A perspective by Bill Prescott, who recently joined Heritage Capital Group, an investment banking firm headquartered in Jacksonville, Florida. Prior to joining Heritage, Bill was the Chief Financial Officer and Senior Vice President of Stadium Operations for the Jacksonville Jaguars NFL franchise, and provided financial and operational leadership to the executive team since its inception in 1993. He was responsible for managing all aspects of the financial operations of the Jaguars and EverBank Field venue management.
The Dallas Cowboys have not been to the Super Bowl in 16 years, but lead the NFL with a $2.1 billion business valuation. In fact, this is the seventh consecutive year that the Cowboys, who recently signed a $500 million, 25-year naming rights deal with AT&T, is the most valuable NFL team.
While many teams may be focused on the outcome on the field, the Cowboy’s owner, Jerry Jones, knows that the key factor to his success is monetizing the team’s popularity. In fact, Jones understood the importance of sponsor activation earlier and better than any other owner in franchise history.
Rewards are not just for teams with marketing advantages. “My former employer, Wayne Weaver, paid $208 million for the expansion Jacksonville Jaguars in 1993,” said Prescott. “The small-market Jaguars have never been to the Super Bowl and have made it to the post-season only twice since 1999. In January, Shahid Khan paid $770 million for the team.”
In yet another example offered by Prescott, he points out that the Cleveland Browns have lost 67% of their games and qualified for the post-season just once since the late Al Lerner paid $530 million for the team in 1998. In October, the team sold for $1 billion. Albeit small, there is a group of wealthy individuals who are interested in the acquisition of a well-run franchise.
“So, your business is nothing like an NFL franchise, “asks Prescott. “Well, I suggest otherwise.” What all of these team have in common is solid business practices with high-level financial management so that at any given time, there is a real-time picture of the financial landscape – and future prospects – of the organization. Moreover, franchise management is fully-engaged, making the most of market position and maximizing opportunities when possible. You can benefit tremendously from analyzing present and future opportunities as well.
”In contrast to NFL Franchises, there is a huge contingency of investors and buyers who are interested in acquiring well run businesses that are on a growth track,” continues Prescott. Here are key factors that Prescott feels will make your company look as sophisticated as today’s NFL franchises:
Develop a constant focus on cash flow and reliable cash flow projections to make sure you have cash to invest in drivers that will enhance the business worth. In the NFL, cash is needed to invest in the most important asset, players, during the off season when very little cash is generated. As a result, cash projections are critical to forecast the cash available to invest in players. This investment is directed to growing revenue by being competitive on the football field. There are parallel investments that are available in your company.
Know the key metrics to determine on a real time basis how your business is performing. For a sports franchise that is not only knowing how ticket and sponsorship sales are pacing compared to budget and prior years, but also fan engagement with the team measured by website analytics, social media analytics, media ratings, and attendance at events outside of games. The deeper a fan is engaged with the team, the more it drives top line sales in all categories.
Your metrics will differ, but they are no less critical. It pays to identify them, measure them, and react quickly to your changing environment.
Of course, margins are a key indicator on the profitability of your business, and you constantly evaluate them to maximize profitability.
A sports franchise may not be thought of as a margin oriented business, but a margin analysis is critical to maintain and enhance profitability. The gross margin for each revenue stream (tickets, advertising, and concessions) is analyzed and compared to budget and industry standards. In addition, margins by customer (sponsor, ticketholder, etc.) are analyzed to make sure resources are being allocated efficiently.
Understanding how to measure margins is fundamental to continued success for any organization so that you take advantage of opportunities to increase them and to drop unprofitable operations.
Listen to your customers and understand their experience in purchasing and consuming your product. Any breakdown in the customer’s journey in the interaction with your company can cost you sales.
A sports franchise’s business is all about the fan’s experience from the purchase of a ticket to leaving the game. A bad experience along the way can cost you future sales. NFL teams constantly monitor fan experience through surveys, town hall meetings with fans, and through assessment of the game day experience with secret shoppers. This feedback used to enhance the fan’s experience by continuous staff training and correction of service breakdowns.
Delivering a successful customer experience not only benefits sales, but engages an organization to focus on the customer and continuous improvement. Measuring customer attitudes and experiences should be the central focus of your marketing strategy as well
Business systems are critical for a company to effectively manage its operations and allow its staff to operate efficiently. For example, for a sports franchise a critical business system was is an inventory management system for ticketing, advertising, merchandise, and concessions. This system allows monitoring of what is sold and unsold, realized sales price, inventory aging, fulfillment reports for purchases, and other key management reporting tools. Interfaced with the general ledger and other systems they minimize manual tasks and provide automated on demand reporting.
The right business systems allow you to better manage your business, and your team to focus on the information that is important. Today’s available technology is one of the most efficient ways to manage your business and report your successes. Make sure you keep your company’s operations up to date on what’s available in technology and systems.
In today’s marketplace, companies have more similarities than differences whether they are an NFL franchise or a small local company. It pays to keep your head in the game.