Marcus Lemonis knows how to break up a fight between two English entrepreneurs.
On Tuesday's episode of CNBC's The Profit, Lemonis invested in California-based custom gazebo company Kensington Garden Rooms, whose British co-founders were exchanging fighting words on a regular basis. Founded in 2012 by Damion Merry and Simon Johnston, the company was turning a profit selling hand-crafted cedar gazebos. But with a price of more than $30,000 per product, the founders were excluding a large chunk of the market and leaving money on the table. What's more, their contentious relationship was threatening the future of the company.
Here are three crucial components Lemonis helped the business construct after investing $150,000 in the gazebo-maker.
1. Trust between partners.
Making gazebos efficiently requires using large-scale industrial machinery, but Merry insisted on working with smaller, inexpensive equipment. Why? He didn't trust Johnston enough to purchase more expensive tools. After forcing the pair to bury the hatchet, Lemonis got the founders to agree on buying equipment that would increase the business's profitability. "You're not building rocketships," Lemonis said during the episode. "This is a time and materials business."
2. Equitable ownership.
One of the problems plaguing the business was a 20-year-old disgruntled employee named Jack. The company's most valuable laborer, Jack had only 5 percent equity in the six-person company. To build a more equitable ownership structure, Lemonis doubled Jack's ownership to 10 percent equity. "When someone doesn't have a ton of skin in the game, it's easy for them to to think about other options," Lemonis said.
3. Targeted marketing.
When Lemonis invested in Kensington, Merry and Johnston were marketing their gazebos only at events like the California Mid-State Fair. Lemonis added additional potential customers by marketing the product to consumers at home-improvement stores and owners of commercial businesses such as vineyards and car dealerships.
After getting the cost of the gazebo down, Lemonis was also able to help the company land a retail partner True Value, where customers immediately swarmed to Kensington's Gazebo.
"There's been more people in the first half hour standing at True Value than there was in four hours at the fair," Lemonis said.