In our last article, we discussed the costs of buying a professional sports team. This week we talk about steps to take in preparation of buying a sports team.
Owning a sports team, or part of a professional sports team, is a big move. And it is one that shouldn’t be taken lightly. So if you think that’s something you want to do, make sure you get yourself prepared before you decide to pull the trigger.
There are a variety of things to look at as you prepare to make this substantial investment. Since most owners don’t get into this to lose money, you can understand that most of those things are financial in nature. Here are some of things to look at.
Is this a large or small market team?
The larger the city, the more businesses that could invest in things like expensive corporate suites or other perks. A larger populous also gives you a better chance to sell more seats, parking and concessions, all which can make your investment more profitable.
Look into the existing Stadium Deal
What is the current status of the stadium? Is there a deal in place with the city or a situation where taxpayers will actually help subsidize stadium development? This can be something that is important to yours and teams bottom line financially.
Do not invest in a league that does not subject player wages to artificial constraints. European football is a great example of how big and small clubs both manage to bankrupt themselves due to wage bills that spin out of control compared to revenues.
What is the existing payroll?
Make sure you take a hard look at this as you are preparing to buy any sports franchise. Find out what you are locked in for from a payroll standpoint and how that matches up with your expected revenue. Will you need to add more payroll costs to make the team competitive?
What are the league revenues, if any?
Revenue sharing and league-wide revenue deals (i.e. broadcasting rights) keep many franchises afloat. Based on the sport, that could be enough to make teams profitable even before the season starts. Without a league-instituted safety-net, a team that fails in the field is likely drag an owner into the red much more intensely than can be endured.
How many more investments are needed in the short term?
Other than the cost to buy the team, what other investments may be required? As mentioned, payroll could be one area needed to make the team more competitive. But what about improvements to the facility, additional advertising to create interest or other short term needs.
Will this investment help your other business interests?
Analyze whether or not this investment may allow you to add new business to your current business interests. For instance, will you be able to entertain new clients with great seats or luxury boxes that may end up in new business connections? If so, this could end up being a win-win adventure.
So those are a few key things that should be researched if you have a serious interest in buying a sports team. If you are confident after analyzing these criteria, owning a sports franchise could be for you.
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