Sal Loretta turned his simple embroidery company in Queens New York into a diverse conglomerate of business. The company used sales of customized hats and T-shirts to generate up to $2 million. Using his own savings, A nearby warehouse was built out into a sign company, a restaurant, and a sports complex, all owned by Sal.
With Artistic Stitch struggling to make a profit and over $1.5 million in debt, Sal turned to Marcus Lemonis and The Profit to see if he could help turn things around.
Artistic Stitch on The Profit
The Profit Season 2 Episode 10
Marcus started out by visiting the Artistic Stitch Sports Complex could feel the stresses and strains throughout the staff. He sat down with Sal and his sales manager, Nick, to go over the finances and try to figure out their debt issues. Profits had dwindled from $900,000 to just $100,000, they owed over $600,000 to a variety of vendors and had come up $140,000 short per year. Sal had been neglecting his personal finances and expenses to pay his employees and keep the businesses alive.
The property was worth $3 million more than Sal had paid for it, and Marcus looked the debt incurred with the purchase of it and felt Sal was playing was the equivalent of a high stakes poker game with Citibank and Chase. Marcus told Sal that he was not interested in investing in real estate. He was a small business investor and if he was to work with Sal he needed to know that Sal was committed to fixing the problems with the business. Marcus would need to take total control of the business and 50% equity in the company.
Though he did not appear to be too receptive to the idea, Sal agreed to Marcus’ terms, which also included offering 10% of the business to a valued employee named Fabio, who had been with Sal since the start of the of embroidery business. Marcus gave Sal a check for $600,000 so he could pay off the company’s debts.
Marcus told the assembled group of employees that he was now in charge and suggested that they acquire some corporate accounts for the embroidery business, the side of the company that was generating the most profits.
Artistic Stitch Sales Pitches
As Marcus began peppering Nick with questions regarding how they went after new business, Nick did not have the answers Marcus was looking for. Nick told Marcus he typically simply used the Yellow Pages to seek out clients. Fabio seemed to know much more about the sales process and history than the sales manager did. Though he was not willing to hire a sales staff, Nick had never personally pitched Artistic Stitch to any big companies and was paid a salary with no commission built-in.
Marcus wanted to see Nick in action and the two headed to a local firehouse to see his sales pitch first hand. Nick had no concept of how to sell the business and lost his nerve, stumbling and cursing while talking with the client in front of Marcus, who eventually was compelled to take over the conversation, asking about their business and their relation to other fire companies in the area.
Marcus told Sal that changes need to be made in the sales department. Nick did not understand even the basics of making sales presentations and Marcus decided to put Nick on a 100% commissions plan based solely on what he sold, promising to give Nick all the resources and support he needed to get on board with the sales aspect of the business.
Wanting to eliminate the legs of the business that were failing to bring in revenue and expand those that did, Marcus said the focus of the company would center on the embroidery and silk screening business and grow out a retail clothing product line.
Sal had told Marcus that all of the debt that had piled up was from the business, but when Marcus dug deeper after speaking the accountant Giovanni, he discovered that Sal and his wife had used the business credit card for personal purchases. Marcus was understandably taken back and told Sal he was not going to finance Sal’s personal debt.
Willing to give Sal a second chance, Marcus let him know that he could not lie to him and he was close to bailing for his deal with Artistic Stitch.
Marcus created a design center and invested in equipment that would allow customers to create personal silkscreen designs.
Financial Picture Worsens
As the physical space of the building was beginning to pick up, Marcus made a disturbing discovery. Artistic Stitch was in worse financial shape than he was told, with the business in arrears by nearly $150,000 in back taxes and rent. Marcus was quickly running out of patience and met with the landlord of the building, who also feared that Sal had been dishonest in his dealings with him. The landlord told Marcus that Sal did not even have a certificate of occupancy for the property and that he had a summons to criminal court, as Sal had never completed the repairs needed.
Basically, Sal did not have the authority to strike the deal he made with Marcus and said that Artistic Stitch was using an old certificate of occupancy. The landlord wanted to deny Sal the right to purchase the building. Marcus informed Sal that his landlord could actually go to jail because of his poor and dishonest dealings with him.
Marcus transformed the lobby of Artistic Stitch into a retail space called Queens Vibe and secured some larger clients like AT&T and put in over $100,000 more for renovations.
Where Are They Now? Artistic Stitch After The Profit
The deal Marcus struck with Sal an Artistic Stitch was not long-lasting. Sal was not using the money Marcus had invested to pay his landlord, and both he and Nick were taking salaries that were not part of the negotiation with Marcus, which was finally done with Sal.
The business is still in operation but no longer appears on Marcus’ website. Artistic Stitch returned the Sports Complex, adding a basketball court and a rock-climbing wall. The company now has a web design business and a sign division that makes car wraps and magnets.
Even though Sal did everything the exact opposite of what Marcus had advised, Artistic Stitch seems to be succeeding in spite of itself. They still have the building and have sold over 300 Groupons for the rock wall and batting cages. Reviews seem mostly positive, though the Artistic Stitch Sports Complex has mixed reviews on Facebook, with users complaining that Sal is running a scam and not paying his bills.
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