you don't have them on your computer? lulu: nope. lemonis: all of your patterns for all of your bags are with florence? lulu: yep. lemonis: well, that's a problem. as the volume goes, the price cannot stay the same. florence: i'm gonna tell you something. you still need somebody that's gonna cut your bag. i don't want to work for nothing. lemonis: all of your patterns life doesn't stop for a cold. [man] honey... [woman] honey that's why there's new dayquil severe honey. it's maximum strength cold and flu medicine with soothing honey-licious taste. dayquil honey. the daytime coughing, aching, stuffy head, fever, power through your day medicine.

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lulu: nope. lemonis: in order to help relaunch lulu's brand, i'm going to introduce her to brand assembly, which is a unbelievable company who helps small businesses in the fashion space. they provide distribution support through trade shows. there's a great opportunity for brands that are just starting out to see a stream of traffic that they normally wouldn't see. adam: we have over 200 brands that show with us, all women's contemporary in various categories. lemonis: brand assembly displays multiple times a year at different markets, and there will be hundreds, if not thousands, of people that will see her products, giving her a pipeline of business. lulu: so i should go to the next shows in l.a. lemonis: i think it's in january. maybe we could be showing there. you just got to get the production thing resolved. it's my expectation that lulu be representing her product at brand assembly in a few weeks. hi, david. good to see you. this is my partner, lulu. i brought lulu to vsl print, one of the nation's premiere packaging companies,

to meet the owner, david. i'm looking to dramatically elevate the way people perceive her product and justify the quality and the price. lulu: so we don't have a box as of today. david: it's a luxury attired handbag. it belongs in a box. lulu: it does belong in a box. it should be in a box. i agree. david: it should be delivered in a box. and we actually did a few things for you guys to look at. lulu: fun. david: this is a box that'll have magnets that'll hold that shut. lulu: i mean, this is very sleek, which i like. david: you also could wrap the box out of a leather material. as far as durability, these boxes will last for 40 years. lemonis: what's the financial commitment? david: in some reasonable quantity, anywhere from $4 a box up to $8 to $10 a box. lemonis: the longer that customer uses your box, the longer they're gonna live in their closet. lulu: i love it. lemonis: next, i'm taking lulu to brandfire, a marketing agency that specializes in rebranding companies. adam: what we do here is, we help to try to create a brand

or refresh a brand that is more aligned with the dna of the company and the founder. so lumillamingus, it's a bit long. i like the idea of having your name associated with it, i mean, because in fashion, let's face it, they're buying you. lulu: yeah. adam: so we looked at your clean lumilla. lulu: i don't know if it's super bold. lemonis: the name needs to be secondary to you but complementary. adam: how can we take the idea and incorporate maybe one of these? lulu: milo? adam: milo. lulu: it's just wild to see because i don't at all connect to it. the paint stroke, we're on the exact same page. i love that. lemonis: so you guys will work together and try to come up with something. lulu: yes, i would love it. adam: yeah, we'd love to. ♪♪ lemonis: and also, i've introduced her to a contemporary artist, rolland berry, to help her work on her creativity. lulu: oh, my gosh.

this is insane. lemonis: she historically hasn't liked color at all. rolland: so he brought you to the place that has the most color in the world. lulu: totally. rolland: okay, let's paint. let's play games. let's paint. lulu: let's do it. rolland: all the way on, all the way up. tighter, tighter, tighter. not bad. lulu: ah! rolland: it's okay. i'm gonna calm her down for you, okay? ready? lulu: okay. ♪♪ rolland: whoo! lulu: this is so cool. i learned to just bring out my inner artist. i love it. ♪♪ lulu: hi. lemonis: hi. lulu: how are you? lemonis: good. unless a deal can be made with florence to solve the manufacturing issue, i'm not sure what the next step is because there's the show coming and production that needs to happen. i thought it would be good just to sit down and work it out. i know that there was...

i don't know how you say it in french, drama. florence: not really drama. frank: drama? lulu: well, you were incredibly mad that day, and i get it. and i was also really... florence: i don't think you get it. i just wanted you to be understanding, which you were not. lemonis: what got relayed from her to me was, it doesn't matter how many we make. the price is gonna be the same no matter what. i was like, "how could it be the same?" florence: you know, we are handmade, one piece by one piece. lemonis: but if it only works for her, you're not gonna do it. florence: yep. lemonis: if it only works for you, she's not gonna do it. and if it doesn't work for the customer, nobody is gonna do it. florence: i don't want to work for nothing. ♪♪ lulu: we're kind of playing around with different colors of the dust bag. lemonis: there's nothing to play around with. lulu: uh-huh. lemonis: not white.

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that maybe didn't sit right with both of us, it felt like you were holding her hostage. florence: definitely, we had, like, a price issue, so this is where i start thinking... frank: [ speaks indistinctly ] at the end of the day, florence just want a guarantee that anything that happen with this venture... lemonis: that doesn't make sense to me. i'm not sure i understand why a manufacturer believes that because they produce bags, they have a right to the production process. at the end of the day, everything that they made, they were paid for.

they're contract labor, not contract designers. they don't have a patent on the business. they didn't design the bags, and they're for damn sure not an owner in this business, so i'm gonna decide where the bags get made. and if the price isn't right, i'm gonna move the production, period. if she designs a bag, she shouldn't have to be obligated to make it here. if we find one bag, and we have to make 2,000, this facility isn't equipped to make 2,000. florence: no. lemonis: so we have to know, what happens if we have to make it somewhere else? florence: i'm very... i'm good at my production, okay, because i'm looking everything one by one. lemonis: i think what got misinterpreted is, as the volume goes, the price cannot stay the same. florence: the problem is, we gonna go to three, four colors, and then maybe the lining is gonna be also three, four color. it's not that we're gonna do 300 same bags. frank: yeah, we can do a lot of different things to save time. lemonis: and here's where we're gonna disagree.

frank: mm-hmm. lemonis: i don't care what you think it should retail for. what i would say is, what we choose to retail for is up to her. what you choose to charge me is up to you. i don't want my manufacturer telling me what i'm supposed to be charging consumers. like, if they want to be in the purse business retailing bags, go ahead, but don't tell me how to run mine. if we choose to bring that bag here, and you make it, it could be here one day, gone tomorrow. then you know what you have? capitalism. lulu: hold on. lemonis: so there's a term that's called an rfp, request for proposal. an rfp is a document that goes out into the marketplace that allows manufacturers to bid on a particular manufacturing job, and it often happens in a bidding process, sometimes closed, sometimes open. at the end of the day, the decision is made by the company to take on one of those manufacturers based on quality, price and terms. you may send an rfp out to nine manufacturers and say, "give me a quote,"

and then you look at all of them, and you choose. florence may be one that will be selected for an rfp. lulu: i just don't want this to happen again. lemonis: florence, do you like working with lulu? florence: what do you mean? lemonis: do you like working with her? florence: i loved working with her before. lemonis: past tense? honestly, no bull[bleep] if this is not gonna work for you or for you, now is the time to know it. lulu: totally. lemonis: right now, and we can shake hands and move on. ♪♪ okay. thank you. ♪♪ after the fallout with florence, at this point, i'm just gonna find another alternative. so i've lined up a meeting at suuchi, a design and manufacturing company that has relationships with factories all over the country. i want lulu to know that as the customer

to all these suppliers, she's calling the shots, not the other way around. the challenge we have right now is that lulu's business has historically been reliant on one provider. suuchi: we have about 400 factories, so we do all of the steps -- production and warehousing and shipping. this is designed to be a high-efficiency production house. lemonis: okay. as i walk around suuchi's factory, i'm amazed at their capacity -- design, manufacturing, sourcing, logistics. i know we can drive down price. i know we can improve quality. this is the big leagues. appreciate it. thank you. thanks again. lulu: we'll see you soon. thank you so much. ♪♪ lemonis: hello. lulu: hello. lemonis: while the manufacturing is definitely at the forefront of all of our concerns, there are still a number of other issues that we have to get ready for before the big trade show. so where are you? lulu: i've got it. lemonis: okay. lulu: so have a seat. lemonis: okay. lulu: so first, the name is gonna be [sighs] lumilla.

lemonis: look at that, wow. lulu: how pretty is that? mingus is done. lemonis: why are you comfortable changing it? lulu: all the feedback that i've been getting. lemonis: i have to tell you that the thing that's been most enjoyable about the process is your open-mindedness to other people's ideas. lulu: this is such a huge opportunity, and it's so fun. like, this is what i like to do. lemonis: okay, so 2 weeks, brand assembly... lulu: so fun. lemonis: ...l.a. market... lulu: yeah, super excited. lemonis: ...big. the launch of lulu's new product at the l.a. market is just a few weeks away, and i'm anxious to see if she can actually pull all the parts and pieces together and have a successful show. okay. lulu: yay! lemonis: couple weeks. great job. lulu: i love it. awesome. lemonis: i'll see you. lulu: thanks, marcus. lemonis: bye. ♪♪

brand assembly is where buyers from boutiques around the country, and sometimes the world, come to look at products. the goal there is to not only display the product, but most importantly sell the product. lulu: the fact that we have all these bags ready right now is nothing short of a miracle. lemonis: i haven't seen the final product. i have no idea what it's going to look like. this entire process has led to this one moment. hi. oh, my goodness. ♪ ♪ we made usaa insurance for veterans like martin. when a hailstorm hit, he needed his insurance to get it done right, right away.

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lemonis: how are you? lulu: good. welcome to lumilla. lemonis: oh, my goodness. while florence has been great in helping us get the final samples made for brand assembly, they still can't guarantee pricing. suuchi, on the other hand, has given a 3-year commitment to lock in price, so from this point forward, i'm moving the manufacturing to suuchi because i have guaranteed pricing and a guaranteed commitment. lulu: can you actually believe it? what do you think? lemonis: i'm stunned. lulu: ooh. lemonis: you know what i love? when you see it all together, all the sizes, all the shapes with the packaging. lulu: right? lemonis: it now is a clean delivery. lulu: it just feels so elevated to me. they all just look so luxurious. lemonis: i'm stunned. lulu: ooh. ♪♪ lemonis: look at that with the strap and the color. lulu: and there's gonna be little belt straps also.

lemonis: so is red the choice now? is that the interior? lulu: it is. i'm really loving the red. it's been very well received. lemonis: so take me through one of them with the dust bag, with the tissue paper, with everything. lulu: yeah. so let me just grab one of the... we're kind of playing around with different colors of the dust bag. lemonis: there's nothing to play around with -- black with the same gold. lulu: uh-huh. lemonis: not white. lulu: yes. i wouldn't do white for this. this goes like this. lemonis: and so that's how we would create a training video for all the boutiques that buy it... lulu: yes. lemonis: ...how to wrap it, how to deal with it, what are the things you need to do? lulu: yeah, i like that. and then actually, it will come with this to the store. this is the little paint stroke. lemonis: it should be black. line sheet. lulu: line sheet. so these, we're gonna get product shots, and we're gonna get professional product shots. lemonis: okay. remember, we're gonna advance production. lulu: yeah. lemonis: we're gonna have inventory in the next week or so. squa lemonis: the kind of people that go to shows like brand assembly are boutique owners and hotels who want to buy product

so they can resell it to the consumer. woman #3: i love these. what's the retail on this? lulu: so this is around $220, retail. woman #3: okay. lemonis: i'm stunned, from the packaging to the little features and details on each product... man #2: oh, this is so good. lulu: isn't it cute? man #3: it's so yummy. lemonis: ...to her line sheet. lulu: so the blue one is wholesale $395. man #3: okay. lulu: so really great prices. man #3: yeah. lulu: and they last. like, the quality, you'll have year after year. lemonis: she really, in a matter of several months, pulled together a brand-new company with a brand-new product with a brand-new process. hi! how are you? xander: good. emma-noelle: good. lemonis: what do you like the most? ava: i like that bag over there. lemonis: you can show me. let's see it on you. you think she'll make you a bookbag with it? lulu: yeah, that could be your school bag. lemonis: in any entrepreneur's life, they give up a lot of their family life and a lot of their personal time to dedicate it to the business. i thought it was important that her entire family come so that they can appreciate all the work that she's done. they know their mom is a kick-butt mom-trepreneur.

lulu: you guys are so good. you're so... lemonis: you guys are so adorable. lulu: and they have been so amazing because i've traveled a lot. lemonis: it's okay to hug your mom. come here. watch this. lulu: group hug! lemonis: see, group hug. are you gonna join us or not? xander: yeah, i... lemonis: alright. that's awesome. ♪♪ starts now last night in the white house, waiting for breaking ne . last night in the white house waiting for breaking news on pardons and then new leadership i'm sheppard smith this is the news on cnbc. >> i'm proud, proud, proud, proud to be a son of delaware. >> a historic transfer of powerless than 24 hours away the 45th president stoking controversy as he leaves office and the incoming one facing unprecedented challenges. >> we want to make sure there is no issues at all