A Finance Expert’s Guide to Professional Sports: Everything You Need To Know
Dan Crumb didn’t start his career in professional sports. Just like all of the best rookie players, he got some experience first. While he’s currently CFO of the Super Bowl-winning Kansas City Chiefs, Dan got his first glimpse of finance when he was just s......
Dan Crumb didn’t start his career in professional sports. Just like all of the best rookie players, he got some experience first. While he’s currently CFO of the Super Bowl-winning Kansas City Chiefs, Dan got his first glimpse of finance when he was just seven or eight years old, reading the stock quotes in the newspaper with his dad. While that was his foundation, and he eventually pursued a degree in finance and then an MBA, he didn’t enter the world of professional sports until later. Or so he told Vena CFO Darrell Cox in our recent livestream, CFO Confidential: The Rise of Strategic Finance (now available on demand to members of Vena’s Plan to Grow platform). “I worked in a number of different industries, small- to medium-sized companies mostly. I started my career at KPMG and then went into private industry,” he said during the panel. “Then I’ve been blessed for the past 15 years to work in the sports industry. I worked at the New Orleans Hornets, which are the New Orleans Pelicans right now in the NBA. I was CFO there and then became CFO here at the Kansas City Chiefs. I’ve been here for 12 seasons now and responsible for the finance department strategy and analytics and IT and we've seen a lot of growth in our business over the past decade since.” Watch the video to hear Dan talk about his first exposure to finance. To watch the full episode of CFO Confidential: The Rise of Strategic Finance on demand, become a Plan To Grow member and join the community. Dan, in other words, was already a finance leader before he even entered the world of professional sports, with a wealth of experience and best practices to bring to his new role. What he might not have had at the time is what many finance experts don't have when they enter a new industry: a playbook that helps them better understand the specific needs and lingo of their new niche. Thankfully, though, if you’re entering the business of professional sports, we’ve got you covered. Keep reading for an overview of the revenue drivers, data sources and processes integral to financial planning for sports teams. First Up: Do You Know Your Leagues? MLS: Major League Soccer NBA: National Basketball Association NFL: National Football Association MLB: Major League Baseball NHL: National Hockey League What Drives Revenue? The professional sports industry has unique financial planning and analysis needs, challenges and best practices. Which means that if you want to talk inside baseball (or football, soccer, hockey, whatever the case may be) there’s a few things you should know. Starting with how professional sports teams make their money. So let’s look at the main revenue sources sports teams rely on—both on game day and beyond. Game Revenue Game revenue includes all of the game-day-related earnings of a professional sports team. And while attendance is a key revenue driver—indicating how many fans show up for games and other special events—it isn’t the only revenue source. As well as ticket sales, concession purchases, sponsorship deals and even stadium parking all contribute to your bottom line. And different types of games will contribute in different ways, depending on the number of people they draw and the excitement they generate. Here are a few terms you might see thrown around when it comes to game revenue: Game Revenue at a Glance Ticketing: Sales of stadium seats to watch the game. Concessions: Sales of food and drinks at the stadium. Merchandise: Sales of apparel and other items that feature the team’s official logo, mascot or other trademark, including T-shirts, hats, balls, mugs and more. Parking: Revenue from pay parking at the stadium. Sponsorships: Sales of corporate sponsorships that give companies exposure to the team’s onsite audience. Suites: Revenue from reservations of luxury boxes and private seating sections within the stadium. Per-Cap Revenue: Dollar spend per game attendee. Game Revenue at a Glance Pre-Season: Before the start of a new season, athletes will warm up with exhibition games that do not affect the team’s official ranking for the season. Regular Season: The series of regulated games where wins and losses contribute to a team’s overall ranking in the league. Post-Season: After the regular season ends, the highest-ranking teams compete in playoffs or championships. Special Events: Stadiums are used throughout the year for events such as concerts or all-star games for charity. Non-Game Revenue But games aren’t the only source of revenue for teams. Non-game revenue includes all of the revenue a team can generate outside of the stadium, such as broadcasting deals, some sponsorship types and online merchandise sales. Non-game revenue became increasingly important during the early days of the pandemic, as in-person events came to a halt and sports teams looked for new sources of income. Here’s a primer of what non-game revenue might entail: Non-Game Revenue at a Glance National Revenue: Professional sports teams share national revenue with the league, with each team getting a share of the league’s TV and radio broadcasting deals as well as nationwide league sponsorship and other shared business ventures. Local Revenue: Professional sports teams bring in earnings from their own local media deals and team-specific sponsorships. Sponsorships: There are a variety of sponsorship types with reach outside of the stadium, from broadcast and digital media sponsorships to technical sponsorships of products and services, such as sports apparel. Online Merchandise: This includes e-commerce sales of apparel and other items that feature the team’s official logo, mascot or other trademarks. Learn how the Kansas City Chiefs made their NFL franchise more profitable—and their reporting 95% faster—with the help of Vena for Professional Sports Teams. What Data Sources Do Teams Draw On? With such a variety of revenue channels and cost centers, professional sports teams have financial data streaming in from multiple source systems (and need a way to connect it all). Some of those systems will be familiar no matter what type of business you come from, but some are unique to the business of sports. A Fixed Asset Register lists every piece of physical property and equipment the business owns to produce its goods and services. A Human Resource Information System (HRIS) keeps track of human capital, including employee information, applicant tracking, payroll, benefits administration and so on. An Enterprise Resource Planning (ERP) system integrates data from a wide range of business processes to improve cross-functional collaboration between departments, including planning, purchasing, marketing, customer service and human resources. Ticketing Systems, such as Archtics (Ticketmaster’s ticketing system) and SeatGeek, include ticketing capabilities along with customer relationship management features that track prospect and customer information. Sponsorship and Fan Engagement Software, such as Kore, brings together CRM and ticketing systems to help sports teams manage the outbound sales pipeline with sponsors and fans. Find out the Arizona Cardinals’ winning strategy for financial planning—and how Vena helped them deliver faster results. What Planning and Reporting Processes Are Standard? Planning templates, reports and dashboards help the executive leadership, financial teams and department heads of professional sports teams make strategic financial decisions and back up business plans with data. The following are the processes teams traditionally draw on. Some are unique to professional sports while others draw from unique data sources. Driver-Based Budgeting Driver-based budgeting shows how investing resources in different activities contributes to achieving KPI targets. It looks at the unique drivers of your professional sports team revenue to help you determine what’s affecting financial performance, good or bad, so that you can budget accordingly. Your team’s past and current performance in regular season and post-season play, for instance, can be a key driver that affects ticket sales and merchandise purchases—investing in marquee players that help build performance (and excitement with fans), then, can drive future financial results. Game Settlement Reporting Game settlement reporting allows you to reconcile your ticket and suite data in Archtics/SeatGeek with your Ticket Manifest to ensure accuracy when reporting both to leadership and the league. Detailed Game Revenue Planning Detailed game revenue planning includes forecasts for all the different game revenue types, including ticketing, concessions, merchandise, etc. League Reporting League reporting rules require teams to submit a uniform financial report, with the exclusion of non-sports-related revenue and expenses. Long-Term Planning Long-term planning involves setting financial goals for the business based on future periods, such as a five-year outlook. Departmental Budget-to-Actual Reporting Departmental budget-to-actual reporting summarizes department head performance by measuring the variance between their planned budgets and the actual recorded results. Box Office Reporting Box office reporting combines all ticket sales figures, including tickets sold online and at the gate. Executive Reporting Executive reporting summarizes key figures across the business to give all stakeholders an at-a-glance view of the financial health of the business. Conclusion Ready to get into the game now? Hopefully, this quick primer will get you up to speed as you enter your new workplace and join the world of professional sports. Now go on and help move your team to a successful season with a winning strategy behind the scenes. We’ll be cheering you on from the sidelines. Put your team on track to financial and operational planning success with Vena for Professional Sports Teams.