Utah based Ramp Sports contacted Marcus Lemonis seeking help to get their business back on track. Although the company has been growing since its inception in 2010, this custom ski and snowboard company has some major financial and personnel issues that have left them burning through cash and increasing their debt instead of turning a profit.
Marcus was very impressed with their product and its manufacturing process. All skis and snowboards are custom-made by hand. The imagery that is printed on the products is designed by their in-house graphic artist. They also have the ability to custom print images and logos on their products which is a really nice value-add that other companies do not have. Marcus had a true appreciation for how much time and labor went into making each product. Made of the best bamboo, each set of skis or snowboard was carefully crafted and made to order.
The main issue that Ramp Sports was having, was not based on their product or processes, but their people and how their leaders were choosing to spend money. Marcus met with chairman, and majority owner, Lou Sardella. Lou has invested close to $9 million in Ramp Sports and needed to see the company profitable and successful to get his money back. Lou owns 64% of Ramp Sports and the next largest shareholder was founder Mike Kilchenstein.
Upon meeting Mike, he immediately was complaining about how little he makes. With a salary of $120,000 per year and 16% equity in the company, Marcus is not impressed with how Mike is behaving when he takes home more than 10% of what the company does in sales. Mike founded Ramp Sports after he worked for another ski company and had the idea to sell direct-to-consumer. He decided to go out on his own and created Ramp Sports.
After meeting the leadership team and watching the manufacturing process, Marcus quickly determined that the product itself is not the problem, the issue is that they are not selling enough products to be profitable. As Marcus pulls back the layers of the company to determine why they aren’t selling more products he talks to Mike, who was VP of sales for a previous company. Mike tells him that he is spread too thin, however, Marcus has seen their processes and does not know how that is possible.
It became very clear that the marketing strategy for Ramp Sports was spending significant amounts of money without generating sales to offset the financial spend. They were activating their product to life through demos, experiential scenarios, and endorsements. None of these things were justifiable or creating a return on their investment.
Where is the money going? pic.twitter.com/JJ12zbDN1k
— CNBC's The Profit (@TheProfitCNBC) December 11, 2019
Although Marcus was nervous that the company appears to be a black hole for money, he decided to extend an offer to Lou. Marcus offered to invest $1 million in Ramp Sports but would want to be paid back first before other shareholders, including Lou. Marcus wanted 100% control to make big changes to turn Ramp Sports around. Lou asked Mike if he was ok with that and Mike was not. They could not come to a mutually agreeable deal and Marcus walked away from Ramp Sports.
Marcus was very upfront and told Mike that he would have fired him because he was so disrespectful and full of excuses. He felt that Mike didn’t want to be held accountable and that was a big reason behind pushing Lou not to make a deal with Marcus. He really felt like Lou miscalculated what a liability Mike would be to the business that he invested in. Since the filming of this episode, Ramp Sports has gone out of business.
Do you think that Marcus made a good decision by offering to invest in Ramp Sports? Do you think that it was wise of them to blow their investment opportunity with Marcus? Was Mike a major liability to Ramp? Start the conversation in the comments below.
“The Profit” airs Tuesday at 10 p.m. on CNBC.
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Very wise to walk away, I don’t know if I would have made an offer in the first place. Team is everything, and Mike’s slack way of burning through someone else’s money is simple disgusting. When you have 16% equity, your salary really comes last. That’s what equity is for to begin with.