Lesson 5.5 - Financing

Lesson 5.5 - Financing

Lesson 5.5 - Financing Copyright 2017 by Sports Career Consulting, LLC Marketing Applications LESSON 5.5 Financing The forecast predicts the costs and expenses as well as anticipated revenue Copyright 2017 by Sports Career Consulting, LLC

Marketing Applications LESSON 5.5 Financing A forecast simply provides a target figure and is not expected to be 100% accurate Copyright 2017 by Sports Career Consulting, LLC The Marketing Plan LESSON 5.5

Financing Example For example, University of New Mexicos athletics program fell short on its ticket revenue projections for the 2015-16 season In anticipation of a continued decline in attendance, the program lowered its projections for its revenue generating sports for the 2016-17 season Unfortunately, attendance dropped even more than expected, resulting in another revenue shortfall

Copyright 2017 by Sports Career Consulting, LLC The Marketing Plan LESSON 5.5 Financing Example Sometimes, organizations can exceed projected revenues In the Seattle Sounders' original business plan, the goal was to sell 12,000 tickets per

game in its inaugural MLS season. However, the team averaged nearly 30,000 in its first year and has maintained that pace throughout their existence. Copyright 2017 by Sports Career Consulting, LLC The Marketing Plan LESSON 5.5 Financing Example Bloomberg reports Puma increased its revenue forecasts for 2017 twice in a span of three months

after seeing significant quarterly gains in both sales and profits Copyright 2017 by Sports Career Consulting, LLC The Marketing Plan LESSON 5.5 Financing Example When establishing a forecast, sports and entertainment marketers will evaluate several factors that will influence revenue and cost projections For example, several factors influenced Georgia

Techs athletics department decision to raise its revenue forecast for the 2018 fiscal year The departments spending on salaries was projected to increase by 9% to provide raises for the football coaching staff which would require an increase in revenue to help balance the budget Copyright 2017 by Sports Career Consulting, LLC The Marketing Plan LESSON 5.5 Financing Example Georgia Techs CFO, Marvin Lewis, tells the Atlanta Journal-Constitution: Many of our salaries are at the

lower tier of the ACC. What we want to do is slowly make strategic increases to get us to the midpoint over time. The program recognized the opportunity for a ticket sales increase due to several key home football games on the schedule and the excitement surrounding the potential for a successful mens basketball season that should attract larger crowds. The budget calls for a 17% increase in ticket sales for the year Copyright 2017 by Sports Career Consulting, LLC Marketing Applications LESSON 5.5

Financing The budget details the financial impact of each part of the marketing plan Copyright 2017 by Sports Career Consulting, LLC The Marketing Plan LESSON 5.5 Financing Example The University of South Carolina athletics budget increased to nearly $122 million (up from 112.73 million for the 2017-18

fiscal year) The Gamecocks budget includes projected revenues from the following for 2017-18: SEC revenue share ($40.1 million) Ticket revenue ($21.7) Gamecock Club ($13.5 million) Sponsorships and royalties ($17.9 million) Media rights ($4.9 million) Premium seat payments ($6 million) Gifts and donations ($6 million) Copyright 2017 by Sports Career Consulting, LLC The Marketing Plan LESSON 5.5

Financing Example Copyright 2017 by Sports Career Consulting, LLC The Marketing Plan LESSON 5.5 Financing Example When an organization is either losing money or hoping to generate larger profits, often times they re-evaluate budgets in an effort to save money. In 2015, five NCAA conferences agreed to give student-athletes a raise by covering their

"full cost of attendance" (instead of just tuition, room and board). According to a story published on rivals.com, Florida States scholarship expenses increased by about $2 million last year as a result, prompting the Seminoles Athletics Director to impose a 2 percent budget cut in an effort to balance out the increase in program expenses. Copyright 2017 by Sports Career Consulting, LLC The Marketing Plan LESSON 5.5 Financing Example

Sony Pictures reportedly shifted their film marketing budget from 10 percent on digital to as much as 50 percent, based on how they felt they could most effectively reach prospective movie goers (and ultimately boost sales at the box office) Copyright 2017 by Sports Career Consulting, LLC Marketing Applications LESSON 5.5 Financing The balance sheet indicates the

current value of the company Copyright 2017 by Sports Career Consulting, LLC Marketing Applications LESSON 5.5 Financing The income statement is a record of profit and loss that identifies all revenues and expenses Copyright

2017 by Sports Career Consulting, LLC The Marketing Plan LESSON 5.5 Financing Example One of the key challenges they will face from a financial perspective is the significant cost of travel for away games Copyright

Lets say your favorite college football team is evaluating their operating budget for the upcoming season 2017 by Sports Career Consulting, LLC The Marketing Plan LESSON 5.5 Financing Example The programs primary budgeted football revenues could include:

Primary revenues: 1) Corporate sponsorship 2) NCAA revenue distribution 3) Ticket sales 4) Guarantee games Copyright 2017 by Sports Career Consulting, LLC The Marketing Plan LESSON 5.5 Financing Example Guarantee Game: A guarantee game is a game where a larger progra ms team (typically football or mens basketball) will

pay a smaller school opponent to go to its campus for a game. For example, in 2017, the Nebraska football program will pay Arkansas State University a whopping $1.65 million for a game in Lincoln, Nebraska. Copyright 2017 by Sports Career Consulting, LLC The Marketing Plan LESSON 5.5 Financing Example Guarantee Game:

The University of South Carolina will pay out a total $2.75 million for three guarantee games for the 201617 season (including $1.5 million to the University of Massachusetts for their trip to the Gamecocks home at Williams-Brice Stadium). Copyright 2017 by Sports Career Consulting, LLC The Marketing Plan LESSON 5.5

Financing Example Primary Expenses: Factors influencing the athletic programs budget decisions relating to football travel could include: 1) The football teams travel to an away game might cost the program $16,000 2) Costs are lower when the team plays opponents in a closer proximity because overnight stay wouldnt be required Copyright 2017 by Sports Career Consulting, LLC The Marketing Plan LESSON 5.5

Financing Example Primary Expenses: Travel also becomes much more expensive when the team is required to fly rather than drive, so playing a team further away might require a $65,000 travel expense. 1) Air travel = $48,000 2) Food = $7,000 3) Lodging = $6,000 4) Bus transportation = $4,600 Copyright 2017 by Sports Career Consulting, LLC The Marketing Plan LESSON 5.5

Financing Example Budget Evaluation Ideally, the program will minimize costs in relation to budgeted revenues to avoid losing money or even resulting in a budget surplus To cut costs, the athletics program might look for ways to minimize travel expenses 1) Programs may have some control over the schedule, so each road trip is evaluated on whether it fits the budget, ease of reaching the destination, game times and availability of commercial flights. Copyright 2017 by Sports Career Consulting, LLC

The Marketing Plan LESSON 5.5 Financing Budget Evaluation In the future, athletics will look for ways to minimize travel expenses to stay as close to budgeted travel costs as possible 2) The program might also look to partners such as Nike and different hotel chains as a means for minimizing expenses through discounts to try to remain within the budget Copyright 2017 by Sports Career Consulting, LLC

The Marketing Plan LESSON 5.5 Blank Slide Available for Teacher Edits Copyright 2017 by Sports Career Consulting, LLC LESSON 5.5 REVIEW (ANSWERS) The Marketing Plan 1) Recognize the importance of

understanding the financials within the marketing plan The key financials included in a marketing plan are the forecast, budget, balance sheet and income statement. Organizations use that financial information to make important marketing decisions. Copyright 2017 by Sports Career Consulting, LLC

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