The tiny house movement has made a big impact on the United States over just a few years, with over 10,000 tiny houses and counting located across the country. But as the lifestyle becomes more popular, even the top mobile tiny house maker has found itself struggling.
When Tumbleweed Tiny House owner and CEO Steve Weissman approached serial entrepreneur Marcus Lemonis to help save his company from collapsing, Weissman did not realize he was the main culprit behind its failure.
Weissman, a former restaurateur, began running the country's largest manufacturer of tiny house RVs in 2012, but had zero prior manufacturing experience.
"I think any business owner's lack of research will ultimately lead to bad decision making. You can't run a business that way," Lemonis said on the latest episode of CNBC's "The Profit."
Despite bringing in $6 million in revenue this year, Weissman's lack of technical abilities and leadership skills put the company at risk of bankruptcy with over $1.6 million dollars of debt. Lemonis stepped in to address Weissman's shortcomings and offer his advice on how to keep the company from failing.
"You're reckless about [the business] because you didn't save any acorns for the future," Lemonis told Weissman. "The fact that you're not scared of debt in one breath, but you've taken on debt like it doesn't even faze you — that freaks me out."
As the owner of recreational retail store Camping World, Lemonis has been in the RV space for over a decade. He noted that although Weissman had little experience building homes, he still managed to grow Tumbleweed Tiny House from a five-person team working out of a garage to a 70-person company working out of a 20,000 square foot facility.
"The idea of being in the tiny home business excites me," Lemonis said, adding that after speaking with employees and "seeing the folks on the factory floor, there's a good recipe there. It just needs some major tweaking."
With faith in both the product and the people in Weissman's business, Lemonis offered a deal: In exchange for a $3 million loan to clean up the payables and return peace of mind to the employees and 75 percent equity, Weissman had to follow a few pieces of advice from Lemonis.
Here are the two pieces of advice Lemonis used to improve Weissman's leadership mindset.
Lemonis spent a night in one of the tiny houses to understand why people love it and how to make it better. But he was genuinely surprised to learn that Weissman had only slept in one of them once.
"I am candidly shocked. This is how a leader gets closer to his business. Does he not care?" Lemonis said.
This prompted him to ask Weissman: "How passionate are you about this business?"
"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," Lemonis said.
When Lemonis first met the Tumbleweed Tiny House team, he noticed they had a bad habit of letting the buyer dictate the business negotiations. But when Weissman owned up to his role as not just the boss, but also as a leader mindful of his floor workers' time, the entire company reaped the benefits.
Instead of giving consumers' total free range on how the houses were built, the company standardized their home units, improved their margins from barely 30 percent to 46 percent and sped the production process from upwards of 22 days down to about 15 days.
"The fact that the team integrated the changes the focus group suggested shows me that they're good listeners and that's the key to manufacturing, feedback-to-final product," Lemonis said.
To prove that "he truly can be a leader" to Lemonis and to his employees, Weissman needed to remove some of the layers between him and the workers.
When Lemonis spoke to the employees on the factory floor, they pointed out that Weissman was rarely there to see the houses built.
"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 don't know why that's missing for him," Lemonis said.
He further pointed out that "Steve is too separated from what happens on the front lines."
To distill the importance of connecting with his coworkers, Lemonis recommended that Weissman work closer to those on the factory floor.
Once Weissman became more involved with the people who were lower than him in the corporate hierarchy, he better understood what was most efficient for his workers and the company overall.
By removing those layers of separation, Weissman said he noticed that communication improved and there was an understanding of what the team's goals and objectives are.
"When I think about my investment into Tumbleweed, I probably couldn't be more excited," Lemonis said. "With the new standard models, the new manufacturing process, an unbelievable team on the floor, and a newly revived leader, as far as I'm concerned, Tumbleweed has a very bright future."
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CNBC's "The Profit" airs Tuesdays at 10 p.m. ET