Without a disciplined inventory process, you might as well be throwing money out the window.
That's the message serial entrepreneur and host of CNBC's "The Profit" Marcus Lemonis gave to struggling business owner Patrick DiLascia on Tuesday's episode.
DiLascia launched his eponymous Los Angeles clothing brand, which specializes in graphic T-shirts, several years ago. Over time, he designed and printed hundreds of shirts without testing the market. Soon, unsold shirts started piling up, which Lemonis derided as "reckless."
"To say his process is broken is an understatement," Lemonis said on the show. "It is a disaster."
With a $207,000 shortfall, DiLascia had become insolvent.
"If you can't track what's selling or not selling, [then] you can't do any forecasting to build inventory. You can't even monitor trends or customer behavior. You have no shot at success," Lemonis said.
He recommended they first test product designs and styles in a focus group before jumping too quickly into production, estimating it would save the company over $50,000 by avoiding waste.
Holding up one of DiLascia's T-shirts, Lemonis asked the team: "Why is this any different than a loaf of bread? This is perishable. I know it doesn't spoil literally, but figuratively it does because fashion goes out of style."
Seeing an opportunity to streamline DiLascia's process and make the most of the designer's talent, Lemonis invested $200,000 for 50 percent of the company.
He helped DiLascia focus on testing concepts with customers first and get his foot in the door at Bloomingdale's — an opportunity that Lemonis thinks is worth about $250,000.
"We now have a process in place that only makes things that people want to buy," Lemonis said. "We're not making every idea that pops into Patrick's head."