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Tuesday, 19 July 2011

Show me the Money

Putting aside the obvious need to play in a good facility, to have a strong team populated by a mix of local ‘stars of the future’ and overseas ‘superstars’, to maintain a tight control over your finances to ensure stability and prosperity, to have a fluid marketing and communication strategy that builds an expanding supporter base, and countless other ‘must do’s’ - the #1 requirement for any sports club is to generate as much income as possible......
Right???
Well - simple answer - YES - because we know that we need money coming in to pay for our existing costs, and we all have ambition so that we can improve the team - so we will need more and more cash to pay for all these exciting new innovations.
So “YES” makes sense.

However - the search for the almighty sale $ can lead sports clubs down the wrong path.  A sale will generate income, a new sponsorship will bring in new people to the Club - all good - but there are other factors that you need to consider when looking at your sales plan.
#1 - Sales amount / Sales Portfolio - this is where the vast majority of sports franchises will be right now.  Looking to build up as large a portfolio of mutually agreeable products as possible - and then selling them all as quickly as possible.  A good sales person will think his job is done once all the product range is sold....  If only it were that simple.....
#2 - Sales longevity.....  Is it better to have 1 major sponsor committed at $1m per year for 10 years (total income = $10m) or hold out for the $1.25m you want annually - meaning that 10 years will generate $12.5m - a whopping 25% more......  If money is all that drives you - then you ditch the longevity option and hope you will sell next year....  However - sales longevity creates other benefits - that don’t always appear on your balance sheet.....
  • Brand confidence - sponsors see other sponsors committed to your brand and assume (sometimes correctly) that you must be giving good value, that you must be servicing the sponsor well - else why would they stick around...  This will attract more sponsors, this will build the value of your brand and this will push up the price of your other sponsorships.... (can we quantify it??  It’s tough)
  • Franchise planning - with longevity - the money is “in the bag” - and you can look ahead at other areas of your business safe in the knowledge that your income streams are safe....
  • Resource usage - a sale of 10 years of course will need servicing - but it won’t need replacing - - so your sales staff can get on with selling other products (rather than always having to deal with the annual replace-athon.....  You will have staff managing accounts anyway - so your existing staff will generate greater return (can I quantify that??  A bit easier - just look at the extra money brought in)
#3 - Sales certainty - this is similar to Sales longevity (in that a long contact does give you a level of certainty) - but there is more to it than that - and what you need to strive for is long term certainty on all levels of income.  This is what you are likely to base your planning on across the organization (accountants will want to get involved and be prudent for sure) - so you need to educate your sales staff to be chasing certainty.  Examples???? - sure....
  • A long term contract gives an element of certainty - but what if your sponsor goes bust???  You need to ensure your contract has guarantees (holding company?)....  What happens when the 10 year deal is coming to conclusion - you need to have been working on replacing that deal for a long time - so that any change is seamless.....  Ideally you will have built such a great relationships with the sponsor that they will assist you in their replacement.....
  • A queue / a waiting list - the holy grail for all income streams.....  Your maximum sales income per year is $20m and you have achieved that well before your deadline...  What do you do next??  You start charging people to be “next in line”....  A sell out generates its own interest and you can use the carrot of ‘being in line’ to put together your ‘bench’ for when existing partners changes their mind / go bust / whatever excuse they come up with....  This approach works with season tickets, with match tickets, with sponsors, with hospitality - with anything for those lucky enough to get to that level.  But at least you know that this is where you want to be aiming....
So when you are planning your sales targets and your sales efforts bear in mind that it is not all about just generating a quick buck.  Come up with a plan that will allow you to drive long term and committed revenues on a consistent basis.
So Cuba should have been shouting “Show me the Money....... and the long term commitment, and a waiting list of replacements in case the Money runs out” - - - - - - not quite as catchy really.

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