You see . It flimsy. Dont ever make these again. You dont sell them. And create a few products. Juli it reduces anxiety and depression. Lemonis i kind of like it. I spent countless days working on these companies. How much money did you burn through . Parker 650,000. Lemonis but we cant always fit everything im thinking into the show. So tonight im giving you an inside look at an episode from season 5, tumbleweed tiny homes. I want to help you be a better c. E. O. Because right now, youre a nice man and a terrible c. E. O. You say you have everything on the line, i expect you to fully immerse yourself in the business, put yourself at risk. John that makes sense. Lemonis over the next hour, im gonna take you behind the scenes to share with you what i was actually thinking during filming. Ive agreed to invest 3 million, and i will be 100 in charge. This is probably one of the most aggressive transactions that ive ever done in the history of the show. John okay, good. Lemonis . And give you an honest assessment of my decisions. This business is upside down. It just sits with me in a very bad way. Amber you didnt want to run . Lemonis no, because at the end of the day, its on a path to something. My name is marcus lemonis, and this is an inside look at the profit. Man [ speaking indistinctly ] woman rolling. Lemonis now, the reason that i brought john on is because he has seen and experienced everything in the tinyhome world, except what ive gone through, and i know you have a lot of questions. John yeah. Lemonis are the questions gonna be like, why did i do a deal here . John maybe. No, no, well see. Lemonis oh, this is gonna be good. John alright. So many questions, lets start. Lemonis with my ownership in camping world, ive been in the rv space for over a decade now, and i feel that investing in tumbleweed would allow me to make a huge splash in the tinyhome market. Amber marcus, why were you interested in tiny homes . Was it because of the rv business . Lemonis no, i think i was mostly interested because i saw the parallel between my primary business, camping world. John what do you think the biggest difference between an rv and a tiny house is . Lemonis the quality of craftsmanship. John 100 . Lemonis that a tiny home is manufactured like a log cabin or like some sort of. John built like a house. Lemonis yeah. John its the same construction. Lemonis absent the frame, you would think a house was being built. John yeah. Steve hi. Lemonis im marcus. Steve im steve. Lemonis nice to meet you. Steve nice to meet you. Its so surreal actually seeing you in the face. Lemonis were here. Lets do it. What prompted you to get into this . Steve im a minimalist by trade. Lemonis do you live in a tiny home . Steve no, i live in a regular house now. Ive 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. Im a minimalist, but i have two homes, one of them in sonoma. I just wanted to clear that up. John i just love, you go, okay. Lemonis yeah. Im gonna bank that one, for sure. Play. What did you do before this . Steve i was a restaurateur. I really dont have much experience in manufacturing. I can manufacture a burger. Lemonis okay. Can you show me the models . Steve so we have the cypress, the farallon alta, the elm 26 equator. John those are nicelooking tiny homes. Lemonis its like a log cabin. John yeah. Lemonis but its movable. John yes. The one thing i noticed about all of these tumbleweed things that i dont particularly like is all that pine wood or that beetle kill wood. I mean, its, like, the whole thing looks exactly the same. To me, thats not interesting. I like to see brokenup materials. These feel like youre going to camp. Amber john, have you ever slept in a tiny home . John i have slept in a tiny home. Lemonis me too. John but embarrassingly, as many times as marcus has. Lemonis which is uno. Amber one time. John yeah. Steve 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. John thats a good price, i think. Lemonis . Capacity that the factory can actually produce . Steve were currently producing anywhere from 8 to 10 a month, and we have about a 3 to 4 to 5month backlog at any given time. Lemonis 3 to 5month . Steve yes. Lemonis well, show me the shop. Steve yeah. Lemonis start to finish, how long will it take . Steve it should take 16 days. This one is probably gonna take us 21. People really want to customize these a lot, so we get curveballs all the time for things that weve 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 . Dont say you dont 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, theres probably about 10 additional costs in design, servicing, labor, sales. Lemonis your margins are 30 . Steve 30 . Lemonis do you think those are good . Steve i dont know if theyre good or bad. Lemonis pause. John yeah, now youre starting to realize. Is this the moment where youre like, oh, boy . Lemonis the thing that concerned me is that its sounding, initially, super inefficient. Like, i dont need to see the financials to know weve got a problem. John yeah. Youre like. Lemonis okay, maybe i. Maybe its lunch. Maybe its time to go. John yeah, totally. Lemonis the more i dig, the less i think he knows. You cant run a business that way. From sonoma. How are you . Im marcus. Brian im brian. Lemonis nice to meet you. Mason mason. Lemonis mason, nice to meet you. Where did you learn how to do this . Brian military. Lemonis youre in the military . Thank you for your service. Those are my kind of dudes right there. Lemonis im like, alright. I like these guys. If all the models that you guys make were Standard Units, how much quicker would the production process be . Mason significantly. Brian yeah. Lemonis double the output . Mason i would say so. Brian yeah. Lemonis how you doing, sir . Austin im austin baker. Lemonis hey, austin. Austin production manager out here. Lemonis 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 im gonna show you the two types of trailers that we build on. We are fabricating our frames right here. Were building them. Lemonis youre not even buying them . Austin were building them. John yeah, this is crazy. Austin everything we can do, we do inhouse. We are so jammed, and its unnecessary. The word custom is sexy, and it sells. Lemonis it also does one other s. Austin ruins us. Lemonis slows things down. John see, i mean can i be honest . Were big proponents of what we do is really personalizing the space. What are the three or four things that really bring you happiness . Lemonis whatever it is. I think ultimately for me, the frustration that i had with the customization piece was really about if you just had 6 models, 8 models, 10 models, pick a number, and just said, these are the floor plans. These are the materials. Yes, you can change in and out tiles or floors or stains or cabinets or fabrics or whatever it may be. Its why chipotle works. John sure. Lemonis its mexican food 100 different ways, but its like, pick this, pick that, pick this and get the hell out. John sure, sure. Lemonis same concept. But when youve taken those ideas to steve, what does he say to you . Austin my ideas were shut down. He doesnt understand what we do out here yet. Hes a restaurant guy. Lemonis has he ever worked in the shop . Austin no, and thats okay. Thats not his job. Thats what he pays me to do. Lemonis its not okay. I believe that an owner of a business at some point needs to be integrated with his team. I dont expect it every day. Theres administrative things that have to happen. John sure. Lemonis but if your business is losing money and you know that the volume of production is part of the reason, and you know that you have a 3month backlog, which means the demand outpaces the supply, you and i would be like, okay. John yeah. Lemonis . How do we get one more out . John yeah. Lemonis just one more. Steve marcus, i wanted to introduce you to lee. Lee hi, marcus. Lemonis hi, lee, how are you, sir . What do you do here, lee . Lee c. O. O. Lemonis okay. Steve lee is brandnew. Hes been with us a week and a half. Lemonis and so how does the reporting structure work here . Austin so we have employee. Lemonis yup, one. Austin we have leads. Lemonis two. Austin we have the foreman. Lemonis three. Austin you have the production manager. Lemonis four. Austin then i have steven slosher, whos the gm. Lemonis five. Austin then thats his boss. Lemonis six. Austin whos 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 doesnt. The only redundancy that we might have is austin because. Lemonis meaning. Lee . You have a general manager, foreman. The foreman is over the two leads. Lemonis pause. Did you catch what he said . John the only redundancy is this guy right here. Lemonis the guy were standing right next to. Dick move. John what do you think that is . Lemonis its not knowing your audience, and as a leader into a new business. John boy. Lemonis . Even if you believed it to be true, if you and i were standing there, brandnew to the company, we wouldnt be like, yup, this guy right here. This guy has got to go. John i dont want to point any fingers, but this guy here. Lemonis it was clear to me that this guy didnt know how i think because that was maybe the worst opening because now im thinking to myself, okay, dude. Youre going. John i think maybe lee was trying to posture a little bit. Lemonis yeah, it didnt work. John just be true to yourself, kids. Thats the message. Lemonis thats right, and know your audience. John know your audience. Lemonis go ahead. How are you . Tracy im tracy. Lemonis tracy, nice to meet you. I just spent a little bit of time with austin. Tracy my husbands name is austin, yes. Lemonis oh, its your husband . Okay. So could you take me through the sales process . Like, if i want to order a certain type of floor. Tracy so youre basically asking for a customization. Lemonis yes, can that be done . Tracy if the Production Team says we can do it, im not walking away from the sale. Lemonis why . Tracy so we get 20 of the cash upfront. If i dont 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 theyre a cash buyer. Tracy yes. Lemonis okay. Its 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 dont understand how youre getting upstairs. Austin but youll never see this in any other house. This was this lady. Lemonis how do you get up there . Austin shes gonna get a little stepstool right here. Lemonis so is there a disconnect between sales design and whats happening in the shop . Austin i cant blame sales because they have to make money. Lemonis i want to ask you a question. Does steve know what hes doing . Austin no. Lemonis does he know how to manage people . Austin no. Lemonis does he know how to design things . Austin no. Lemonis whos really running this company . Tracy hes running the outside, and im running the inside. Lemonis doesnt something have to change . Whats wrong . Austin so. Whats wrong . Lemonis talk to us. Tracy just that we love this place so much, and we love those people. These people are here because they care. Theyre not here because of this paycheck. I can promise you that. Lemonis the idea of being in the tinyhome business excites me. I mean, theres a good recipe there. It just needs some major tweaking. Whats the year been like for you . Bernadette we worked really hard. Lemonis how hard has this been on him . Bernadette incredibly difficult. Steve i have taken a huge risk just to get here today. Lemonis do the people that work here know how bad it is . Steve the top managers do. The rest dont. Lemonis and so if the business closes, what happens . Bernadette we start over from scratch, yeah. Lemonis what does that mean . You have to file bankruptcy . Bernadette about, like, a week away from that. Lemonis wow. In looking back, im not so sure how sincere they were. John hmm. Really . Lemonis you say you have everything on the line, i expect you to fully immerse yourself in your business and put yourself at risk. John that makes sense. Amber john, you had heard of tumbleweed, right . John yeah, absolutely. Amber whats their reputation in the business . John my impression was always oh, jay shafer, who kind of is credited with starting this tinyhouse movement, like, oh, he started tumbleweed, and then he left. Amber right. John so they had that sort of legacy brand name. Lemonis do you have jays number . Can he come back . 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. 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 did you make in 12 . Steve about 100,000. Lemonis what did you make in 13 . Steve about 100,000. Lemonis what did you make in 14 . Steve 400,000. Lemonis what did you make in 15 . Steve in 15, we lost money. When we expanded, about 1. 1. Lemonis so 100,000, 100,000 and 400,000 is how much . Steve 600,000. Lemonis youre at a 600,000 positive. You lose a million one in 15. Steve mmhmm. 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 yeah, because you took it all. 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. John and youre thinking, this is a good investment. Lemonis total liability, 2,885,000 against assets of 1,239,000, and that means that your negative equity, this business is upside down, insolvent to the tune of 1. 6. Steve correct. Lemonis the debt is so significant. Really, it just sits with me in a very bad way. Amber can you explain what it means when a business is insolvent . Lemonis when a business is insolvent, it means that its liabilities. John can i get a notepad . I feel like i should. Im, like, in business school. No, i like this. This is good. Amber weve all gotten a business degree on this show. John i know. Lemonis so the insolvency in a business means that its liabilities, what it owes people, is greater than the assets that it has. So whether you have bank debt or payables or any sort of loan exceeds the amount of assets, which is cash, inventory and receivables, and theres really no way out of insolvency unless more capital goes in or debt thats on the books converts to equity. Amber right. Lemonis so when i look around this factory, how did all of this get funded . Steve so originally, customers were paying upfront. 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. John that look, i love that look. You go. Lemonis i just want you to know, i took out 600,000. John but i put some of it back lemonis . But when it got tough, i dug in my pocket, and i put in. John 1,500. Lemonis . 1,500. Where youre 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 thats growing. Why did you take it all out . Steve i didnt see this coming. I didnt know it was gonna happen. Lemonis who gives a [bleep] 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 im running on the edge. This has me. Lemonis do you know what fakak means . Steve yes. Lemonis what does it mean . Steve it means all screwed up. Lemonis that doesnt scare you, does it . Steve curious as to why you say that. Lemonis because youre reckless about it, because you didnt save any acorns for the future. The fact that youre not scared of debt in one breath, but youve taken on debt like. This doesnt even, like, phase you. That freaks me out. Im willing to lend 3 million. This is really important. John okay, okay, okay. Alright. Lemonis . Because this is probably one of the most aggressive transactions that ive ever done in the history of the show. John okay. Good. Whoo. Tmobile has the first and only, nationwide 5g network. And with it, you can shape the future. Weve invested 30 billion dollars and built our new 5g network for businesses like yours. While some 5g signals only go a few blocks, tmobile 5g goes for miles. No other 5g signal goes farther or is more reliable in business. Tomorrow is in your hands. Partner with tmobile for business today. My psoriasis. Cosentyx works on all of this. Cosentyx treats the multiple symptoms of Psoriatic Arthritis to help you look and feel better. Dont use if youre allergic to cosentyx. Before starting, get checked for tuberculosis. 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Lemonis lemonis. John see . Easy. Lemonis but some people say lemonis and. John yeah. Amber lemonya. John ooh, lemonya. Oh, i like that. Lemonis how do people say your last name sometimes . John wheezebarth because the weis. Lemonis okay. I like that name. John great. I like. What did we call it . Amber perfect. Lemonya. John yeah, i like that name. Amber lemonade. Lemonis the fact that youre not scared of debt, that freaks me out. This doesnt even, like, phase you. Steve no, i completely understand what youre saying. Lemonis so you have a business thats 1. 6 million underwater, but the product is great. The people that work here are spectacular. Phenomenal. So im willing to lend this business 3 million to clean up the payables, the lenders. John this seems so fast to me. Lemonis . 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. John 75 . Lemonis okay. Amber pause, and you