Marcus Lemonis: This is how to know it's time to fire someone

When you're running a small business, there's not much room for an employee who isn't meeting expectations — one person's poor performance can impact the entire company.

But how does a manager know when it's time to let an employee go? That's the tough lesson that turnaround king Marcus Lemonis has to teach one business owner on this week's episode of CNBC's "The Profit."

Though Lemonis has helped dysfunctional teams overcome obstacles before, he faces a challenging environment at California-based Bodhi Coffee, a high-end coffee bean wholesaler. Their story illustrates a key management lesson for business owners: When an employee demonstrates consistent disregard for a company's well-being, it's time to take action.

Steve Sims, owner of Bodhi Coffee, talks with Marcus Lemonis.

Bodhi Coffee saw incredible success in its first few years of operation, but as the company grew, so did its internal issues. As the show reveals, poor inventory management and declining sales were the direct result of one employee's lackluster performance.

"He's demonstrated a lack of consideration for his coworkers," says Lemonis, speaking of the employee. "He has represented himself as somebody he is not."

As a result of his behavior, the company suffered financially, and high-achieving employees became dispirited. If owner Steve Sims didn't change how he ran his team, the state of his business wouldn't improve either.

"Humility is a requirement for me to be in business with somebody," Lemonis tells Sims, "but there's a certain amount of confidence I would like you to have to be partners with you."

Sims began holding more staff meetings to increase communication with his team. He had a difficult conversation with the under-performing employee and after weighing the pros and cons of letting him go, Sims decided to terminate him.

"You've got to be able to communicate," Lemonis says. "If you can't, it's like, people don't know what to do."

Check out how one obvious mistake could be costing your business thousands

CNBC'S "The Profit" airs Tuesdays at 10 p.m. ET

Video by Zack Guzman