Over the past few years I have worked with several people, businesses, entities, and organizations that have wanted to be involved in racing. The interest has ranged from wanting to sponsor a single race, sponsoring a driver, owning a team, developing an affiliate racing program, and even building a track. Each and every attempt has failed and has cost IM&P a substantial amount of time and money. Here’s why…
My approach to failure is that each one is a lesson to make me better the next time I move forward and try again. I have tried, tried, and tried again. I continue to learn, that means I’ve continued to fail. Now, this is not for my lack of connections, experience, understanding of the industry, or the timing of our efforts. I have developed and offered my clients some of the best packages in racing and will continue to do so. So far, the money I have made in the racing industry has been from my work as a motorsports photographer.
The one single fact that exists in racing is that it is driven on cash. Racers want to race,they are highly competitive, and if you want to race right (the only way I would do it) it requires A LOT of cash. The other fact is that racing IS NOT an investment. It is an expense. This expense is generally advertising, employee welfare, marketing, retention, activation of product, and so on. As a team owner, you can make money in racing by being successful and attracting interested parties that will pay more for your sponsorship than your operating costs. The real benefit of going into racing as a sponsor or supporter is the ROI you get from marketing, cross marketing, activation, and employee/client experiences that make them want to stay with you as a customer or employee.
WHAT DO YOU NEED AND HOW DOES IT WORK
The cold hard fact is that the racing industry has had many hard lessons learned. Teams and Drivers have been left empty handed by wishful people on race day. It is unsettling how many times sponsors and backers have exited at the last minute. The industry has built in protections against this to the most reasonable extent possible.
- You need a connection to the industry or someone that can speak the language, understand the timing, knows the value of things, and ideally has existing relationships in the series or program that has captured your interest. There are many resources to accomplish this, including Infield Media.
- You need to be willing to retain AND PAY the individual or firm facilitating your introduction and entry into the sport. This should be a general consulting arrangement and may or may not include a success fee. Depending upon the level of effort required Infield requires a minimum $5K retainer, and a weekly fee of $1K until the deal is closed or determined to be unable to proceed. This agreement will include a Non-Disclosure Agreement.
- The consultant will approach industry and gain an estimate of cost based upon what you are seeking. Costs are highly variable depending on series, event, progress through the season, and a multitude of other factors. Teams, drivers, and tracks WILL NOT open discussions without proof of ability to fund the transaction. Top-level racing entities get inquiries on a constant basis regarding affiliations of all sorts. The ability to fund a transaction is a screening method to determine the veracity of an individuals interest and ability to deliver.
- You will need to place a MINIMUM of 10% of the overall cost of the program you are seeking in escrow. This deposit will release to the consultant when an entity agrees to do business. So for example if you are seeking to sponsor a single race for $300K you will need to place at least $30K in escrow. It is important to understand that the value the consultant brings is in their relationships and the credibility they build by bringing the sport well-qualified and reliable business partners. If a transaction moves forward to negotiation it puts the most valuable asset the consultant has (relationships, connections, integrity) at risk.
- You will need to prove that you have the ability to finance the ENTIRE program you will be seeking to develop. This can be in the form of a bank letter that states your balances are sufficient to meet the transaction amount, a stand-by letter of credit, certified funds, escrow deposits for the full amount, or other generally accepted financial instruments. These documents MUST be able to be independently validated.This is where much of the difficulty occurs in these types of transactions. Specifically the question arises as to why proof of funds are required before the racing entity commits? This transaction is similar to entering a transaction to rent a car. The agency requires you to present a credit card to secure the transaction, you must have secured the credit and/or financial ability to rent a car BEFORE you approach the agency.
Imagine this scenario: You pay an individual (consultant) to present you to a rental car company (race team), owned by one of their long standing business connections, as someone able to rent a car. The consultant has no idea of your ability to pay for the transaction but they know you really want to rent that car. They introduce you to their trusted business partner. That partner prepares a car, tells you how much it will cost, shows it to you, maybe even lets you sit in the car. Then, when the paperwork is all put together in great detail, they ask for your credit card to secure the deal, and you don’t have one. You look bad, your consultant looks bad, and the rental car company has wasted a ton of effort showing you the goods. Overall a colossal waste of time. Then, to top it off, you leave the consultant and the team behind, secure a credit card, and then go to another rental car company with all the information you gained and get what you think might be a better deal.
- Up to this point the consultant has protected the identity of ALL parties in the transaction. As an interested party you do not have any money at risk. The funds in escrow ONLY move if the sought after party agrees to engage.
- Once the ability to fund is established your consultant will present you to the entity along with the evidence of ability to fund. It is at this point that all parties are known, and the racing entity will determine whether to engage in the deal. If agreement is reached, escrow funds are released to the consultant. Your consultant will facilitate the discussion to assure you get the maximum value for your program. Once an agreement between parties is reached, the general consulting agreement terminates.
If you are still interested and can complete a transaction please fill out the below contact info and we will be in touch.