The CF Finances Thread
I posted this on Robb's blog, I'm not sure how many people saw it.
From “The Best Way to Rob a Bank is to Own One” by William K. Black
(page 1) “A control fraud is a company run by a criminal who uses it as a weapon and shield to defraud others and makes it difficult to detect and punish the fraud (Wheeler and Rothman 1982). Fraud is theft by deception: one creates and expoits trust to cheat others… Successful control frauds have primarily one skill: identifying and exploiting human weakness. Audacity is the trait that sets control frauds apart…Well-run companies have substantial internal and external controls designed to stop thieves. The chief executive officer (CEO), however, can defeat all of those controls because he is in charge of them… Control frauds create a “fraud friendly” corporate culture by hiring yes-men. They combine excessive pay, ego strokes (e.g. calling employees “geniuses”), and terror to get employees who will not cross the CEO. Control frauds are control freaks (Black 2000)… The CEO causes the firm to engage in transactions that are ideal for fraud. Control frauds are accounting frauds. Investments that have no readily ascertainable value are superior vehicles for accounting fraud… Control frauds grow rapidly (Black 1993d). The worst control frauds are Ponzi schemes, named after Carlo Ponzi, an early American fruad. A Ponzi must bring in new money continuously to pay off old investors, and the fraudster pockets a percentage of the take. The record “income” that the accounting fraud produces makes it possible for the Ponzi scheme to grow. .. Control frauds are predators. They spot and attack human and regulatory weakness.
The author William K. Black is legit. PhD in Criminology, JD, professor at UT, regulator during S&L crisis.
With that in mind, I'd like to start a running list of verifiable facts and figures on CF finances. I'd appreciate any help in answering the following questions: Where does the money come from? How is money spent? How much are people paid? What are the expenses? What are the liabilities? Plus any other pertinent questions I forgot to ask.
Here is what I have so far:
CF is a private publishing company based in Arizona which employs 10 people, but how might one go about getting a peak at their tax returns, or any other finance statement? Also, if anyone knows any statistics related to CF & $ (that can be verified), I'd say it'd be a good idea to start compiling a list.
As it stands now, there are 50 Level 1 certs. I counted the total number of people from the 5 Cert pictures from 12/21/2009 and they were, if I'm not mistaken, 51, 62, 59, 52, and 38, which averages out to 52.4. So I'll use 53 as my number (which, compared to my Level 1, is a conservative number, but may reflect the slowing demand.)
53 people times 50 certs times $1,000 = $2,650,000. Since those Certs run until April, (which is the fourth month) multiplying 2,650,000 by 3 will give an approximate pre-tax year total income before expenses. 2,650,000 x 3 = 7,950,000. For simplicity's sake, I'll round that up to $8 million. So we can expect Cf to make 8 million this year on Level 1 certs, before costs. I've heard that Level 1 trainers make $400/day, so $400 x 2 days x 6 trainers = $4,800. Multiplied by 50 certs, that's $240,000. 240,000 x 3 = $720,000, so CF will spend $720,000 this year on trainers, if those figures are accurate, which is about 9% of the income. I believe they do not pay to use the CF gym which holds the cert, because it is deemed an honor. For every dollar CF makes, they have to pay out 9 cents to trainers. Thinking about it another way, the Return on Capital is %1,111. So for every 9 cents they spend, they make 1 dollar. And that's for Level 1 only.
I need some help filling in the blanks on these:
There is one Level 2 cert in January, so I will assume 1 per month on those. It may turn out that there is 1 every 4 months, or 3 a year. But it's somewhere between 3-12. Does anyone know the number of trainees and trainers at a Level 2? Or the prescribed ratio?
CrossFit Kids is $595 for two days + $50 for a background check. There are 5 certs right now, so that's 15 a year. If they get 30 people a class, that would net them $267,750, pre-tax and expenses. Does anyone know the cost of a background check? Is it $50, or is someone making money on that too?
7 certs until March (03/3009) x 4 = 28 certs a year. $595 for a two day cert. Anyone know how many trainers and trainees?
$795 for a 2 day cert. 5 certs through May.
$595 for a 2 day cert. 10 certs through March, so that would make 40 certs a year.
$595 for a 2 day cert. 6 certs through April so that would make 18 certs a year.
Mobility and Recovery
$225 for a 1 day cert. 5 certs through April so 15 a year.
$249 for a 1 day cert. 5 certs through April, so 15 certs a year.
$595 for a 2 day cert. 12 certs through April, so 36 certs a year.
$595 for a 2 day cert. 3 certs through March, so 12 certs a year.
$395 for a 1 day cert. 5 certs through April, so 15 certs a year.
$595 for a 2 day cert. 2 certs through February, so 12 a year.
Crossfit Coach's Prep Course
Price unlisted, requires a $250 deposit.
$1490 for a single, $1365 for a single. 5 days, 2 certs (Gymnastics and Nutrition). 1 in January.
$25 per year, or free with cert.
CF Games and Regionals
$500 or $1,000 or $2,000 depending on when you got in.
There are 1330 paying affiliates, as I counted them. At the very least, that's $665,000 per year. Does anyone know when the price hikes started, and the affiliation counts too? I bet that number is at least 1 million a year.
My mind is blown
I quote from the November 2008 Outside Magazine article about Mark Twight:
(Crossfit) It's on track to earn more than $13 million this year. Twight, whose operations remain private, earns roughly $200,000 a year with Gym Jones.
So... a free little website spins gold.
I forgot Merchandise. But I have no idea how much they make on that. $60 for a Zip-up hoodie, $14 for a 50% off tshirt, $46 for a normal shirt, $11 for socks, $26 for baby one-piece, $58 for shorts, $140 for Jacket, $32-34 for tank top. Does anyone work in the garment/textile industry, and be willing to help discover the mark-up?
So $13 million is the number. What year was that, do you know? Here is what Hoover's has to say:
Estimated annual sales: 5.5 million.
Based in Prescott, AZ
That's quite a discrepancy.
I don't think anyone can argue against the fact that CF has honed the skill of identifying and exploiting human weakness, which is primarily what jumped out at me. This works on many levels. First, physical weakness. It is a fitness program. Second, psychological weakness. Body insecurities, etc., make ripe targets. Also, GG has stated on video that Cf has tremendous psychological benefits, and even went as far as to say he thought CF would be used to treat mental illness in some capacity.
The yes man culture is at CF too.
What about regulation and the RRG/insurance/safety issues?
The CEO has shown that he is willing to override some internal and external controls, evidenced by his unwillingness to have a third party investigate the black box seminar fiasco and Castro's workplace violence.
The question is, is it a Ponzi, or can it become one if things turn down? The Cultfit article mentioned it was similar to a Multi-level marketing scheme. It's worth it to look at.
Well I hear Couch gets his car detailed 365 days a year. This is obviously subtracted from the gin fund.
The figure I quoted was in the November 2008 issue of Outside Magazine.
Basically, with the small amount of work you've done, it has become quite obvious that there's a whole bankload of money going into the CF coffers (who knows how fast it is being spent, not my business).
There's many more expenses than what you've come up with, though. For example, the CFHQ trainers are likely getting at least their travel expenses paid for (because $800 a cert would cover the flight/hotel/meals and maybe not much more). I could be wrong.
Anyway, as Jamila noted, it's just hilarious that sheeple still push the "free website" thing on anyone who protests the costs of seminars etc. "Free" my arse.
It seems like they are entitled to the money.
The author's name is Nick Heil. I've tried to contact him, we'll see if he responds. He has a facebook account, someone else give it shot. Garrett, you live in Arizona where CF is incorporated. Perhaps you might be able to go to your local courthouse and dig up some tax returns, or any other information? Check that link I posted from Hoover's, it has the address in case you need it. Most state court systems have tax leins and other public documents online, so you can check the entire state for free if you go in person. just a thought.
Is anyone a CPA? I'd be willing to do the research if you could point me in the right direction and the right resources.
As far as this being anyone's business, I'd say looking into everything is a necessary service to affiliate owners (and former affiliate owners), and anyone else who has invested in CF, including certs.
Dominic, I think some people get upset when the "free" notion is constantly jammed in their face. Most websites are "free" to look at.
You used the word "entitled". I would equate that as close to "deserved". A wise old barber told me once, "be careful of saying you deserve something, you might actually get what you really deserve instead of what you think you deserve." I think the backlash may fit right into that idea about now.
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