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Good Sports

Get off the sidelines and into the game! Starting a business based on professional sports could put you in the big leagues.
By Geoff Williams
Entrepreneur Magazine - March 2004

URL: http://www.entrepreneur.com/magazine/entrepreneur/2004/march/69188.html

The crunching of body parts, as 300-pound linebackers slam into each other. The crack of the bat, as Sammy Sosa slams another ball, whipping through the air and into a stadium full of thousands of cheering fans. Millionaire giants lunge for a ball, hoping for the chance to seize a brief moment of glory and win one for the team.

There are a hundred dozen ways to explain the appeal of sports--and yet no way to explain it. You either get it or you don't.

But one thing is for sure: "Sports" is plural; it's almost always about the team. There are a few exceptions, like golf and tennis, but most sports are a group effort. That's why fans always shout "We won," instead of "You won." But as some entrepreneurs know, you can be part of a winning team without being able to pitch a 95-mile-an-hour fastball. You don't even have to paint your face green and scream like a lunatic in 25-degree weather. You can be part of a team by starting a business in the professional sports industry.

Sure, you can focus your company on college sports, where everybody is making money, even the players--or do you think free college tuition and other perks aren't forms of money? Or you might make a mint with a business aimed squarely at the high school or kiddie sports crowd. But arguably, your best point spread comes when you can attach yourself in some way to professional sports, where there are more teams and fans, and where there's more money. In part, that's because it's an ever-changing, ever-evolving industry, says Skip Horween, president of Chicago-based Horween Leather Co., which has been providing leather for NFL footballs since the 1950s. "There are a lot of barriers," he says of entering professional sports, citing a base of established competitors, many of whom are running lean by outsourcing their operations. But on the plus side, "there's differentiation and specialization," more so than in other industries. For instance, Horween, 47, knows of an entrepreneur who sells briefcases, watches and other leather-made gifts, all manufactured from old major league baseball gloves. That type of innovation is rooted in the history of the sports industry.

And so if you want the best odds to create your own winning team, you may hit a home run by starting a business based on professional sports.

Brian Feeny, 30, has fond childhood memories of watching his heroes slide into home and get crushed into dust near the end zone. "All my friends were into watching sporting events. I think it's a law in western Pennsylvania," says Feeny, who was also influenced heavily by his mom. "My dad wasn't into baseball games, but my mom and I would watch the Pirates, and we'd go to the stadium two or three times a year."

But while Feeny was a sports science major in college, he opted to study business in graduate school. "I thought I could marry the two, business and sports," says Feeny, whose first enterprise had nothing to do with sports. He founded Heirloom Gift Bazaar LLC. "I learned that general gift items is a really tough, tough market. It's more of a shotgun approach, where when you're marketing, you're saying 'I want to find somebody who is looking for gifts.' But it's a lot more focused when you're trying to reach a football fan who wants Pittsburgh Steelers merchandise."

Feeny sold Heirloom Gift, which is still up and running at Heirloomgift.com, and for less than $1,000, he started an online store (SportsFanfare.com) that sells thousands of officially licensed products from universities and professional sports teams in baseball, basketball, hockey, football and golf, as well as from auto racing. As Feeny explains it, "This is the place for the displaced fan. If you're from Texas A&M University or Indiana University, or if you're a Philadelphia Eagles fan, you're probably not going to easily find merchandise if you live far from those venues. If you want a hat or a blanket, you'll have to go online to get it." Preferably, Feeny hopes, at SportsFanfare.com.

And many people are doing just that. Feeny started the company in 2002, when he had a day job as a business analyst at an insurance firm. Soon after, he gave his notice. "It just grew so fast, tenfold what my other business had done," marvels Feeny, who now has three full-time employees. He finished 2003 with around $3 million in sales, and he projects the company will earn nearly $4 million in 2004.

There's no easy answer for how Feeny became successful, of course. Clearly, sports fans are a formidable customer base. He says that a lot of what he does has to do with his knowledge of how to get appropriate placement in Internet search engines, and the odds of him sharing his formula for that are about as likely as the Cubs or the Red Sox ever winning the World Series. However, Feeny says he also recognized that his market wasn't yet saturated. GSI Commerce Inc. is his biggest competitor, selling merchandise through regional sports outlets like Dick's Sporting Goods and national fitness centers like Bally Total Fitness. GSI's net revenue in the third fiscal quarter of 2003 was $47.5 million, if that gives you an idea of just what he's up against. But Feeny says that as big as GSI is, they aren't yet a Barnes & Noble or an Amazon.com. (Feeny had been interested in selling books online, but he quickly realized that it would likely be a lost cause.)

Feeny also notes that it's important to "forge relationships," which he has done with dozens of distributors and manufacturers. It might feel intimidating to work with major companies that distribute officially licensed products of teams, some of which you have worshipped since birth. But even if you feel small, the people you work with aren't going to think of you that way, says Feeny. "If you place a sizable order, they won't care who they're buying from."

How to Be a Contender

So you love sports, and you love the business world, but you're not sure what type of sports business you want to start? Here are but a few ideas:

• Sports fantasy camps: Think City Slickers, only with baseball. These are growing in popularity-they let fans experience what it's really like to play on a professional basketball team, baseball team or what have you; generally, some sort of former professional athlete is on hand to give an aura of authenticity.
  
• A sports magazine: The title Sports Illustrated is taken, but you could look for an underserved market with a growing fan base and start putting a magazine together.
  
• A Web site devoted to a sport: You could sell officially licensed products and books on the sport and offer chat rooms, scores, articles and information about said sport.
  
• Finding and buying a sports-related franchise: Velocity Sports Performance is but one example, and it's an unusual one. The Alpharetta, Georgia-based company, which had 15 franchises across the country at the end of 2003, specializes in training athletes--helping them increase speed, power and agility, while preventing sports-related injuries.
  
• Sports-themed restaurant or bar: Who doesn't like to eat? For other ideas, simply think of the business first, and then apply sports to it. If you've always wanted a video production company, you could specialize in producing sports documentaries; if you're interested in printing, you could produce inspirational sports posters and sports-themed greeting cards; if you've always dreamed of creating snacks or drinks, veer toward sports drinks and energy bars; if computer games are your thing, specialize in developing sports video games. The list goes on and on.

Innovation, market trends, manufacturers, distributors--there are a lot of terms thrown about in the sports industry that you'll also hear in the corporate sector. So while it's obvious, it still needs to be said--a sports-related business is a business. "Once you get past the point of being amazed that 'Hey, I'm working with really tall people in basketball,' you'll realize you're marketing a product like Coca-Cola or anything else," observes Dan Mannix, CEO of LeadDog Marketing Group in New York City and adjunct professor at New York University, where he teaches classes in sports entrepreneurship and sports events tourism.

Echoing those thoughts, former business consultant Jennifer Munro says, "You still have to have the right sales, accounting, the capitalization and management. You're working with the same principles as an accounting firm." Munro knows of what she speaks. She's now the president of corporate sales at Golf Digest Schools in Palm Beach Gardens, Florida, and specializes in hosting corporate programs that bring business concepts and the sport of golf together.

But Munro concedes that while it's a business, the sports industry is "glamorous; it's more exciting, if you're into drama and excitement and visibility. And it's simply more fun."

"The sports-industry crowd is much more fun, and more satisfying [to be a part of], than the corporate sector," agrees Ed Estes, owner of Cincinnati-based DigitalBang LLC. "Of course, I love sports, and that's a big part of it."

Estes' company, which employs seven people, was an all-purpose marketing firm when it began in 1997--until Estes discovered sports. Today, sports-related marketing accounts for approximately 75 percent of his business, which stands to make $2 million by the end of 2004. Estes' first foray into sports was Hoops Frenzy, a software program that helps people run their own men's college basketball contests online. In a nutshell, Hoops Frenzy capitalizes on the office basketball pools across the country, and it makes it easier and quicker for the office pool manager to keep track of scores, teams and who in the pool is winning what. From there, DigitalBang moved on to creating online sports games that customers can play at company Web sites, which offer consumers fun but also ask questions about their buying habits along the way. The company now has products relating to everything from NASCAR to football.

Estes, 38, says it's always a challenge to serve impassioned customers: "You're going to hear very quickly if you get something wrong. If we accidentally input a score wrong [using the Hoops Frenzy software], we might get a dozen e-mail messages. But as long as your answer to your customer is accommodating, people [will] forgive those bumps. Just make sure you are ready to respond quickly when you do mess up."

But even the messing up isn't so bad, because it's linked to a lifestyle and culture that Estes feels passionate about. "This is so much more satisfying than any other industry I've been involved with," says Estes, who used to work in IT sales. "In the corporate world, you're working on what the client needs done, and you often don't feel that great about the product you're working on. But when it's related to sports, because most of us here enjoy sports 24 hours a day, seven days a week, we feed off that satisfaction. And so even though it's a business, suddenly it becomes a much more interesting one when it's spun around a sporting event."

If your business is a success, chances are good that, at some point, the sports community is going to notice-really notice. Maria Erickson, is president and CEO of Fantasi International, a company known for Bette & Court, a clothing line for women golfers. She has 35 employees as well as a couple dozen independent sales representatives working for her. Erickson has had pro golfers approach her to be paid spokespeople for the Bette & Court division--which brings in $8 million to $10 million annually.

Not a bad take, especially considering that her initial investment was only about $13,000 from her savings, although Erickson, 43, says she ultimately had to take out loans to keep the business running in the lean years. "We were definitely operating on a shoestring budget," says Erickson, who's fallen into a few sand traps and made a shank or two over the years.

One such year was around 1996, when she thought "Oh, boy, the market's going great with the ladies--let's get into men's clothing." What she didn't realize at the time was that the "barriers for entry [were] much greater," she says. "The rules of business, the way the business game is played, is much different than the one I had come from. I thought we could take the exact formula and replicate it with the men's [clothing]." We'll resist the urge to make a pun about a clothing company losing its shirt, but Fantasi, based in Hialeah, Florida, did lose "a significant amount of money" because Erickson had plunged into an area of business that she hadn't fully researched.

Add to that the sagging economy of recent years, which hammered away at Erickson's business. "When the economy is tough, golf is a luxury. And when there are corporate layoffs, and you're worried about your job and working twice as hard because you've lost half your staff, the last thing you want to do is spend frivolously on golf."

This is one reason why Erickson's business is still going after new golfers, expanding its female clothing by marketing to senior citizens and even girls. "I think the future is very bright, but you always have to be cautious," says Erickson, which is why she's not likely to join forces with an athlete to promote her clothes, even though her experience with having a spokesperson was largely a positive one. Erickson brought aboard Michelle McGann--who was and still is a force on the Ladies Professional Golf Association Tour--as a paid spokeswoman. That was about four years ago, and McGann represented the company for approximately three years.

For those who are interested in having a celebrity athlete as a spokesperson, Erickson says you can realistically expect to pay an athlete anywhere from $15,000 to $100,000 per year to market a brand. And, of course, you're talking about a scenario of "how much money have you got?" if you want a Michael Jordan type of player hawking your wares. But Erickson cautions, "You really have to look at the big picture and ask yourself 'I've got $40,000--if I spend it here, what are the pros and cons?' Having a celebrity spokesperson could potentially bring you nothing--and if you do lose that 40 grand, then that's 40 grand less that you could have spent on something else." That's an expensive lesson.

But perhaps the most important tutorial is imparted by Munro, who observes, "Just because somebody loves a sport doesn't mean they can necessarily market a business." The subtext here is that you have to love and understand the inner workings of the business world as well.

Mannix, who often meets young entrepreneurs with basketball on their brains, seconds that. "I think the most common mistake entrepreneurs make is thinking 'I love sports, so I want to work with [it].' What does that mean, anyway?" wonders Mannix. "I love cheesecake, but that doesn't mean I should start making it for a living."

Getting Equipped

Dan Mannix is CEO of LeadDog Marketing Group in New York City and adjunct professor at New York University, where he teaches classes in sports entrepreneurship and sports events tourism. We asked him for some ideas on where to turn if you're interested in learning more about starting a sports-related business.

Periodicals

• Street & Smith's SportsBusiness Journal: "A publication everybody seems to get," says Mannix.
  
• The Licensing Letter: A newsletter, published by EPM Communications, providing news and statistics on the licensing industry. "A great resource for someone who wants to do something in sports licensing," says Mannix.
  

• SportsBusinessDaily.com: Essential reading if you want to stay on top of the sports-business industry. It also has a daily newsletter, The Sports Business Daily, and this, says Mannix, is a venture that's only a few years old-"a perfect example that there's always room for something new in the sports-business industry."
  

Books
Curiously enough, the two books Mannix considers essential reading for his students are not specifically sports-related books, but they're written by the founder of International Management Group (IMG), considered the leader in sports marketing worldwide:

What They Don't Teach You at Harvard Business School: Notes From a Street-Smart Executive (Bantam) by Mark H. McCormack
Never Wrestle With a Pig: And Ninety Other Ideas to Build Your Business and Career (Penguin) by Mark H. McCormack

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Geoff Williams is a writer in Loveland, Ohio. Contact him at gwilliams2@cinci.rr.com.

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