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CRB Business Building Seminar BUSINESS PHYSICS

CRB Business Building Seminar BUSINESS PHYSICS. Presented By: Greg Crabtree, Brandon Gray, Patrick Myers. Business Physics. What are the laws of Business Physics? Laws properly applied: Rental Equipment, Inc. Laws not applied: Outlet, Inc. Laws of Business Physics. Salary vs. Dividend

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CRB Business Building Seminar BUSINESS PHYSICS

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  1. CRB Business Building SeminarBUSINESS PHYSICS Presented By: Greg Crabtree, Brandon Gray, Patrick Myers

  2. Business Physics What are the laws of Business Physics? Laws properly applied: Rental Equipment, Inc. Laws not applied: Outlet, Inc.

  3. Laws of Business Physics Salary vs. Dividend 4 Competing Forces of Cash Flow Taxes, Debt, Capital, Dividends Must be profitable to survive Million Dollar Profit Makeover

  4. Rental Equipment, Inc. Founded in 1991 1994: $200K LOC, Overdrawn $20K 2006: $0 LOC, $1.9M in cash

  5. Rental Equipment, Inc.

  6. Law: Salary vs. Dividend Ownership Structure: Active Employee / Investors Salaries based on market levels Dividends only paid according to the Laws of Cash Flow

  7. Law:4 Competing Forces of Cash Flow Taxes – Company has a “pay as you go” strategy Debt – $200K in 1994 ; $0 in 1999 Capital – $19K cash in 1994 ; $1.9M cash in 2006 Dividends – First issued in 2003

  8. Law:Must Be Profitable to Survive Marketplace change: 15% NOI reduced to a 0% NOI Company given “Salary Cap” Challenge – service more customers with less people Outcome – 25% reduction in payroll ; achieved & exceeded profitability target Side benefit – cost savings across the board

  9. Outlet, Inc. Founded in 1995 2001 1.1M in Debt, 300K in cash 2005 3.6M in Debt, 189K in cash 2006 – Out of Business

  10. Outlet, Inc.

  11. Law: Salary vs. Dividend Ownership Structure: Non - Employee Shareholders Shareholders paid little to no salary. Dividends paid based on shareholder discretion

  12. Law:4 Competing Forces of Cash Flow Taxes – Company never was profitable thus paid no tax Debt – $380K in 1995 ; $12M by 2000 Restructure in 2001 – change business model ; acquire additional capital Debt – 1.1M in 2001 ; 3.6M in 2005 Dividends (Return of Capital) – Paid throughout life of the Company - over 3.5M between 2001 and 2005

  13. Law:Must Be Profitable to Survive Switch to remainder product business model Applied Salary Cap – Not to total Company Challenge to increase gross margin to cover home office expenses Outcome – Increased profit margin ; Home office expense to high 2005 – Got away from remainder ; increased home office expense 2006 - Bankrupt

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