We're definitely starting to see Marcus's growth strategy evolve this second season. I refer to Marcus carving out a part of the original concept for an escape pod in event the main project fails or is simply a pass. This time around the escape pod is Tina's protein treats.

Lets take a look at Sena's Pro-fit gym. The owner, Michael, is a perfect example of someone who thinks that he has a business when in reality he only has a job. This truth usually sinks in when someone tries sell their business and discovers that no one wants to buy it. One of the primary tests to distinguish between a real business and a job is to ask the question: Does the owner have to be there all the time? 24/7? If he or she has to play a role in producing and delivering the service or product then it's a job. With a real business the owner can be on the beach because trained staff and management are able to run the thing for extended periods.

Think of it this way, it doesn't make economic sense to accept both a low income and the responsibility for fixed overhead. If you are willing to accept low income then get a job and let your employer fret over covering the overhead.

Product

The main product consists of highly supervised fitness training classes that do not utilize weight-lifting equipment. I have been a gym member for many years and always preferred to work out by myself using a printed-out spreadsheet of exercises to do with only a minute's rest between sets. This allows me to get in and out within an hour and have a very intense workout. You won't catch me standing around shooting the breeze with fellow gym members. I also don't like having trainers standing over me so Pro-fit's approach would never win me over as a customer. Since I'm not the only person like this, I suspect Pro-fit has a very limited market. Even Tina does her workouts at another gym that has weight-lifting equipment.

The secondary opportunity consists of Tina's homemade protein snacks which eliminate the bad aftertaste that these things are notorious for.

Process

Pro-fit has little upside due to the fact that its floor space is severely limited allowing it to run only a few classes per day. On top of that it appears to be situated in a ghost town of a mall where all the nearby spaces sit empty. This means low visibility. Last year's gross sales were an estimated $429K with $50K in profit.

Did anyone else find it odd that Marcus went on an exercise equipment shopping spree before he knew how the lease situation was going to conclude? Maybe that was just a case of bad editing?

People

If you ever wondered why smart business people advise married couples never to work together, now you know. Everyone needs some time and space away from their Pookie-Bear. Frankly speaking, Marcus was absolutely brilliant in splitting Tina off from the gym and bankrolling her protein bar business separately. He most likely saved their marriage as a result. As for Michael, well he's entertaining. He cracked me up when he expressed his sincere dismay over the fact that his "dog bowl" was to be smaller than Marcus's in reference to the proposed 75/25 equity split.

Now lets take a look at the most interesting issues in this episode.

What are they doing in there?

What the heck are they doing in there now?

The Lease

I have to confess to initially wondering what was going on with Marcus assigning Michael the task of trying to break the lease. Was Marcus sending Michael on a Fool's Errand because he needed an excuse for not partnering with him? It certainly was beginning to look that way based on the fact that Michael seemed more concerned with Tina's new business opportunity than his own. I lost count of how many time Marcus had to shoo him away and tell him to go work on the lease problem.

Here's the main point I want to share. Commercial leases are almost impossible to break if you're a little guy or gal. When I worked as a broker and got a call from someone interested in listing their company for sale with me, one of the first issues I looked into was the lease. Could it be broken or at least assigned to a new owner? You'd be horrified at how many times the owner was locked in for the duration and couldn't sell. The only businesses that have the ability to extract themselves from a commercial lease are large companies who had the leverage to negotiate escape clauses. Commercial space owners have always struck me as being the most stubborn business people on the planet. I have known many who preferred to see a space sit empty for years rather than rent or lease it out with a concession or two.

After Michael reported that he couldn't break the lease, I expected Marcus to tell him that he was going to pass on the gym and just help Tina. Then to my surprise Marcus announced that he was going to sink some serious money into renovating the space. When Michael managed to throw a wrench in the works by altering the new floor plan without letting Marcus know, I wasn't that surprised. Marcus was irate. Michael still has some work to do on containing his over-sized ego.

The end result was a highly cramped looking space offering little elbow room for members.

Marcus are you sure that you want to be even a majority partner in this business?

Scalability

These days everyone wants businesses to be scalable. That's a big part of the appeal of the Internet. You can go from zero customers to millions simply by plugging in additional servers as needed. That's the big advantage of technology. That's also the downside to the Internet. Everyone is chasing the same opportunities where only a few can be winners. This is the problem with any business category that has low barriers to entry.

With offline businesses you have less competition but typically far more complexity. Pro-fit is far from a scalable business for two main reasons. First, adding a new location is a lot more complicated than plugging in another server to help handle the growing web traffic. You need to scout out the location. Then you need to negotiate the lease. Then you need to build out the space according to your model. Then finally you need to hire and train your staff. Pro-fit needs highly trained people who can notice if someone is doing an exercise properly and correct them if they are not. This type of training takes time and money. On top of that, in my experience, most gyms have a high staff turnover. Gym work is seen as a way to have a pay check while you search for a real job. High turnover is costly to a business.

As always, best of luck to Michael, Tina, and Marcus, but personally I would have passed on Pro-fit. The protein bars are a coin toss. If you have money like Marcus you can afford to gamble a bit on these types of small deals.

Find out how Marcus Lemonis does it.

9 Responses to The Profit: Marcus Lemonis and Sena Pro-Fit

  • Mike is a very insecure person who tries to hide it with bluff and bluster. The problem is that everyone sees through him. Marcus made a bad decision funding him.

  • Here’s another big problem with the new cramped quarters. Sweat splash from the person next to you. Uggh! If you have ever been splashed by someone else’s sweat you will know what I mean. That place will be out of business as soon as Mr. Lemonis tires of paying its bills.

  • Tina’s protein bites could be a hit. I would try it and I know many others who would at least try it. I am definitely like Marcus in this tiny way, in that I am looking for a protein bar that has a good taste…they are either highly chalky, or protein taste, or are just bland.

    I would never have invested in Michael’s gym, no matter how different or anything it was.

  • Good point about the commercial lease. Most people don’t know that in most malls and shopping centers, the owners make the big money from the little guys. Anchor tenants have more flexibility and negotiating power, and get big breaks on their rent. One mall owned by General Growth, charges a fortune for tiny kiosks. Granted the mall is one of the largest in the country, and generates huge revenue, but $20k a month for a kiosk that sells flat irons? Better be selling a lot of them!

  • Does the owner have to be there all the time? 24/7? If he or she has to play a role in producing and delivering the service or product then it’s a job. With a real business the owner can be on the beach because trained staff and management are able to run the thing for extended periods. Um HUH? You cannot be serious with this statement? I own a BUSINESS that I work my butt off in. Sure I can take a day off here or there if needed and work when I want but in no way shape or form is a business owner able to just lay on a beach and make money.

    And here – um did you actually watch the show??? Clearly you did not. Last year’s gross sales were an estimated $50,000 with only a dismal $4,290 in profits The SALES were 429,000 and the PROFIT was 50,000. Here’s a thought, if you are going to have an online opinion please know what you are talking about. It’s clear you have no clue with this article.

    • Sue, my bad. I reviewed my handwritten notes of the episode and discovered that it included “Last year sales: $429,000” So you are correct. I blame multitasking and a delay between watching the episode and writing this piece for the mistake. At least one other blogger got it wrong as well.

      http://i.imgur.com/i3t6zXd.png

      The other one may have corrected the mistake as I am quite certain two quoted the same sales numbers as I did.

      However, it is a confusing episode due to editing. If they made a profit of $50K on $429K in sales then where’s the fire?

      I will fix the error above.

      My point with the beach comment was that in a real business the owner should be able to go away for a spell without having it fall apart. It’s a matter of putting systems into place.

      • I never heard anyone say they paid themselves any amount of money and yes I agree that being the owner does have a little wiggle room that the 9 – 5 slaves to the clock and commutes don’t but I just got done with tax season for the 36th year so … no beaches for me til NEXT month.

  • I don’t understand why anyone hasn’t mentioned how unbelievably patient Marcus is with Michael. Michael is immature, controlling, and a hypocrite. I will try to stay classy but anyone who watched knows what I’m saying. He actually just said that Tina is only concerned with her own identity! Hello? The name of the gym is?? I agree with SP about not investing in Michael but that Tina could be great. She is likeable and probably some sort of a saint for putting up with her husband. Just my humble opinion.

  • 👿 Michael Sena spells trouble insecurities in a business is bad for both parties Michael needs to cool his hot head and stop trying to control everything how Tina put up with your bs is beyond me me I would I would hightailed it out of their in a split second I have 1 word it’s called teamwork it takes 2 to tango to make things better for the both of them I think Tina is an amazing person Tina needs to branch out on her own she is being held back by Michaels oberbearing overcontroling hothead bodybuilder who thinks that his sh-t don’t stink news flash take a good look at yourself in the mirror and see what we as viewers see I would join Tina’s gym in a minute work it work it

Leave a Reply

Your email address will not be published. Required fields are marked *

Your First 100 Million

I am ready to build something great. Where do I start? Right here.

Your First Million

Not ready yet for the big leagues? Then go work on your first million instead. Click here.

Send Me More Info

Tell me more about how I can grow my business faster with acquisitions. Click here.

Categories

Protected by Copyscape Duplicate Content Check