Marcus Lemonis, famed star of CNBC's hit series The Profit, has some bad news for second-time Ask Marcus Lemonis subject Joseph Nocella: "I still don't think you know your numbers well enough," he says.
Nocella, who heads up the Brooklyn, New York-based bike manufacturer 718 Cyclery, was previously turned away from his meeting with Lemonis for not knowing the breakdown of his off-the-rack versus custom-made bike sales. Overall, in 2014, he said the company brought in about $900,000.
This time, Nocella has a number in mind--but Lemonis cautions that he's still not charging what he should be.
Each week on Inc.com, as part of the Ask Marcus Lemonis video series, a featured entrepreneur gets the opportunity to talk shop with Lemonis, who then helps him or her with a pressing business challenge. For Nocella, the challenge still lies in growing his bike shop (and charging the optimal price).
Nocella explains that his off-the-shelf margins are 32 percent, compared with 42 percent for custom bikes. But when he goes into the specifics of how he got to that number--flagging that a $120 labor charge "seemed to work" for customers--Lemonis grows suspect.
"Sometimes people believe that their margins have to be a certain number, so they become somewhat undisciplined in calculating the costs," Lemonis explains. He says that it sounds like Nocella is "fudging" the amount of time it really takes to manufacture the bike, and the corresponding cost of labor.
Rather, Lemonis suggests Nocella should expect 47 percent profit margins for custom bikes--charging $1,745 each, up from $1,512 --with a labor charge of about $237.
Lemonis also has a strategy for helping 718 Cyclery grow its revenues, given that the shop is more of a relationship-based venture, as opposed to a products venture. For more on that strategy, watch the episode above.