Sports Finance Project
Introduction
The Eagle Stars Football Club (ESFC) was formed and promoted in New York. The football club usually operates at Bryant Park for training and other undertakings. There has been an increase in demand for the past five years, with over 300 players. Moreover, several players have come to the club since 2016. The club was developed and made official in 2015 to inaugurate New York Soccer League home and away games. ESFC is associated with the football governing bodies, such as the New York Soccer League and the Football Federation of New York.
As seen from the club’s membership, local clubs receive a lot of support from the local area. The main focus is to develop and maintain membership in the ESFC. Over the past years, the club has managed to grow and sustain its membership successfully. In addition, the number of members in the club has made it difficult for various facilities to be found at the club. The facilities have made it hard to meet the increased demand at the club. The ESCF board has developed a prudent plan to tackle the challenges faced by the club and meet the facilities’ requirements. The facilities will strengthen the current and future club potential. The Business Plan drafted below will ensure the ESCF is managed in the right way and its goal is reached in the coming years (2022-2032). Besides, the Board will ensure that the plan is followed and modify it to consider any further growth and needs of ESCF if needed.
Marketing
The current trend in the ESCF will ensure that the club keeps on generating profitability and income for the organization to be successful. The trend will ensure that women’s sports will be adopted in the process (Badenhausen, 2011). Women’s football is on-demand, and tickets to women’s games will ensure that the organization generates a lot of income by selling the tickets, especially when women are playing. Furthermore, investors such as sports brands and team sponsors are in the current technological age investing in the innovating advertisement campaigns that are currently associated with women’s sports. The club’s primary focus will be to promote women’s games to captivate more investors and sponsors.
Besides, ESCF will encourage its projects through advertisement via social media platforms, local TV and radio stations, coupons in newspapers, and flyers. The club will ensure that it has maintained its media relations, grow and spread journals through emails, and build and improve a website that will increase the club’s fundraising by 100%. The mentioned will ensure that the team is recognized, and more people will be attracted to join the team’s activities. Furthermore, the club will ensure that more income is generated by advertising the players’ branded jerseys, selling snacks, paying parking fees, and selling beverages when matches are being played.
Additionally, the club will ensure that sponsorship packages have been formalized, and there will be a growth in sponsorship levels. To generate more revenue, the club will inquire about more local, federal, and state grants to ensure the club generates more revenue. ESCF will also ensure that the annual budgets are codified and year reports developed. Furthermore, the club needs to hold annual general meetings that will help the club grow its finances.
As the Board is purchasing ESFC, it has to cater to New York City’s municipality taxes. The payment may affect the club for some time as it progresses to develop its way into the sports market. The club has to develop strategies to ensure that revenue is generated at the club and the proper expenditure is used so that it can limit its income tax exposure and expand the club in the process (Skoric, Bartoluci & Custonja, 2012). Moreover, the club is going to encounter challenges such as taxes, as well as legal issues such as sexual harassment, with the program’s progress. The point of women’s harassment has been on the rise for the past years, especially with such programs. Consequently, incorporating women in the program may see them harassed, for example, in unprofessional relationships between the players.
Financial Plan and Assumptions
| Income Statement | ||||
| Sales Revenue | Expenses | Net Income | ||
| 1st Year | Jan | $67 000 | $33 000 | |
| Feb | $64 000 | $53 000 | ||
| Mar | $58 000 | $49 000 | ||
| April | $55 000 | $50 000 | ||
| May | $82 000 | $68 000 | ||
| June | $44 000 | $53 000 | ||
| July | $46 000 | $39 000 | ||
| Aug | $39 000 | $30 000 | ||
| Sep | $79 000 | $52 000 | ||
| Oct | $46 000 | $36 000 | ||
| Nov | $77 000 | $66 000 | ||
| Dec | $82 000 | $71 000 | ||
| 2nd Year | Quarter 1 | $199 000 | $234 000 | |
| Quarter 2 | $239 000 | $249000 | ||
| Quarter 3 | $234 000 | $ 239 000 | ||
| Quarter 4 | $245 000 | $200 000 | ||
| 3rd Year | $700 000 | $267 000 | ||
| 4th Year | $767 000 | $389 000 | ||
| 5th Year | $498 000 | $222 000 | $679 000 |
|
Cash Flow |
||||
| Operation | Investing | Financing | ||
| 1st Year | Jan | $66 000 | $75 000 | $121 000 |
| Feb | $86 000 | $86 000 | $133 000 | |
| Mar | $71 000 | $88 000 | $164 000 | |
| April | $97 000 | $97 000 | $175 000 | |
| May | $86 000 | $88 000 | $185 000 | |
| June | $88 000 | $88 000 | $ 186 000 | |
| July | $86 000 | $79 000 | $178 000 | |
| Aug | $52 000 | $79 000 | $186 000 | |
| Sep | $75 000 | $87 000 | $135 000 | |
| Oct | $88 000 | $57 000 | $144 000 | |
| Nov | $64 000 | $86 000 | $155 000 | |
| Dec | $52 000 | $68 000 | $175 000 | |
| 2nd Year | Quarter 1 | $141 000 | $181 000 | $478 000 |
| Quarter 2 | $151 000 | $171 000 | $443 000 | |
| Quarter 3 | $167 000 | $161 000 | $481 000 | |
| Quarter 4 | $161 000 | $ 154 000 | $456 000 | |
| 3rd Year | $976 000 | $684 000 | $2 342 000 | |
| 4th Year | $865 000 | $376 000 | $2 287 000 | |
| 5th Year | $645 000 | $159 000 | $2 775 000 |
| Balance Sheet | ||||
| Assets | Liability | Investments | ||
| 1st Year | Jan | $71 000 | $29 000 | $693 000 |
| Feb | $61 000 | $34 000 | $467 000 | |
| March | $72 000 | $34 000 | $654 000 | |
| April | $59 000 | $37 000 | $634 000 | |
| May | $79 000 | $37 000 | $791 000 | |
| June | $76 000 | $33 000 | $754 000 | |
| July | $69 000 | $47 000 | $634 000 | |
| August | $87 000 | $26 000 | $798 000 | |
| Sep | $69 000 | $42 000 | $734 000 | |
| Oct | $56 000 | $34 000 | $945 000 | |
| Nov | $83 000 | $53 000 | $776 000 | |
| Dec | $89 000 | $41 000 | $798 000 | |
| 2nd Year | Quarter 1 | $217 000 | $89 000 | $2 456 000 |
| Quarter 2 | $207 000 | $113 000 | $2 224 000 | |
| Quarter 3 | $191 000 | $56 000 | $2 871 000 | |
| Quarter 4 | $181 000 | $74 000 | $1 876 000 | |
| 3rd Year | $731 000 | $251 000 | $6 651 000 | |
| 4th Year | $691 000 | $201 000 | $5 754 000 | |
| 5th Year | $798 000 | $176 000 | $6 357 000 |
Financial Analysis
The club’s health has to be put first, and the Board will ensure that by utilizing the below ratios. Firstly, is the profitability ratios, which provide the club with different financial performance measures of an organization regarding the profit of the club considering the gross margin of the performance of the club that is measured by the percentage of the total income of the organization following settling the cost of the goods sold (Alberta, 2020). The mentioned is derived from the subtraction of the prices of the club’s sales from the cumulative income received in the Year by dividing the club’s total income. If the club gets more than 60%, it shows that it is performing quite exemplary well.
Secondly, the liquidity ratio gives the data of an organization’s potential to abide by the financial management. In the case mentioned above, the ESFC will go with the instant solvency ratio that the organization will employ to know the club’s capacity regarding the short-term arrears and the aptness to clear their obligations as required in the club’s short-term outstanding amounts (Alberta, 2020). The current solvency ratio is acquired after subtracting the general liabilities from the current assets. To prove instant solvency, the club will ensure that a ratio record is put in place between 0.5 and 1 or even more.
Besides, financial leverage ratios play an essential role in the long-term of a club’s solvency. To ensure the above is achieved, the club will use a debt ratio to measure the percentage of resources outside the club over the resources within the club. The debt ratio can be obtained by dividing the general liabilities and the available assets within the club. The club will then be considered successful if the ratio obtained is 3 to 1 or more.
Financial Risks
Among the potential financial risk faced by the club include those mentioned below. The club will meet the economic shocks about the demand for sports during different economic temperatures. When the economy is not performing well, the club will be affected in that the attendance of some of the sporting events will decrease (Elfman, 2015). In the long run, the club will sell fewer tickets, generating low revenue. Moreover, the sale of specific merchandise, such as the jerseys at the club, will decrease.
The risk of a possible scandal at the club may affect the club in that harassment of women whereby the club will incorporate women in the program. When such a scenario occurs, the club’s brand will be destroyed. Hence, the above may pave the way for the club to lose some of its sponsors, and the club may lack other sponsors who want to invest in the club. In addition, the club will generate less revenue.
Moreover, there is the risk of losing unexpected income in the club through the various sporting events. The mentioned could be that some of the teams withdrew from invited football events (Elfman, 2015). Furthermore, the club may lose some income through vandalism and theft. It is crucial to note that the facilities at the club are vital in achieving the objectives set by the club, and in case they are destroyed, the club’s planned activities could come to an abrupt end.
Mitigate Risks
The club has set several steps to alleviate the mentioned risks. The club can decrease the risk of loss of unexpected income from football events by ensuring that the material used is of good quality and is well taken care of during sporting activities. In addition, the club needs to put alarm systems around the organization and employ professional personnel to ensure that the place is safe and reduce the chances of theft. Furthermore, the club will see to it that all sporting events are well planned and that there is enough time for every team to organize themselves.
To counter the chance of destroying the club’s brand, for instance, from incidents of sexual harassment, the club will ensure that an uncompromising disciplinary committee has been set in place to deal with any player or staff who will go against those rules. The policies may include punishment such as termination of a player’s contract or any team. Furthermore, the guidelines will ensure that no player will act disrespectfully and that the club’s image will not be destroyed.
Besides, the club can survive through economic shock when the Board cuts all irrelevant spending, such as trips for players when they do not need them. Trips should be organized when the economy is doing well, and the players should be made aware of any situation to keep abreast with any issue. Moreover, the club’s committee needs to reduce the ticket price so that fans can attend any sporting event without a struggle. The above will ensure the club’s economy runs smoothly during times of economic thrives.
Investor Return on Investment
When looking for possible investors at the club, the Board will come up with the following projects. The Board will ensure that the investors will get a partnership at the club. The partnership will ensure that investors participate in the club directly and have a say in the decision-making process. Moreover, they will get an opportunity to allocate the profit equally. The stocks offered will be familiar to all possible investors (Fried, DeSchriver & Mondello, 2019). When the board and investors engage in common stocks, the returns will be higher for all the investors in the long term. Concerning decisions made at the club, the investors will have a single vote per share in choosing members of the boards who will control the club.
Besides, the Board and the investors will divide the extra profits acquired after settling up the creditors. The dividends will be emailed to investors in the percentage of the shares in less than a week. Furthermore, the investors are expected to pay a royalty fee each Year. The price will ensure that the club is promoted through promotions and adverts. When selling jerseys, parking fees, and snacks during sporting activities, the dividend will be distributed uniformly among all the owners.
Exit Strategy
In 2032, I will exit from the business using the management buyout plan. The strategy is a deal through which the club’s management purchases all the operations and assets of the organization. The approach mentioned above will ensure that ESFC moves to the private sector, improves its profits, and streamlines its operation. The team’s management will use the resources to buy the entire club. The process will ensure the direction accrues more revenue and thus increase the club’s profits.
Conclusion
The business plan discussed above plays a crucial part in making the management of the club successful in the next ten years. The business plan has laid out the marketing schemes set for the club, outlining several taxes and legal issues the organization may come across. Furthermore, it shows the club’s financial strategy and assumptions from the past few years. Moreover, the business plan outlines several financial risks and how to reduce them. Besides, the project ensures that the information given will give the possible investors the necessary information to obtain funding for the club. Eventually, the plan has an exit strategy from the organization.
References
Alberta. (2020, May 12). Preparing financial projections and monitoring results. https://www.alberta.ca/preparing-financial-projections-and-monitoring-results.aspx
Badenhausen, K. (2011). The World’s 50 most valuable sports teams 2019 (Links to an external site.). Forbes. Retrieved from https://www.forbes.com/sites/kurtbadenhausen/2019/07/22/the-worlds-50-most-valuable-sports-teams-2019/#7689efb283da
Elfman, L. (2015). Money matters: Leaders in intercollegiate sports wonder what’s in store for non-revenue-generating sports (Links to an external site.). Diverse Issues In Higher Education, 31(25), 12. Retrieved from https://diverseeducation.com/
Fried, G., DeSchriver, T. D., & Mondello, M. (2019). Sports finance Retrieved from https://www.redshelf.com.
Skoric, S., Bartoluci, M., & Custonja, Z. (2012). Public financing in Croatian sport (Links to an external site.). Financial Theory And Practice, 36(2), 179-197. https://doi.org/10.3326/fintp.36.2.3
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Question 
In this assignment, you will create a condensed business plan for purchasing and operating a professional sports team. This is a hypothetical sports team, and you may make assumptions to support your key points.
Sports Finance Project
Include the following elements in your condensed business plan:
Overview: Introduce the business plan for purchasing and operating a professional sports team, and provide a thesis statement for your business plan.
Marketing: Discuss how specific marketing promotions will help drive revenue and profitability for your sports organization. Consider trends, market strategy, pricing, sponsorships, advertising, revenue generation sources, etc.
Tax and Legal Issues: Discuss at least one tax and one legal issue you may face in the purchase or operation of your sports business.
Financial Plan: Develop pro-forma financial statements (5 years) for your sports business. Include:
An income statement on a monthly basis for year 1, a quarterly basis for year 2, and an annual basis for years 3, 4, and 5.
A balance sheet on a monthly basis for year 1, a quarterly basis for year 2, and an annual basis for
years 3, 4, and 5.
A statement of cash flows on a monthly basis for year 1, a quarterly basis for year 2, and an annual basis for years 3, 4, and 5.
Important Note: Use a spreadsheet program such as Excel to create the financial statements. Then, embed the statements by copying/pasting them into the final Word document.
Financial Plan Assumptions: For all financial statements, include a list of key assumptions that drive your financial plan.
Financial Analysis: Describe three financial metrics or ratios that you will use to analyze the health of your business.
Financial Risks: Describe three potential financial risks for your sports business.
Mitigate Risks: Describe possible ways to mitigate each of the risks listed above.
Investor Return on Investment: Describe what you will offer potential investors in order to seek funding for your business. Consider types of ownership, stocks, dividends, interest payments, royalty fees, merchandise profit sharing, perks, etc.
Exit Strategy: Describe your exit strategy, assuming you are ready to sell the sports business in 10 years.
Fried, G., DeSchriver, T. D., & Mondello, M. (2019). Sports finance (4th ed.). Retrieved from https://www.redshelf.com
Badenhausen, K. (2011). The World’s 50 most valuable sports teams 2019 (Links to an external site.). Forbes. Retrieved from https://www.forbes.com/sites/kurtbadenhausen/2019/07/22/the-worlds-50-most-valuable-sports-teams-2019/#7689efb283da
Elfman, L. (2015). Money matters: Leaders in intercollegiate sports wonder what’s in store for non-revenue-generating sports (Links to an external site.). Diverse Issues In Higher Education, 31(25), 12. Retrieved from https://diverseeducation.com/
Badenhausen, K. (2011). The World’s 50 most valuable sports teams 2019 (Links to an external site.). Forbes. Retrieved from https://www.forbes.com/sites/kurtbadenhausen/2019/07/22/the-worlds-50-most-valuable-sports-teams-2019/#7689efb283da
Elfman, L. (2015). Money matters: Leaders in intercollegiate sports wonder what’s in store for non-revenue-generating sports (Links to an external site.). Diverse Issues In Higher Education, 31(25), 12. Retrieved from https://diverseeducation.com/
Skoric, S., Bartoluci, M., & Custonja, Z. (2012). Public financing in Croatian sport (Links to an external site.). Financial Theory And Practice, 36(2), 179-197. https://doi.org/10.3326/fintp.36.2.3