Financing Sports

By: Kadence Buchanan
Submitted: 2007-01-17 16:26:00
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In earlier times the marketing manager of an athletic team would project sales, the engineering and production staffs would determine the assets necessary to meet those demands, and the financial manager's job was simply to raise the money needed to purchase the required plant, equipment and inventories. That situation no longer exists. Decisions are now made in a much more coordinated manner, and the financial manager generally has direct responsibility for the overall financial status of any business.

According to theory, a healthy economy depends on efficient transfers of funds from people who are net savers to firms and individuals who need funds. Without efficient transfers, the economy simply can not function. Thus, sport businesses, as individuals and government units, often need to raise funds. Stock exchange markets, merges, acquisitions, promotional techniques, athletes' transfers, diversification, product or market development and syndicated loans, constitute methods for increasing cash flow levels.

But since some clubs and sport unions, spent more than they can afford, it is more than obvious that they will accrue dept and losses. As ticket sales have severely dropped over the years, agreements have collapsed and governments have not yet engaged themselves in financing clubs, the interested parties have tried to find ways of minimizing the losses, such as cutting down players wages or not renewing their contracts. Actually, financing a sport and keep the interest in high levels, both in the athletes' and in the funs' circles, is a difficult task that clubs have to work with. One of the practices in order to put an end in the expenses of clubs was the decision to pay athletes in relation to their performance. Bonus deals did not found always the athletes agreeing to such a policy, as their solicitors claim that ‘regardless the game's outcome, players are still doing the same job so they should be paid what was in their original contract.'

Innovation and careful financial planning-like the new emerging market of stadium construction, debt refinancing and revolving loans-are considered as the prime considerations of any sports organization if it plans to excel. Additionally, fierce competition, environmental trends and demand fluctuation play a very important role regarding financial backing. However, some observers see an opportunity for investors, as low trading and share prices dropping are considered ‘good' times to invest. Some experts believe that merges and acquisitions, related or unrelated to the core of the sport business, is a current issue of great concern for most sports financial managers, as it can save firms from losses.

Establishing higher prize money can also lead sports firms towards success by reducing risk and uncertainty to the interested parties. In 2002, for instance, British racecourses earned 46 million pounds from media deals, but only 5 million was distributed as prize money-a mere 11%. The British horseracing Board, response was to announce a plan to raise minimum prize money in 2003 by 18 million pounds. In fact, fair distribution of prize money can alter the financial condition of the sport and provide a safer environment in such a competitive industry.

Reduced revenue required companies to reduce costs by minimizing funding, cutting work force and spending less in sports sponsorships and advertising. For example, Investing in infrastructure is considered more serious than funding the Olympic bid. Consequently, the financial manager looks over the funding as money that can be spread out into schools, coach wages and sport clubs.

Sports business operates as a money generator if top management strives for excellence and performs continuous environmental scanning techniques. The main factor that distinguishes winners from losers is the eagerness to win competition and excel. Talent correlates nowadays with character promotion. When these two are combined can be translated to ticket sales, sponsorships, or image transformations.

Article source: Expert Articles