just expose their clothing or expose their food. set. these two possess the heart so, we really honed in on that on this unit. and the passion and the work ethic annie: yeah. it looks very clean. that every small business owner in america should have. 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. ♪ lemonis: tois this my tiny home?... [ laughter ] a colorado manufacturer of tiny homes tracy: we wanted to integrate some of the creature features has dreams of building an empire. of your daily life in this unit. the quality of workmanship is unbelievable. we are actually prototyping some different built-in furniture. but the owner's finding out that the big business pat: you did a great job. annie: yeah, you did. pat: it looks really nice. it does. of little living is more than he bargained for. tracy: how you doing up there, marcus? lemonis: good. tracy: you like that dimmer? i want to help you be a better c.e.o.. lemonis: just so you know, dimmers are my favorite thing. 'cause right now, you're a nice man and a terrible c.e.o. [ laughter ] he's put the business in over a million dollars of debt. austin: you see the usb up there you can plug your phone into? do the people that work here know how bad it is? lemonis: i think what i love about this standard unit steve: the top managers do. more than anything else, the rest don't. bernadette: it puts a lot of pressure. is that, the team really listened to lemonis: his lack of leadership has killed morale. what the customer said -- integrated furniture, space. steve: i avoid conflict and i have not done a good job and the fact that they were able to process that information at holding people accountable. lemonis: if i can't get him to change his mind-set... and integrate it into the standard model this doesn't even, like, faze you. shows me that they're good listeners. that freaks me out. and that's the key to manufacturing --

...and fix the foundation of his company... feedback to final product. tracy: these people are here because they care. tracy: the bathroom, ladies. lemonis: ...the entire tumbleweed business annie: yeah, this is huge. pat: wow, nice! will collapse. oh, this is great. do you know what "fercockt" means? tracy: it was really just about making sure that my name is marcus lemonis, we were really maximizing. pat: every inch counts with a tiny house, right? and i risk my own money to save struggling businesses. annie: absolutely. pat: that is great. we're not gonna wake up every morning yeah. very nice, tracy. austin: and this room right here is our utility closet. wondering if we have a job. we're gonna wake up every morning it's all located in one area for your maintenance man. wondering how many jobs we have to do. it's not always pretty. pat: yeah, this is great. everything's gonna change. everything. and then, i know we have a similar unit and the pitch of the roof was a little bit higher. but i do it to save jobs, and i do it to make money. austin: yeah, you raised it a little bit? pat: yeah. it makes a big difference when you're in the loft. this... let's go to work. ...is "the profit." 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? in 2012, steve weissmann took over if he starts agreeing to tumbleweed tiny house company... well we'll change this by an inch and that by an inch steve: how are sales going? lemonis: ...now america's top manufacturer and move the roof up and we'll do all these things of mobile tiny homes. i just wasted a bunch of time we're not doing that tracy: this is our roanoke model. lemonis: he had little experience building homes. for exclusives, extras, and business advice, still, he managed to grow the company from five people visit theprofit.cnbc.com. 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, brad, i've got an idea for a song. nationwide has this app. you can pay your bills, even start an auto claim. steve turned to unconventional loans and credit cards. so what i was thinking... let me guess. ♪ start a claim right from your app. ♪ now, with over $1 million of debt, have you been looking in my notes? ♪ tumbleweed is on the verge of bankruptcy. steve: the company is in jeopardy. hi, it's real milk, just00% farmwithout the lactose, id. lemonis: with my ownership in camping world, so you can enjoy it even if you're sensitive. i've been in the rv space for over a decade, and i feel that investing in tumbleweed would allow me delicious. now, i've heard people say lactaid isn't real milk. to make a huge splash in the tiny-home market. ok, well, if it isn't real then, i guess those things over there can't actually be cows. pat: yes, sir. how may i assist you today? must be some kind of really big dogs, then. lemonis: hi, there. pat: welcome to tumbleweed. lemonis: how are you? i'm marcus. sit! pat: oh, marcus. so wonderful to meet you. lemonis: nice to meet you. bad dog. 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. [ text notification now that you have] so, this is your business. steve: this is it. new dr. scholl's massaging gel advanced insoles lemonis: what prompted you to get into this? with softer, bouncier gel waves, steve: i'm a minimalist by trade. you'll move over 10% more than before. 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. dr. scholl's. born to move. lemonis: what happened to, "i want to be a minimalist"? so that early retirement we planned. steve: i still am a minimalist. it's going ok? great. lemonis: yeah. what did you do before this? now i'm spending more time with the kids. steve: i was a restaurateur. i'm introducing them to crab. i really don't have much experience in manufacturing. crab!? i can manufacture a burger. they love it. lemonis: okay. so, you mentioned that that money we set aside. can you show me a few models? steve: so, we have cypress, the farallon alta, yeah. the kids and i want to build our own crab shack. ♪ ♪ the elm 26 equator, and the roanoke. ahhh, you're finally building that outdoor kitchen. lemonis: i mean, it's like a log cabin. steve: yeah. lemonis: but it's movable. yup - with room for the whole gang. steve: yes. they can pick their floor finish, ♪ ♪ see how investing with a j.p. morgan advisor can help you. they can pick their roof and window colors. people really want to get into these and customize them. visit your local chase branch. 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? (tires squealing) steve: we're currently producing three out of four people think this much horsepower anywhere from eight to ten a month. and we have about three to four to five month backlog is "excessive." ♪ at any given time. three out of four people are wrong.

lemonis: three to five months? steve: yes. in the beginning, when we started off, we were building about two to three a month, if we were for everyone, and we started selling more, and so our backlog grew we'd be for no one. and grew and grew and grew. lemonis: uh-huh. introducing dodge power dollars. steve: well, we're gonna go out in the shop and take a look. lemonis: well, show me the shop. purchase and get $10 per horsepower! steve: yeah, all right. that's $7970 on the srt challenger hellcat redeye. 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. here, hello! starts with -hi!mple... people really want to customize these a lot, how can i help? a data plan for everyone. so we get curveballs all the time everyone? everyone. for things that we've never done before. let's send to everyone! [ camera clicking ] lemonis: like? steve: like folding porches. wifi up there? -ahhh. we had no idea what that was gonna entail. sure, why not?

lemonis: what did it cost you to make? don't say you don't know. how'd he get out?! a camera might figure it out. steve: our costs of labor and materials on one of these units that was easy! is around 60%. glad i could help. lemonis: so, your margins are 40%. at xfinity, we're here to make life simple. easy. awesome. steve: well, okay, so, besides the cost of goods, so come ask, shop, discover at your xfinity store today. 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. kes a big difference when you're in the loft. i think any business owner's lack of research lemonis: to make the roof higher? pat: yeah. would you have that flexibility? will ultimately lead to bad decision-making. steve: so, just keep in mind, as long as you can't run a business that way. we can make them standard, then we're gonna be great. what's up, guys? brian: hello. lemonis: how are you? brian: good. we can't be doing the custom game. lemonis: i'm marcus. brian: i'm brian. lemonis: i got to be honest -- i'm really impressed lemonis: nice to meet you, brian. mason: mason. lemonis: mason, nice to meet you. where did you learn how to do this? that steve isn't falling back to his bad habits brian: military. lemonis: you were in the military? where he would let a buyer of a product just drive the process. brian: yeah. lemonis: thank you for your service. brian: thanks for your support. lemonis: i'm gonna put everybody on the spot right now. [ chatter ] if all the models that you guys made were standard units, we're all in the back room! "this is the product we make. how much quicker would the production process be? we know it's awesome. we hope you buy it. mason: significantly. brian: yeah. lemonis: double the output? thank you." mason: i would say so. pat: well, it looks good. you guys did a great job. lemonis: how are you doing, sir? austin: i'm austin baker. steve: thanks. lemonis: hey, austin. austin: production manager out here. so, what, would you say -- 5 units, 10 units, 15? lemonis: how are you, sir? austin: great. lemonis: nice to meet you. so, are you in charge of the floor? pat: what's the price point on this unit today?

austin: yes, sir. lemonis: you want to give me a little tour, just you and i? steve: all right. so, the price on this one is $79,000. austin: please. it does have a couple upgrades. so, i'm gonna show you the two types of trailers we build on. pat: you're ordering multiple units, then what does that do to the discount? we are fabricating our frames right here. steve: when you're buying half a million dollars, we're building them. lemonis: you're not even buying them? austin: we're building them. you've got your discount. everything we can do, we do in-house. when we get over $750,000, if we get an order past that, we are so jammed, and it's unnecessary. the word "custom" is sexy, and it sells. 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: it also does one other "s." austin: ruins us. lemonis: slows things down. lemonis: retroactive. steve: retroactive, right. the real problem in this production process lemonis: and so, does that seem like an arrangement that we can move forward on? is that the customization slows things down. pat: absolutely. lemonis: awesome. pat: yeah. the relationship has evolved. lemonis: thank you very much. jeff: thank you very much. in tumbleweed's current manufacturing process, lemonis: impressing an industry leader like els there are two distinct lines, is no small task, and the fact that meaning that only two homes can be built at one time. there's a real potential for big orders is a big accomplishment. and while they're being built, they're done in four distinct stages. what's changed with steve, guys? in stage 1, the trailer comes in and the floor goes in. tracy: i feel like he's actually reaching out to a lot of our employees, in stage 2, the walls and the roof go in. and they're recognizing it and they're seeing it. austin: i've heard from the floor they use your name now. in stage 3, the interior starts to get put in. and in stage 4, that's where they do the finishing touches. you helped involve people in the business. so much so, this guy is in my business too much now. if there's one thing that needs to change in the unit, it slows down the entire line. [ laughter ] he knows things i know, and i don't like that. when you've taken those ideas to steve, what does he say to you? so, i mean -- lemonis: but you respect it. austin: i respect the crap out of it. austin: my ideas were shut down. that means -- 'cause he's actually out there on the floor,

he doesn't understand what we do out here, yet. and it's a hard job. steve: thanks. he's a restaurant guy. lemonis: steve and i -- we've made the decision lemonis: has he ever worked in the shop? austin: no, and that's okay. to have you guys become partners in the business. that's not his job. that's what he pays me to do. tracy: wow. lemonis: i'm surprised that steve isn't immersing himself lemonis: we want to distribute some equity to you, and we want you to feel like you're connected on the floor with the guys, step-by-step, learning. to the business as more than just a team member "how do i improve it by a day?" with a paycheck. tracy: i don't even know what to think about that. not just to make more money, i mean, that's amazing. austin: i don't even know what to think. but to help your people be more successful. i feel like i'm dreaming or something right now. i-i don't know why that's missing for him. tracy: it's just, hard work pays off. lemonis: that's right. austin: marcus, i wanted to introduce you to lee. you're building something for your family together. lee: hi, marcus. lemonis: hi, lee. how are you? lee: very nice to meet you. lemonis: nice to meet you. okay? what do you do here, lee? austin: well... steve: congratulations. lee: c.o.o. lemonis: okay. lemonis: when i think about my investment into tumbleweed, 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? i probably couldn't be more excited austin: so, we have employee... lemonis: yep, one. austin: ...we have leads... because with the new standard models lemonis: two. austin: ...we have the foremen... and the new manufacturing process and an unbelievable team on the floor lemonis: three. austin: ...we have the production manager... lemonis: four. and a new revived leader, as far as i'm concerned, austin: ...then, i have stephen schlosser, who's the gm... lemonis: five. tumbleweed has a very bright future. austin: ...then, that's his boss... lemonis: six. austin: ...who's his boss. lemonis: okay. i'm gonna run, guys. lemonis: seven. austin: yeah. i'll leave you here. steve: okay. al right. lemonis: so, seven layers between you and the people lemonis: i'll see you soon. i'll see you soon. tracy: bye, marcus. that make the magic happen. steve: correct. lemonis: thank you for everything. lemonis: does that seem like a lot to you? i'm very proud of you. steve: yes, it does. tracy: thank you. lemonis: i'm very proud of you. 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, ♪ (female announcer) america's number one anti-aging body treatment system because the things that he is doing, i would expect steve to do. for crepey skin just got even better. steve is too separated from what happens on the front lines. (male announcer) new crepe erase advanced ♪ gives you even faster results and is clinically shown to give you how are you? tracy: i'm tracy. lemonis: tracy, nice to meet you. smoother, firmer, younger looking skin. i just spent a little bit of time with austin. (female announcer) on your neck... tracy: my husband's name is austin, yes. (male announcer) chest... lemonis: oh, it's your husband. tracy: uh-huh. (female announcer) arms... lemonis: okay. tracy: we've been married almost 13 years? something like that. lemonis: i like him, by the way. (male announcer) legs... (female announcer) and hands. tracy: he's very passionate about what he does. sponsored by body firm and featuring jane seymour, lemonis: yeah. tracy: and his people out there.

lemonis: so, could could you take me through courtney thorne-smith... the sales process? like, if i want to order a certain type of floor... (male announcer) and dorothy hamill. 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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do you want ready to wear clothing without all the hassle? you can, with bounce dryer sheets. we dried one shirt without bounce, and an identical shirt using bounce. the bounce shirt has fewer wrinkles, less static, and more softness and freshness. bounce out wrinkles, bounce out static. when you start with a better that's no way to treat a dog... ...you can do no wrong. where did you learn that? the internet... yeah? mmm! with no artificial preservatives or added nitrates or nitrites, it's all for the love of hot dogs. 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. happe? 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 c 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?

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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. d 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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yeah. it should fit! it should fit! the take-it-back-for-something -smaller-with-the-carmax- seven-day-money-back- guarantee way. whatever your way, that's the way car buying should be. 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.