Direction September/October 2017 - 36

GROWING BROKE
HOW TO FINANCIALLY MANAGE RAPID GROWTH
Rapid growth can kill a business. "It must
be managed carefully," said David Duryee,
managing director of Horizon Management
Services, a management consulting
business with a focus on the moving and
storage business.

reduction in the borrowing power of the
business. A reduction in borrowing power
puts a severe strain on cash flow and
the ability to pay bills and other obligations,
and it may cause something bad, such as
Chapter 11 bankruptcy.

"Basically, it goes like this: Growth in revenue
causes growth in assets; growth in assets
causes cash flow to go down to pay for the
assets. Cash flow going down causes either a
drop in existing cash or an increase in liabilities.
An increase in liabilities causes an increase
in the debt-to-equity ratio, which causes an
increase in the riskiness of the business.

"It is called 'growing broke,' and I have seen
moving companies do exactly that on more
than one occasion," Duryee said.

SEPTEMBER | OCTOBER 2017
Direction

36

learned the military business from
sister company National Forwarding.
"Joining a van line is important to gain
partnerships with other agents. We
were operating in a vacuum. You don't
work with competitors in the local
market, and we didn't have friends
outside of Tampa. When we joined a
van line, we suddenly had hundreds
of agents we could call on and ask
advice," Hunt said.
In 2008, First Class signed a contract with North American Van Lines.
"Partnering with a globally recognized brand is absolutely a reputation
builder. It had a huge impact on our
business," Hunt said.
Running with the big dogs wasn't
easy, and there were a lot of costs
involved. The company had to learn
to run lean. "Good management and
the recession put us in the position we
are in today," Fallon said.
As the recession drove other
moving companies out of business,
First Class attracted more work. It
also bought equipment at affordable
prices. Today, the company owns 65
pieces of equipment. "By 2013, we
were triple the size we were when we

1. Minimize your assets. Consider leasing
or renting fixed assets, even if it is more
expensive than owning. If you must buy
assets, finance them over as long a period

2. Maximize net profit margin. This does not
say maximize net profit, Duryee warned. With
the highest possible margins for both gross
and net profit, you have the best opportunity
to increase your growth rate.
3. Maximize net equity. Every dime of
earnings should be reinvested in the
business, so you have sufficient equity
to pay for growth. Even when business is
good, resist the temptation to pay yourself
big bonuses.

Photo courtesy of First Class Moving Systems Inc.

"An increase in the riskiness of the business
makes the banker anxious and causes a

What is the answer? Duryee offered the
following three key points:

as possible to keep payments low. This
reduces what you spend and increases
your ability to grow.

For First Class Moving Systems CEO Chris Hunt, left, and Chief Operating Officer Will Fallon, partnering with North
American Van Lines in 2008 had a huge impact on their business.

joined North American Van Lines,"
Fallon said.
The recession also taught the two
men that business diversity is important. The company learned to woo
commercial work, real estate professionals, property managers, facility
managers, shipping and logistics.
"You can't burn any bridges in this
business," Hunt said. "It is a very
small network."

He particularly advises being
an active participant in AMSA.
"Attending the annual conference and
being able to garner new relationships
with other agents is a huge opportunity," he said. n
Jennie L. Phipps is a veteran business journalist based in Michigan. She is a frequent
contributor to Direction.



Table of Contents for the Digital Edition of Direction September/October 2017

From the President
Industry News
What's New at AMSA
Supplier Profile
Growing a Moving Company Takes Heavy Lifting
Patent Trolls vs. Transportation Companies
Washington Watch
Fast Facts
Advertisers' Index
Direction September/October 2017 - Cover1
Direction September/October 2017 - Cover2
Direction September/October 2017 - 1
Direction September/October 2017 - 2
Direction September/October 2017 - 3
Direction September/October 2017 - 4
Direction September/October 2017 - 5
Direction September/October 2017 - 6
Direction September/October 2017 - 7
Direction September/October 2017 - From the President
Direction September/October 2017 - 9
Direction September/October 2017 - Industry News
Direction September/October 2017 - 11
Direction September/October 2017 - 12
Direction September/October 2017 - 13
Direction September/October 2017 - What's New at AMSA
Direction September/October 2017 - 15
Direction September/October 2017 - 16
Direction September/October 2017 - 17
Direction September/October 2017 - 18
Direction September/October 2017 - 19
Direction September/October 2017 - 20
Direction September/October 2017 - 21
Direction September/October 2017 - 22
Direction September/October 2017 - 23
Direction September/October 2017 - 24
Direction September/October 2017 - 25
Direction September/October 2017 - 26
Direction September/October 2017 - 27
Direction September/October 2017 - 28
Direction September/October 2017 - 29
Direction September/October 2017 - Supplier Profile
Direction September/October 2017 - 31
Direction September/October 2017 - Growing a Moving Company Takes Heavy Lifting
Direction September/October 2017 - 33
Direction September/October 2017 - 34
Direction September/October 2017 - 35
Direction September/October 2017 - 36
Direction September/October 2017 - 37
Direction September/October 2017 - Patent Trolls vs. Transportation Companies
Direction September/October 2017 - 39
Direction September/October 2017 - 40
Direction September/October 2017 - 41
Direction September/October 2017 - Washington Watch
Direction September/October 2017 - 43
Direction September/October 2017 - 44
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Direction September/October 2017 - 46
Direction September/October 2017 - 47
Direction September/October 2017 - Advertisers' Index
Direction September/October 2017 - Cover3
Direction September/October 2017 - Cover4
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