lemonis: tois this my tiny home?... a colorado manufacturer of tiny homes has dreams of building an empire. the quality of workmanship is unbelievable. but the owner's finding out that the big business of little living is more than he bargained for. i want to help you be a better c.e.o.. 'cause right now, you're a nice man and a terrible c.e.o. he's put the business in over a million dollars of debt. do the people that work here know how bad it is? steve: the top managers do. the rest don't. bernadette: it puts a lot of pressure. lemonis: his lack of leadership has killed morale. steve: i avoid conflict and i have not done a good job at holding people accountable. lemonis: if i can't get him to change his mind-set... this doesn't even, like, faze you. that freaks me out. ...and fix the foundation of his company...

tracy: these people are here because they care. lemonis: ...the entire tumbleweed business will collapse. do you know what "fercockt" means? my name is marcus lemonis, and i risk my own money to save struggling businesses. we're not gonna wake up every morning wondering if we have a job. we're gonna wake up every morning wondering how many jobs we have to do. it's not always pretty. everything's gonna change. everything. but i do it to save jobs, and i do it to make money. this... let's go to work. ...is "the profit." ♪ in 2012, steve weissmann took over tumbleweed tiny house company... steve: how are sales going? lemonis: ...now america's top manufacturer of mobile tiny homes. tracy: this is our roanoke model. lemonis: he had little experience building homes. still, he managed to grow the company from five people working out of a garage to 70 people working out of a 20,000-square-foot facility.

tracy: we have hundreds and hundreds of floor plans. lemonis: and today, sales exceed $6 million per year. however, as the company has grown, so have the operating costs. tracy: if i do not get my windows ordered, it is gonna really kill us. lemonis: desperate to keep the lights on and expand, steve turned to unconventional loans and credit cards. now, with over $1 million of debt, tumbleweed is on the verge of bankruptcy. steve: the company is in jeopardy. lemonis: with my ownership in camping world, i've been in the rv space for over a decade, and i feel that investing in tumbleweed would allow me to make a huge splash in the tiny-home market. pat: yes, sir. how may i assist you today? lemonis: hi, there. pat: welcome to tumbleweed. lemonis: how are you? i'm marcus. pat: oh, marcus. so wonderful to meet you. lemonis: nice to meet you. steve: hey. lemonis: i'm marcus. steve: i'm steve. lemonis: steve, nice to meet you. steve: nice to meet you. it's so surreal, actually,

meeting you face-to-face. lemonis: we're here. let's do it. so, this is your business. steve: this is it. lemonis: what prompted you to get into this? steve: i'm a minimalist by trade. lemonis: do you live in a tiny home? steve: no. i live in a regular house now. i've got a family and kids. i actually live in sonoma and in colorado. lemonis: what happened to, "i want to be a minimalist"? steve: i still am a minimalist. lemonis: yeah. what did you do before this? steve: i was a restaurateur. i really don't have much experience in manufacturing. i can manufacture a burger. lemonis: okay. can you show me a few models? steve: so, we have cypress, the farallon alta, the elm 26 equator, and the roanoke. lemonis: i mean, it's like a log cabin. steve: yeah. lemonis: but it's movable. steve: yes. they can pick their floor finish, they can pick their roof and window colors. people really want to get into these and customize them. lemonis: so, what is your typical price for an average unit sold here? steve: right now, $80,000. lemonis: and what's the maximum capacity that the factory can actually produce? steve: we're currently producing anywhere from eight to ten a month. and we have about three to four to five month backlog at any given time. lemonis: three to five months? steve: yes.

in the beginning, when we started off, we were building about two to three a month, and we started selling more, and so our backlog grew and grew and grew and grew. lemonis: uh-huh. steve: well, we're gonna go out in the shop and take a look. lemonis: well, show me the shop. steve: yeah, all right. lemonis: what's fun about tiny homes is that, although they're mobile, they typically stay more stationary, and the craftsmanship really matters. when i look at this particular product and i look at the materials that they use and the work that's going into them, the work is unparalleled. i have never seen anything with this high of quality. start to finish, how long will it take? steve: it should take 16 days. this one's probably gonna take us 21, maybe 22. lemonis: well, how do you not know? steve: we're gonna know when it's done. lemonis: no, no, no, no. how are you pricing the unit before you know how long it's gonna take? steve: we have a lot of estimates on our pricing. people really want to customize these a lot, so we get curveballs all the time for things that we've never done before. lemonis: like? steve: like folding porches. we had no idea what that was gonna entail. lemonis: what did it cost you to make?

don't say you don't know. steve: our costs of labor and materials on one of these units is around 60%. lemonis: so, your margins are 40%. steve: well, okay, so, besides the cost of goods, there's probably about 10% additional costs in design, servicing, labor, sales. lemonis: so, your margins are 30%. steve: 30%. lemonis: do you think those are good? steve: i don't know if they're good or bad. lemonis: the more i dig, the less i think he knows. i think any business owner's lack of research will ultimately lead to bad decision-making. you can't run a business that way. what's up, guys? brian: hello. lemonis: how are you? brian: good. lemonis: i'm marcus. brian: i'm brian. lemonis: nice to meet you, brian. mason: mason. lemonis: mason, nice to meet you. where did you learn how to do this? brian: military. lemonis: you were in the military? brian: yeah. lemonis: thank you for your service. brian: thanks for your support. lemonis: i'm gonna put everybody on the spot right now. if all the models that you guys made were standard units, how much quicker would the production process be? mason: significantly. brian: yeah. lemonis: double the output? mason: i would say so. lemonis: how are you doing, sir? austin: i'm austin baker. lemonis: hey, austin. austin: production manager out here. lemonis: how are you, sir? austin: great. lemonis: nice to meet you. so, are you in charge of the floor? austin: yes, sir. lemonis: you want to give me a little tour, just you and i?

austin: please. so, i'm gonna show you the two types of trailers we build on. we are fabricating our frames right here. we're building them. lemonis: you're not even buying them? austin: we're building them. everything we can do, we do in-house. we are so jammed, and it's unnecessary. the word "custom" is sexy, and it sells. lemonis: it also does one other "s." austin: ruins us. lemonis: slows things down. the real problem in this production process is that the customization slows things down. in tumbleweed's current manufacturing process, there are two distinct lines, meaning that only two homes can be built at one time. and while they're being built, they're done in four distinct stages. in stage 1, the trailer comes in and the floor goes in. in stage 2, the walls and the roof go in. in stage 3, the interior starts to get put in. and in stage 4, that's where they do the finishing touches. if there's one thing that needs to change in the unit, it slows down the entire line. when you've taken those ideas to steve, what does he say to you? austin: my ideas were shut down. he doesn't understand what we do out here, yet.

he's a restaurant guy. lemonis: has he ever worked in the shop? austin: no, and that's okay. that's not his job. that's what he pays me to do. lemonis: i'm surprised that steve isn't immersing himself on the floor with the guys, step-by-step, learning. "how do i improve it by a day?" not just to make more money, but to help your people be more successful. i-i don't know why that's missing for him. austin: marcus, i wanted to introduce you to lee. lee: hi, marcus. lemonis: hi, lee. how are you? lee: very nice to meet you. lemonis: nice to meet you. what do you do here, lee? lee: c.o.o. lemonis: okay. steve: lee is brand-new. he's been with us a week and a half. lemonis: and so, how does the reporting structure work here? austin: so, we have employee... lemonis: yep, one. austin: ...we have leads... lemonis: two. austin: ...we have the foremen... lemonis: three. austin: ...we have the production manager... lemonis: four. austin: ...then, i have stephen schlosser, who's the gm... lemonis: five. austin: ...then, that's his boss... lemonis: six. austin: ...who's his boss. lemonis: seven. austin: yeah. lemonis: so, seven layers between you and the people that make the magic happen. steve: correct. lemonis: does that seem like a lot to you? steve: yes, it does. lemonis: how about to you? lee: no, it doesn't. the only redundancy that we might have is austin,

because you have general manager, foreman -- the foreman's over the two leads. lemonis: i was with you up until shop foreman. the further we get away from the work that, i get nervous. steve: lee's like flight control. do we have the parts we need? which house is coming into the line next? are the plans complete? lemonis: which is, normally, in a small business, what the owner would be doing. steve: so, i don't personally think that i've got the time to do all that. lemonis: so, what are you spending your time doing? steve: i do a lot of the website, back-end work, as well. it's not a small job. lemonis: okay. it was kind of interesting meeting lee, because the things that he is doing, i would expect steve to do. steve is too separated from what happens on the front lines. ♪ how are you? tracy: i'm tracy. lemonis: tracy, nice to meet you. i just spent a little bit of time with austin. tracy: my husband's name is austin, yes. lemonis: oh, it's your husband. tracy: uh-huh. lemonis: okay. tracy: we've been married almost 13 years? something like that. lemonis: i like him, by the way. tracy: he's very passionate about what he does. lemonis: yeah. tracy: and his people out there. lemonis: so, could could you take me through

the sales process? like, if i want to order a certain type of floor... tracy: so, you're basically asking for a customization on this? lemonis: yes, can that be done? tracy: if the production team says we can do it, i'm not walking away from the sale. lemonis: why? tracy: so, we get 20% of the cash up-front. lemonis: uh-huh. tracy: if i don't have a lot of cash customers for the month, those guys are struggling for materials. lemonis: so, better said -- you say "yes" to anything, especially if they're a cash buyer. tracy: yes. lemonis: okay. it's become clear to me that every single unit that is bought from this company has some nuance to it that is slowing down the process. tracy: this house, right here, is a custom one. lemonis: i don't understand how you're getting upstairs. austin: you'll never see this in any other house. this was this lady... lemonis: how do you get up there? austin: she's gonna get her little step-stool right here. lemonis: so, is there a disconnect between sales, design, and what's happening in the shop? austin: i can't blame sales, because they have to make money. lemonis: i want to ask you a question. does steve know what he's doing? austin: no. lemonis: does he know how to manage people? austin: no. lemonis: does he know how to design things? austin: no. lemonis: who's really running this company? tracy: he's running the outside, and i'm running the inside. lemonis: doesn't something have to change?

tracy: yeah. austin: if something doesn't change, it won't happen. lemonis: okay. what's wrong? austin: so... what's wrong? lemonis: talk to us. tracy: just that we love this place so much, and we love those people. we do it for these people. these people are here because they care. they're not because of the paycheck, i can promise you that. lemonis: the idea of being in the tiny-home business excites me. and after talking to tracy and austin and seeing the folks on the factory floor, i mean, there's a good recipe there. it just needs some major tweaking. steve: hi, marcus. i want to introduce you to my wife, bernadette. lemonis: bernadette, how are you? bernadette: nice to meet you, marcus. lemonis: nice to meet you. bernadette: thank you for being here. lemonis: i thought it may be a good idea for the three of us to go outside and talk, just, away from everybody. bernadette: yeah. lemonis: is that okay? let's head out. you have kids? bernadette: two. they're in there. lemonis: oh, they are? bernadette: yeah, stocked up with snacks and games. lemonis: how old are they? bernadette: 5 and 7. lemonis: what's the year been like for you? bernadette: we've worked really hard, and i'd hate to see what we've worked for, um, disappear.

lemonis: he smiles a lot. bernadette: he does. lemonis: is that a real smile, or is that just for show? bernadette: it's a real smile. steve: i smile when i'm stressed, i smile when i'm nervous, and i smile when i'm happy. lemonis: well, that's good. steve: it's my default position. [ laughs ] lemonis: how hard has this been on him? bernadette: incredibly difficult. a lot of questioning himself. steve: i have taken a huge risk just to get here today, and i've pushed myself to the limit. lemonis: do the people that work here know how bad it is? steve: the top managers do. the rest don't. lemonis: you know that it makes me crazy that you have all these layers of people, right? steve: i know. lemonis: and so, if the business closes, what happens? bernadette: we start over. we start over from scratch, yeah. lemonis: what does that mean? you have to file bankruptcy? bernadette: mm-hmm. about, like, a week away from that. it puts a lot of pressure. you can hear it in his voice, and then i know it, and then i can't sleep, and that's all you can think about and it's spinning in your head and your stomach's clenched and... it's been very difficult. lemonis: wow. steve: when business doesn't go well, it's hard to be a good father and a good husband.

and that's the biggest disappointment. to me, the most important thing of my life is my kids, you know, being there for them. i haven't been. bernadette: it's okay. lemonis: okay. do you have some financials we can look at? steve: yeah. lemonis: maybe head inside? bernadette: mm-hmm. lemonis: i feel like i've gotten a good sense of the great people that work here. the fantastic product, while inefficiently made, still a really quality product. so, i commend you for that. steve: thank you very much. lemonis: let's go through the p&l. steve: okay. lemonis: so, your total revenue for the last 12 months is $6.9 million. your gross profit is $2.5 million. your total expenses... steve: $2.6 million. lemonis: and so, then, your net profit would be... steve: minus $100,000. lemonis: okay. have you ever made money here? steve: yes. lemonis: what'd you make in '12? steve: about $100,000. lemonis: what'd you make in '13? steve: about $100,000.

lemonis: what'd you make in '14? steve: $400,000. lemonis: what'd you make in '15? steve: in '15, we lost money. when we expanded, about $1.1 million. lemonis: okay, so, $100,000, $100,000, and $400,000 is how much? steve: $600,000. lemonis: you're at a $600,000 positive. you lose $1.1 million in '15. steve: mm-hmm. lemonis: takes your $600,000 positive to a $500,000 negative. steve: well, there were no retained earnings, so these earnings were all taken out. lemonis: what do you mean they were taken out? where did they go? steve: to me. lemonis: so, you took all the money out of the business? and so, at the start of '15, there was no money here. steve: yeah. lemonis: so, if i take everything -- your total liability of $2,885,000 against assets of $1,239,000, and that means that you're negative equity. this business is upside-down -- insolvent -- to the tune of $1.6 million. steve: correct. lemonis: the debt is so significant, really, it just sits with me in a very bad way. so, when i look around this factory,

how did all of this get funded? steve: so, originally, the customers were paying up-front. lemonis: so, essentially, customers financed this whole business. steve: and also, in addition, i put some money in. it was $1,500. lemonis: 1,500 bucks. steve: correct. lemonis: okay. from an outsider's perspective looking in, you put very little money in the business. whatever money the business made, you took out. the hole in this business, now, is $1.6 million. steve: correct. lemonis: that's not even to provide any more working capital. that's to get the payables current and all of the debt paid off. steve: correct. lemonis: and where you're sitting today is, in a business that, quite frankly, is out of business. and i have a real problem with the fact that you took $600,000 out of the business, in a business that's growing. why did you take it all out? steve: i didn't see this coming. i didn't know it was gonna happen. lemonis: is this really a smoke-and-mirrors business? steve: no. we have a real product. lemonis: okay. are you running a house of cards? steve: i'm running on the edge. lemonis: do you know "fercockt" means? steve: yes. lemonis: what does it mean?

steve: it means "all screwed up." lemonis: debt doesn't scare you, does it? lemonis: i'm curious as to why you say that. lemonis: because you're reckless about it. and because you didn't save any acorns for the future. the fact that you're not scared of debt in one breath, but you've taken on debt. this doesn't even, like, faze you. that freaks me out. austin: i mean, we were both yelling at each other, cussing. it's only a matter of time he's gonna fire me. i'm nervous. i don't know what to expect, and that's why, i guess, i'm scared. lemonis: let's go talk to him.

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that freaks me out. that you're not scared of debt -- this doesn't even, like, faze you. am i totally, like, bat [bleep] crazy, here? steve: no, i completely understand what you're saying. lemonis: so, you have a business that's $1.6 million underwater, but the product is great, the people that work here are spectacular. so, i'm willing to lend this business $3 million to clean up the payables, the lenders -- everything -- so that the employees can continue to work and so that the company can breathe. steve: yes. lemonis: in exchange for that, i want to be paid back, and i want 75% of the equity. based on steve's pattern of how he deals with money, i have to structure this deal very differently than i normally would. and so, the money that i'm gonna put in is gonna go into the company in the form of debt and equity. so, not only am i gonna be the lender,

i'm gonna have 75% of the equity. and while that may seem aggressive, i have to protect myself. because when you look at the pattern here, i don't think i have a choice. steve: it's certainly not the offer i was expecting. lemonis: what'd you think the offer was gonna be? a few million dollars and i sprinkle fairy dust in here? steve: 51%. lemonis: i want to help you be a better c.e.o. 'cause right now, you're a nice man and a terrible c.e.o. c.e.o. is not a title. it's a philosophy. this would be a business that i would invest in with camping world, so that we felt like we were fully integrated. and so, do we have a deal? can you agree to those terms? steve: yes. thank you very much. lemonis: okay? steve: okay. lemonis: i'll see you soon. steve: thanks. ♪ lemonis: hey, guys. we need to get everybody together right here. all right, so, come on down.

so, i've agreed to invest $3 million, and i will be 100% in charge. now, the challenge is, in my opinion, we have to standardize this process to really start to crank things out. we will have four standard models, and that's it, okay? i believe i can take any standard floor plan and make simple adjustments to it and sell them on the value of what we already created. 'cause honestly, people will change anything if you give them the right to. how many people like cake? raise your hand. i like a one-layer cake, not a seven-layer cake, and this company has so many fricking layers, so we're gonna flatten out the organization, but we're gonna be a team. i love investing in american businesses. we want to really be proud of what we're making, and we need to put out good product. all right, let's get to work. [ applause ] tracy: good job. man: all right, let's go to work. ♪

lemonis: all righty. i want to spend the evening, overnight, in a tumbleweed tiny home to understand why customers love it and how we can make it better. [bleep] when i went inside the unit, what was most interesting to me was how space gets utilized. this isn't well-thought-out. furniture's in the way. i wish this furniture was integrated. this window's too small. no collapsible tables. i think their use of space is not really great. my fat ass up here... it's actually kind of cool. what i felt was missing from the unit is little things that we have become accustomed to having in our homes, like charging stations -- a variety of things. ♪

[ knocking ] steve: good morning. lemonis: good morning. steve: how'd you sleep? lemonis: i didn't sleep bad. i like the fact that there was a very homey feel to it. i like the pitch of the room. i didn't feel claustrophobic. as i think about this place, there's a number of design changes i would make. i look for little creature features. and so, i thought about, like, "where do i charge my phone at night?" so, have you really slept in one? steve: i have. lemonis: overnight? steve: overnight. lemonis: for how many times? steve: i've slept in one in sonoma. lemonis: i am candidly shocked. this is how a leader gets closer to his business. does he not care? steve, let me ask you a question. steve: yeah? lemonis: how passionate are you about this business? steve: this has been a very tough and hard journey for me. lemonis: i need to see more from you. steve: tell me what you want to see. lemonis: looking at the finances, looking at the decisions you've made, looking at the layers you've added, rather than serving the business, you've had the business serving you. steve: you know what? i have to admit that you're right. i really don't have much experience in the manufacturing business.

so, as far as construction goes, i don't know that we're doing it right, and i know i need to improve that. i avoid conflict and i have not done a good job at holding people accountable. and when i brought in lee, i recognized, here's somebody who's really good in execution, and if i hire him, hands off, solves my problem, i continue to be bad in execution. lemonis: in order for steve to prove to me and to the rest of the employees that he truly can be a leader, we're going to have to remove some of those layers between him and the workers. what i want to see going forward is that you have the personal sacrifice and the commitment. that's gonna be something that we're gonna have to work on together. why don't we head back to the office. steve: all right. lemonis: all right? ♪ in order for us to start designing the standard model, we're gonna have to get feedback from customers. so, i'm taking a unit and the team over to camping world in colorado springs.

tracy: so, this is a rvia-certified rv built on a travel trailer. i'm excited to actually have a couple of you guys go up there, so... woman: you need some more storage. lemonis: in order for steve to continue to develop his leadership skills, asking customers questions and getting ideas from them, and then, figuring out how to work them into his business is a good step. steve: all right, folks, i want to hear some feedback about what creature features this is missing and what other changes you would like to see. man: i would give it more storage space. i didn't see much cupboard space or storage space in the unit. girl: you should always have, like, something that you can pull out, and it'll just be there as a piece of furniture. lemonis: integrated into the walls. the key to selling a product like this is selling value and experience, not selling customization and price. thanks, folks, very much. woman: thank you. guys, i'm gonna take austin to the service department. i'll see you in a little bit. since austin is in charge of overseeing

the production of the tiny homes, i wanted to show him some features and benefits from rvs here at the dealership. all of this furniture is integrated. this table can extend, but it's part of the place. and i think the thing that's missing in the tiny homes is the lack of integrated stuff. but i also wanted to spend a minute with him away from steve, getting some feedback on how he and the other employees are feeling since i've made my deal. how do you think steve is right now? austin: i think, as a leader, very, very strong. but i will tell you, with lee, it's only a matter of time until he fires me. lemonis: why? austin: stephen and lee -- they were meeting. they had conversations about a seven-layer cake, and i was the sacrificial lamb. i'm nervous. i don't know what to expect, and that's why, i guess, i'm scared. lemonis: so, why wouldn't you talk to steve about solving that problem for you? austin: with lee, he's an authoritative person. steve, he absolutely hates conflict. lemonis: but he can't lead you if he doesn't know what you're thinking. 'cause if he's the ultimate leader... austin: right. lemonis: ...then why wouldn't you allow him to lead?

let's go talk to him. lemonis: i love the fact that austin feels comfortable enough to talk to me about what's happening in the business, but they need to learn to deal with their issues by themselves. i can't resolve their problems. i'm not here every day. austin: i guess i'm just gonna squash this. i'm afraid that, with lee, the way he was treating me, it's done. it's only a matter of time. lemonis: if your business is in trouble and you need my help, log on to...

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and if you've had tb, hepatitis b, are prone to infections, or have flu-like symptoms or sores. don't start humira if you have an infection. be there for you, and them. ask your gastroenterologist about humira. with humira, remission is possible. a whole new concept in skin say heldefense.e-tox! new absolutely ageless®... ...pre-tox day mask from aveeno®. its' powerful anti-oxidant formula... ...fights pollution and keeps skin looking younger, longer. aveeno®. austin: i guess i'm just gonna squash this. i'm afraid that, with lee, it's done. it's only a matter of time. lee's new. he's only been there a couple of weeks, but he's an authoritative person, and he's gonna fire me. i'm the sacrificial lamb, if you will. i guess, what i'm getting at is, just, asking for a little bit of help. steve: there's been a disconnect between you and i, for sure, right? austin: it's the layer in between us. steve: so, first thing monday morning, it's obviously something we should talk about. lemonis: first of all, i love the fact that you're having an open dialogue. and you've been a great listener, and you've been a great communicator.

the guy gives you 100%. you have to hold onto them. they have to feel protected, and your job is to protect them. steve: yeah. austin, you don't have to worry. lemonis: layers in the cake are creating a problem for the business. in most cases, it would be easy for me to make the decision for steve, but i really want steve to show leadership, that he will make sure that he addresses the issue himself. the reason people will go to battle for each other is, if he knows you'll have his back. austin: shoulder to shoulder. arms in arm. i'm -- you -- steve: okay. austin: yes. lemonis: let's roll. ♪ i think it'd be a good idea if we can start working on what a standard unit would look like. steve: absolutely. tracy: perfect. lemonis: now that we've gotten the feedback from the customers on what they like and don't like, i want to take that information and incorporate it into the process of making the four standard units. woman: i would advocate for the door to the opposite end. lemonis: is that move possible, guys? mason: definitely possible. it opens up space to enlarge the bathroom,

if needed, and the closet space. lemonis: in order for the design process to actually come out right, there has to be communication. so, i want to show steve another leadership tool, which is collaboration. tracy: this is a true great room here, and if i really wanted this to be a bedroom, i don't have a door intruding into my area. steve: you've got a tape measure there. can you just measure the width versus the depth on that thing? lemonis: i like what i'm seeing with the team because everybody feels like their opinion's being heard, and steve's doing a decent job of actually orchestrating it all. so, next time i see you guys, i want to see two standard models, okay? ♪ lemonis: when we talked the other day about austin and lee... steve: yes. lemonis: i wanted to get an update on where you are. steve: myself, lee, and stephen started talking through the situation, and austin was pretty frustrated by it and left. he said, "i quit," and he walked out. i think he's having a hard time with the changes. lemonis: so, he's not working here anymore? steve: correct. lemonis: i got to be honest with you, i'm totally confused,

because a couple of weeks ago, steve and austin are talking about how they're gonna work together and how steve is gonna protect him. and now, i'm finding out that, yesterday, austin stormed out of here and quit. like, what happens when i'm not here? so, i call austin because i want to know exactly what happened. i want the facts. what happened yesterday? austin: they said that we need to figure out how to talk about the seven-layer cake, and their way of addressing that and through our conversation was showing the hierarchy on the board. lemonis: okay. austin: and i jumped the gun because they circled me, and then, the three people below me. lemonis: meaning that one of you guys was gonna go away? austin: right. lemonis: and you just wanted to protect them. austin: if i've got to be the casualty, that's fine. lemonis: i partially invested in this business 'cause of you. we thought we were gonna work together. i told you, [bleep] happens out here, not in some fancy office. austin: someone's gonna get the ax. lemonis: right. austin: and it better be me and not them. lemonis: nope. it ain't gonna be you, and it ain't gonna be them, either. austin: i mean, i -- lemonis: it ain't gonna be anybody that's on the floor.

austin: thank you, man. thank you, and i believe you. lemonis: why don't we get everybody together in the conference room from yesterday, okay? austin: yes. lemonis: hey, so, i know you guys had a get-together yesterday. you want to, maybe, lead the process? steve: sure. okay, so, what happened is, yesterday we had a meeting that started off on the shop floor and led into here, where, austin, you walked out. austin: guys, come on. i put three years of my heart, soul, and energy into this place, and then, my world's turned upside down. lee: i agree in premise that we have a structural issue to fix in this company, but there's a difference between staying in the room and hashing it out and looking at your colleagues and saying, "you don't know your business. i resign." there is the chance that this is the path that we're going to go down. austin: well, what i saw was my family -- it's turned upside down. that's how i felt. lemonis: so, were you mildly relieved when he left yesterday? lee: the company's not profitable. the business model is not successful. austin: is it their fault? lee: the plan -- you're not letting me finish. austin: okay. lee: you resigned. you can't have people, especially managers, who just resign and then decide,

"mm, i'm gonna come back the next day, and i'm going to start work. maybe the next day after that i'll decide to resign again." steve: if you would've stopped and said, "guys, i am not comfortable with this. i need the rest of the day to process," that's one thing. but you didn't contribute. you just said, "hey, i'm out of here." austin: but i mean, steve, a guy that had been with you from the beginning that you talked very highly about -- you panicked. what is your opinion about what should change in the seven layers? steve: these two would go to one layer, and these two would go to one layer. lemonis: so, you're going seven to four. lemonis: and so, just out of curiosity -- i'll just go ahead and start with you, 'cause you're squeezing yourself -- is you or lee surviving? steve: why not both? why can't there be two people on the same layer? lemonis: are you really trying to sell me on this [bleep]? anything change in the staff? steve: actually, a couple people have left. lemonis: people left? steve: yes. lemonis: oh. steve: yeah. lemonis: okay. who left? ♪ join t-mobile

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steve: why not both? why can't there be two people on the same layer? lemonis: are you really trying to sell me on this [bleep]? in one breath, you're saying you think there's too many layers. your suggestion is, they're co-managers? steve: correct. lemonis: steve, this is a very important moment. both of our jobs is to put the company in front of our own personal interests. and so, you are permitted to come back to work here. austin: yes, sir. lemonis: and you and i will continue to work together. steve: perfect. lemonis: all right? this is the most drama-filled manufacturer i've ever been to in my life.

lee: so, what are we thinking about the next few weeks? what would you like out of me? lemonis: i think you have to decide if you feel like, you know, you could add value here. i think that's the question. lee: i mean i've been around long enough that i think you need me lemonis: yeah. lee: austin has some capabilities, but i'm not sure that he could run at the layer that really should be required for a company of this size. the right model is to have a gm or a site leader for this sized operation this plant you'd have to burn it to the ground and redo it lemonis: if steve was actually managing correctly and austin was able to get the raw materials and not have all these layers over him. things would be fine. i just need to make a few tweaks not burn the business to the ground and start over the question is are you going to be here? is steve going to be here ? or are neither of you going to be here? lemonis: currently, the trailer manufacturing of the frames themselves takes up over 30% of the floor space and so what i want to do is outsource the manufacturing

of those trailers and the amount of production that i can run through that area will almost double the production of the company lemonis: so we are at a local manufacturer called excalibur which by the way can produce twice as much as tumbleweed was able to produce before lemonis: if i gave you 75 to make, what's the best you could do on that 75? 'cause we think we're gonna make -- call it 250 a year. man: let's do 80 of them at 4,900. lemonis: okay. steve: great. man: all right. lemonis: now that we've struck a deal to move trailer production off site, with the additional space being freed up in the factory, they'll be able to finish the existing customized units and now start making standardized units. ♪ oh, hi! steve: good to see you. lemonis: what's going on? i'm heading back to tumbleweed. i want to check in on progress, and i want to see what's happening with the standard unit. steve: so, we're moving along. lemonis: anything change in the staff? steve: actually, a couple people have left. lemonis: people left? steve: yes.

lemonis: oh. steve: yeah. lemonis: okay. who left? steve: so, lee did leave. lemonis: why did he leave? steve: he was really, really... upset about austin being brought back, being overruled on that. that was a hard thing for him. lemonis: right. i'm surprised that lee made the decision to resign, and that he did it so quickly. and i never want to see infighting inside the business, and i don't ever like to see a power struggle, but there's a layer problem. and so, i feel like it's necessary, anyway. and how has austin been? steve: he's been amazing. i'm actually really grateful that you said you're bringing him back, because it was the right call. lemonis: austin. austin: how you doing? lemonis: so... where is there a standard unit? is there one started? [ sighs ] steve: no. we haven't started it. we still have to work these. lemonis: ones that were sold months ago? steve: yes. we did find a spot where we're gonna squeeze a new standard unit, and the guys have done a great job. they've put the creature features into it. lemonis: while i'm a little disappointed

that they haven't put the standard unit into production, i do like the fact that the team is starting to work closer together, and that they've taken feedback from the customers to start to come up with new ideas, new innovation, and new efficiencies. austin: this is our utility closet. lemonis: for what kind of model? steve: it's actually going to all the models. lemonis: what's in here? austin: we have a furnace. we have an air exchanger. this could be an on-demand water heater. your electrical panel. and your 12-volt action going on right here. lemonis: i want you to patent this. this is the reason that the company can be worth something, because you've designed something that allows standardization to work. this cube can go in any unit. steve: correct. lemonis: when you take out layers out of the business and you push yourself closer, what happens with the organization? steve: communication improves. understanding of what our goals and objectives are improves. i love the direction that it's going. when we show you the other models... lemonis: can we gather up those plans? steve: yeah. that'd be great. christian: and so, we have four models total with two floor plans per, is what we're gonna work through,

and end up with a total of eight. lemonis: so, i think now that you guys have got your head around that, what i want to do is, i want to take one standard unit and this team to a national company that could potentially buy, maybe, 10 to 15 or 20 a year. but i need it to be done in probably two and a half weeks. steve: i'm gonna push back on marcus here, for a minute. pat: we have a similar unit, and the pitch of the roof was a little bit higher. austin: yeah, you raised it a little bit. pat: yeah. would you have that flexibility?

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-right away, i could tell his priorities were a little unorthodox. -keep going. stop. a little bit down. stop. back up again. is this adequate sunlight for a komodo dragon? -yeah. -sure, i want that discount on car insurance just for owning a home, but i'm not compromising. -you're taking a shower? -water pressure's crucial, scott! it's like they say -- location, location, koi pond. -they don't say that.

it's like they say -- location, location, koi pond. stevso, my concern is,back on mwe took our best guysute. and we put them on this unit to get them to two and a half weeks, and the other ones get slowed down. one of our rules is, we've got to protect the floor, and when we do this, we don't protect the floor. lemonis: hallelujah. i think your explanation of wanting to protect the stability of the floor makes me want to follow your lead. and i appreciate you having that evolution to say, "i want the sale bad, but i'm not willing to break my people or my customers for it." and that, for me, is really the epiphany. so, what is the time? steve: well, it's about 3 1/2 to 4 weeks. lemonis: so, can you compromise 3 1/2? steve: yeah. we can do 3 1/2. lemonis: so, the task is to get this unit made. we will take the unit to a location, and the group will pitch the entire company... steve: okay. lemonis: ...on becoming -- having a national account

that will buy from you on a regular basis. okay? i'm gonna let you guys work. ♪ now that the team has standard units in production, we can accelerate the purchase of raw materials, improving our margins. not only do we have them readily available, but we're getting a pretty significant discount because we're buying in bulk -- almost 8% on the material side. i estimate that it will be close to $4,000 a unit. across 200 units a year, that's $800,000 of additional gross profit. this is a standard floor plan? steve: it's a standard floor plan. lemonis: so, how many days will this have normally taken to make as a custom unit? steve: would've been about 21, 22 days. instead, it's gonna be about 16, 15 days. lemonis: and now, what did they pay for it? steve: $80,000. lemonis: and what did it cost you to make? steve: our costs on this one are gonna be $46,000. lemonis: so, your margins are 40%? steve: 40%. we're improving. lemonis: and how has austin been? steve: he's been amazing! he's doing an amazing job. we're communicating in a way

that we've never communicated before. austin: he's talking to us. he's getting involved in the decision-- instead of just making a decision, he's seeing how the decisions are affected. lemonis: is he spending time on the floor? austin: heck yeah. i don't even know when he's left. lemonis: it's clear to me that the elimination of layers actually brought people closer together -- particularly, steve and austin closer together. you can see that there's a relationship built on mutual respect, and that, for me, is progress from both of them. austin: we're not having to reinvent the wheel, per se. we know what we need to do, and we're just gonna execute on our plan. ♪ lemonis: now that the process is really right and the standardization has been implemented, i want to take steve and the team, along with one of the units, to meet with representatives from equity lifestyle properties -- the premier campground operator. the primary reason is to really see if there's a real potential for big orders here and if steve truly can sell it with conviction. oh, this is awesome! look how cool this is! steve: yeah. lemonis: how are you? jeff: hi, there.

lemonis: i'm marcus. jeff: i'm jeff wehrung. nice to meet you. lemonis: jeff, nice to meet you, sir. steve: good to meet you. i'm steve. jeff: nice to meet you, steve. annie: hi, i'm annie. nice to meet you. lemonis: annie? annie: yes. lemonis: nice to meet you. steve: tell us about this place. pat: okay. annie: sure. this is the mt. hood tiny-house village. lemonis: what's the most popular unit here? pat: lincoln is one of our most popular units. annie: they all have names and personalities. lemonis: well, let's go look at the new tumbleweed tiny home. pat: sounds good. jeff: thank you. annie: thank you. pat: all right. so, this is the new unit. steve: i wanted to start by having tracy and austin -- you two have spent a good amount of time working on this unit, perfecting this unit. tell us about what you guys accomplished. austin: i've built about 350 of these now. this is probably the first one you can actually move in right away. there's more storage in this house than any of them. pat: very nice. tracy: some of the biggest feedback that we've got from some of the focus groups is that they didn't want to just expose their clothing or expose their food. so, we really honed in on that on this unit.

annie: yeah. it looks very clean. pat: very clean. jeff: it's bright in here. pat: it is very bright. steve: we did change the lights, didn't we? austin: yes. we went to recess lights, led lights. the bedroom's up on a dimmer. lemonis: oh, let me go try it. [ laughter ] tracy: we wanted to integrate some of the creature features of your daily life in this unit. we are actually prototyping some different built-in furniture. pat: you did a great job. annie: yeah, you did. pat: it looks really nice. it does. tracy: how you doing up there, marcus? lemonis: good. tracy: you like that dimmer? lemonis: just so you know, dimmers are my favorite thing. [ laughter ] austin: you see the usb up there you can plug your phone into? lemonis: i think what i love about this standard unit more than anything else, is that, the team really listened to what the customer said -- integrated furniture, space. and the fact that they were able to process that information and integrate it into the standard model shows me that they're good listeners. and that's the key to manufacturing -- feedback to final product. tracy: the bathroom, ladies. annie: yeah, this is huge. pat: wow, nice!

oh, this is great. tracy: it was really just about making sure that we were really maximizing. pat: every inch counts with a tiny house, right? annie: absolutely. pat: that is great. yeah. very nice, tracy. austin: and this room right here is our utility closet. it's all located in one area for your maintenance man. pat: yeah, this is great. and then, i know we have a similar unit and the pitch of the roof was a little bit higher. austin: yeah, you raised it a little bit? pat: yeah. it makes a big difference when you're in the loft. lemonis: to make the roof higher? pat: yeah. would you have that flexibility? lemonis: what i'm wondering is... what steve's response is going to be? if he starts agreeing to well we'll change this by an inch and that by an inch and move the roof up and we'll do all these things i just wasted a bunch of time we're not doing that for exclusives, extras, and business advice, visit theprofit.cnbc.com.

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kes a big difference fights pollution and keeps skin looking younger, longer. when you're in the loft. lemonis: to make the roof higher? pat: yeah. would you have that flexibility? steve: so, just keep in mind, as long as we can make them standard, then we're gonna be great. we can't be doing the custom game. lemonis: i got to be honest -- i'm really impressed that steve isn't falling back to his bad habits where he would let a buyer of a product just drive the process. [ chatter ] we're all in the back room! "this is the product we make. we know it's awesome. we hope you buy it. thank you." pat: well, it looks good. you guys did a great job. steve: thanks. so, what, would you say -- 5 units, 10 units, 15? pat: what's the price point on this unit today? steve: all right. so, the price on this one is $79,000. it does have a couple upgrades. pat: you're ordering multiple units, then what does that do to the discount?

steve: when you're buying half a million dollars, you've got your discount. when we get over $750,000, if we get an order past that, we will increase the discount. and then, if we get past $1.5 million, we'll increase the discount even a little bit more. lemonis: retroactive. steve: retroactive, right. lemonis: and so, does that seem like an arrangement that we can move forward on? pat: absolutely. lemonis: awesome. pat: yeah. the relationship has evolved. lemonis: thank you very much. jeff: thank you very much. lemonis: impressing an industry leader like els is no small task, and the fact that there's a real potential for big orders is a big accomplishment. what's changed with steve, guys? tracy: i feel like he's actually reaching out to a lot of our employees, and they're recognizing it and they're seeing it. austin: i've heard from the floor they use your name now. you helped involve people in the business. so much so, this guy is in my business too much now. [ laughter ] he knows things i know, and i don't like that. so, i mean -- lemonis: but you respect it. austin: i respect the crap out of it. that means -- 'cause he's actually out there on the floor, and it's a hard job. steve: thanks. lemonis: steve and i -- we've made the decision to have you guys become partners in the business.

tracy: wow. lemonis: we want to distribute some equity to you, and we want you to feel like you're connected to the business as more than just a team member with a paycheck. tracy: i don't even know what to think about that. i mean, that's amazing. austin: i don't even know what to think. i feel like i'm dreaming or something right now. tracy: it's just, hard work pays off. lemonis: that's right. you're building something for your family together. okay? austin: well... steve: congratulations. lemonis: when i think about my investment into tumbleweed, i probably couldn't be more excited because with the new standard models and the new manufacturing process and an unbelievable team on the floor and a new revived leader, as far as i'm concerned, tumbleweed has a very bright future. lemonis: okay. i'm gonna run, guys. i'll leave you here. steve: okay. al right. lemonis: i'll see you soon. i'll see you soon. tracy: bye, marcus. lemonis: thank you for everything. i'm very proud of you. tracy: thank you. lemonis: i'm very proud of you.

♪ at a california company specializing in retail displays, the products are eye-catching. different colors? jeff: different colors, all different colors. lemonis: but the future looks grim. aimee: where do we go? you know, what do we do? lemonis: one of the owners struggles with the need for control. jeff: no, this is what we're doing. this is how it's gotta be done. lemonis: slowing down the process... jeff: [bleep]. lemonis: scaring his family. wes: he's gonna put himself in the ground the way he's going right now. lemonis: and sending the company into a tailspin. you're, unfortunately, on paper, out of business. if i can't persuade him to let go of the reins... if you can't trust their work, the business will never grow.