The lower economy over the past few years has had an interesting effect on endorsement opportunities for athletes. There are actually more endorsement deals and sponsorship activation taking place. While the economy has lowered the price on larger endorsement deals, the type a Peyton Manning might receive, the change in demand price has created extra funds for companies to supply more endorsements at a lower cost. Overall, more athletes are receiving endorsements.
In a recent issue of The Sports Business Journal John Slusher, Vice President of Nike Sports Marketing says, “Our strategy hasn’t changed [due the the economy]. We are buying as many athletes, if not more, but at a better price.” While this might mean less endorsement dollars for an individual athlete, it also means more athletes have endorsement opportunities. Although there was a slight decline from 2009 to 2010, Nike shows over a 100% increase in endorsements commitments over the last five years (1.6 billion in 2006 to 3.8 billion in 2010).
This brings me to my point that it is important to have an agent who takes a pro-active approach to securing endorsements. This begins with a solid marketing and public relations strategy. You will hear me say this more than once, but many times endorsements get lumped together with marketing and PR, but they are different. The marketing department of a business doesn’t sell the product, rather marketing efforts promote the product. If an agent is pro-active in developing the image and brand of the athlete, then the athlete will be that much more appealing to a companies offering endorsement opportunities.
So, it is both a pro-active approach in marketing/PR and securing endorsements that makes a good agent. Any agent can sit around the phone and wait for endorsement deals to come, and maybe they will, but you want an agent who is going to work for you.
The statistics show that it is no longer only the high tier athletes and superstars who are receiving endorsements. Some deals have to be found. Keep in mind, every backup quarterback is a hero in his hometown.
Nike Source: Lefton, T. (2010). Endorsements remain buyers market. Street & Smith’s Sports Business Journal, 13(21), 25-32.
Sunday, July 31, 2011
Sunday, July 17, 2011
Financing a Sports Agency
On the theme of agency start up, I want to talk about financing. The truth is the sports agent business can be one of the most risky due to high competition and up-front costs, which also means that the financial investment can be risky.
Darren Heitner (sportsagentblog.com) says $100,000 is a good solid number of start-up capital necessary for a new agent. Most agents I have talked to agree. In addition to normal start up costs such as office supplies and technology purchases, the majority of the money will go towards travel and training for players. Training can range anywhere between $10,000-$20,000 (Bechta). Before training even happens, agents have to recruit and spend a lot of time and money pursuing potential clients, and maintaining relationships with current clients.
So lets dig further into financing an agency start up. The more traditional approach would be like any other business start up; try to invest as much capital yourself and look for investors or a loan to cover the rest. Personally, I would not recommend a loan that has to be paid back. Debt equity can be a killer to agents trying to start out because you end up investing a lot of money up front without a guarantee of return. If you blow a loan on a few athletes that don't pan out, how will you pay back the loan? The best direction to go here would be with an investment in return for giving a piece of your agency to the investor. You can even structure it creatively in a way that offers a certain percentage of revenue until the loan is paid back, which then after the investor receives a smaller percentage as a stakeholder in the business.
An alternative rout would be through a partnership with an experienced agent or agency or any third party that is willing to fund on a per-athlete basis in exchange for a 50/50 share of income generated from a particular athlete-client. You would find investors or an agent ahead of time that agrees to fund you if you can sign an athlete-client. The value of this is that there is no financial risk to you and your funded depending on how many athletes you can sign, and the talent level of the athlete. This route would take a lot of preparation, due diligence and relationship building ahead of time, but also provides the least amount of risk.
Darren Heitner (sportsagentblog.com) says $100,000 is a good solid number of start-up capital necessary for a new agent. Most agents I have talked to agree. In addition to normal start up costs such as office supplies and technology purchases, the majority of the money will go towards travel and training for players. Training can range anywhere between $10,000-$20,000 (Bechta). Before training even happens, agents have to recruit and spend a lot of time and money pursuing potential clients, and maintaining relationships with current clients.
So lets dig further into financing an agency start up. The more traditional approach would be like any other business start up; try to invest as much capital yourself and look for investors or a loan to cover the rest. Personally, I would not recommend a loan that has to be paid back. Debt equity can be a killer to agents trying to start out because you end up investing a lot of money up front without a guarantee of return. If you blow a loan on a few athletes that don't pan out, how will you pay back the loan? The best direction to go here would be with an investment in return for giving a piece of your agency to the investor. You can even structure it creatively in a way that offers a certain percentage of revenue until the loan is paid back, which then after the investor receives a smaller percentage as a stakeholder in the business.
An alternative rout would be through a partnership with an experienced agent or agency or any third party that is willing to fund on a per-athlete basis in exchange for a 50/50 share of income generated from a particular athlete-client. You would find investors or an agent ahead of time that agrees to fund you if you can sign an athlete-client. The value of this is that there is no financial risk to you and your funded depending on how many athletes you can sign, and the talent level of the athlete. This route would take a lot of preparation, due diligence and relationship building ahead of time, but also provides the least amount of risk.
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