Making $ w race team?

Pls give me some ideas on how to make $ w racing team.
We have a few products for sale & will add more soon.

 

Pay drivers aka drivers paying to race

 

you don't. Motorsports is a negative sum game.

 

Turn it into a reality show...

Hire some chubby English guy to host... A tall lanky mechanic and call him Ed, then throw in some hot chicks to moan about the workload...

Then, wear garish clothes, get lots of tattoos, and yell out " whooooaaaaa" a lot. Make sure all your cloths have your brand on them...

Show lots of rich people, or their housewives, constantly griping about their husbands while they trounce around Beverly hills...

Then, hire me as a producer so I can help you out... My lack of xperience should be a plus on camera....

When should we start?

Bo

 

You can make a small fortune racing by beginning with a large fortune.

 

I have some legit ideas and have been looking at a team for sale ... If you are serious pm me

 

Assuming the professional racing series pays out to the champion(s) the obvious answer is to keep winning, but besides that:

Merchandising with clothing and accessories. You could license your car's livery to scale model manufacturers if you think there's a market, but it would be very very small.
Sell rides in the race car as a passenger.
Sell driving time in the race car for those that want the 1x experience and offer more professional driving instructions for those looking for more than "I drove a race car" experience like those Nascar places already offer.
Offer the car for rent for people that want it for display only purposes (movies, tv, special events locally, etc).
Sell unneeded spare parts for people as memorabilia (again, very little money).
Sell the cars when they get replaced rather than keep them in storage and not for use (assuming you don't do the instructor/passenger experience thing).
Get people to pay you to race the car as already stated.

Those would help break even and doubt it would make any real money after expenses and time spent that could've been used elsewhere to make money more easily.

 

Sell tickets to the after race pool party

 

Joking aside, I am looking for a career change. Have extensive motorsport experience myself and been last 12 years at Penske. My strengths are logistics, accounting, security, media but most technical jobs can handle. PM me if any openings.

Would help knowing what type of race team or series most interested in. As a tax-break, usually good idea to bring on board a charity. Starting w/ association of a charity also draws support from other marketing partners (not sponsors). And I always get warm-fuzzies seeing the smile of deserving children and their parents when you allow child into car for photo-op with helmet and harnesses. Priceless.

 

Can't go wrong here... Seems a proven mix of ingredients for success!

Ruben

 

In all seriousness, you're about to see a transition of the race team business model. Smarter teams are FINALLY starting to figure out that the racing is only a small part of the equation.

The money is earned in sponsorships sold. Period. Winnings don't cover a single weekend of racing expenses. That's why it goes to the drivers. So, how do we sell sponsorships?

In reality nobody cares who wins what in ANY racing series. Not even the sponsors. The sponsors spend money with you for the exposure. The sponsors like getting the cool racing merchandise with their logos on it. They can point to their involvement in racing that makes them cool.

Example is Target stores. NOBODY buys a Target branded T shirt. You put Target Racing on the shirt with a picture of their race car and you have a winner! Lowes, Home Depot, etc using their sponsored racing images in their stores all the time. Where have you ever seen a sponsor list their racing results in any of their marketing materials? NEVER!

Therefore, the race team is responsible for creating exposure for their sponsor OUTSIDE of racing. How? MEDIA CREATION & DISTRIBUTION!!!

Ultimately a race team is not a race team. They are a media company. Racing is simply their content. The racing series' are finally starting to figure this out. They are finally learning that they have to generate and distribute their own media to get sponsors for their series, the teams, and give consumers the "in depth" coverage they so desperately want. We all know that regular television broadcasts will NEVER give any racing series the coverage the fans want. The Internet is the medium for distributing this content to the numerous fans that have been ultimately frustrated by television companies.

Just look at the IMSA & PWC series. Although there is partial coverage on television, they produce their own content for the entire series available live on their website. There is also additional content from individual teams that bother to produce the content to make their program interesting. Any series or team NOT doing so will be dead in short order.

 

do you understand how the Target sponsorship works?

 

Please explain the relavence of your question to my explanation of the business model I described.

 

Target buys all the "inventory" from Ganassi (i.e. all the space on the cars/uniforms/transporters/etc) and resells it to their suppliers-sometimes in the form of associate sponsorship, sometimes in the form of full car sponsorship-which is why the Ganassi cars sometimes appear as T Mobile or Banana Boat or Energizer cars.

it's entirely a B2B relationship. they could care less if fans pay attention or buy/wear gear (as evidenced by their steadfast commitment to CART/Indycar throughout the split ). Target also makes money on their racing sponsorship-again, why it's lasted so long.



also, PWC and IMSA took their production in-house and stream it online because it's significantly cheaper (and therefore easier to sell to sponsors) to do it that way than having to buy time on cable.

 

Motorracing has been around since there was 2 cars. And you think they are just now starting to figure it out?

 

McLaren, Ferrari, Porsche, Hendrick, Penske, Roush, Ganassi, Dyson...all have it figured out, all long term successful, all supported by ancillary businesses (cars/engines/electronics), B2B relationships, and/or leveraging OEM relationships.

not many teams survive long term trying to monetize eyeballs or clicks.

 

What GuyIncognito says.

I have heard that some of the sprint car teams can make money/break even. Anyone know if that's true?

Edit - Some prep shop owners make a living at amateur and pro levels, through a huge amount of hard work and finding the right spot where they can charge drivers enough to cover costs. That's not what's being asked about here, of course. And my own observation is that it's not an easy life.

 

Not sure if this helps, but I have seen teams funded by other companies under the same ownership as a marketing device for the parent. Race team has an exclusive deal with parent to promote their products. Parent has exclusive with race team to primarily promote their company over others. Additional sponsors are allowed, especially subcontractors and clients of the parent. Makes for a nice little incestuous package formed essentially to subsidize someone's racing jones, prove tax shelter and maybe break even at year-end.

 

agree, some people do make money (or break even) doing the pay driver deal, but that's a tough row to hoe. and probably not what Hubbster is looking for since he likes to drive. TRG and GMG have, or had, owners who co-drive but again those teams are supported by large parts/service/tuning businesses.

fun until the IRS shows up.

 

Several ways to "make money" (i.e. run a race team as a profitable business)....

The first, and most common, is to own and run a race shop, where you are essentially paid by drivers (overwhelmingly), maybe a few commercial side sponsors. "Arrive and Drive" - this is the business model in the vast majority of racing in North America, if not the world. SCCA Pro, PWC, GT3 Cup, Ferrari Challenge, IMSA Conti, most IMSA GT, lower ranks of NASCAR. As a team owner, you may or may not own the car, but you run the driver in the series. Example - "buying a ride" in IMSA GT, one would have to pay the team, probably hire/pay a couple pro drivers, then you'd be able to put your logo on the car.

The second is to leverage your friends and family, or your own company, as the "sponsor" so you can break even, or turn a moderate profit, and pay for some very talented drivers. You'll see this every now and then at the lower ranks, but very prevalent at the PWC, IMSA and IndyCar levels. If you own a company, you can certainly pay a "marketing fee" for a racing program. Just be careful to set it up properly, as the IRS is increasingly scrutinizing losses (i.e tax breaks) off "hobby businesses". If you're a public company, your auditors will likely be strict about it. If you're a car dealer, a tuning shop, a wheel maker, it's pretty easy.

The third is to find a very funded driver that you can build around. Using Maldonado as an extreme example, PVDSA was paying for him to drive, not so much to sponsor Williams or Lotus. There are a number of commercial sponsorship deals around where "benevolent funding" supports a set of specific young drivers. If that driver changes cars/teams, there goes the funding, and your business. It's a derivative of the "pay driver" model, just paid by a donor. FWIW I know quite a few of the young/up-and-coming drivers in US and Europe, their money flows as long as they are winning. I'd imagine 90%+ of GP3, GP2, FR3.5, Pro Mazda, etc etc in the US is either direct pay drivers or "benevolent sponsors".

Another is the extremely rare case (eg. Ganassi) where there is a solid multi-platform play, or where a manufacturer chooses to engage your team (along with $$) to run their cars. Ganassi has Ford GT, Core has Porsche in GTLM, Pratt and Miller has Corvette. As for "big sponsor plays", especially if the company is publicly held, 99% it's a marketing expense, and most of the time the series at least has some defensible media coverage (i.e. a TV package).

Remember that, like it or not, "sponsorship" tends to be very personal (i.e. benevolent friends) or very commercial (exposure, hospitality, media coverage, brand enhancement).

Some series (eg. NASCAR) is so developed, you can make money running a decent (not championship) program in the feeder series, or way down on the grid. (hence the outbreak of "start and park" teams). The further down the grid, the more the ground game on getting money is (eg. very localized). I'm sure everyone has also noticed the fragmentation of sponsorship deals - eg. in IndyCar, some huge percentage of race day sponsors are for the Indy race only, and only if the car qualifies.

 

BTW - and from the "ask me how I know" dept.

1) using a charity platform to fund or "launder" racing money has become a bit target of the IRS - not just for racing, but for any commercial use. Trying to "round trip" money with a charity will get picked up quickly (I.e. I donate $100K to the SPCA, they "sponsor me" for $80K, I take a deduction and they list as a marketing expense). Uh uh.

2) on the "if you run a race shop/car dealer/et al", you'll get a lot of attention if your predominant business is not fully legitimate; also the IRS has a new litmus test that requires you to show cause and purpose, and if a "hobby business" (i.e. an adjunct to another corporation, LLC, et al) is not profitable 3 out of 5 years, you cannot take losses (i.e. no tax breaks for the owner).

 

is that what CTF is up to?

 

I don't know, and I realized my comment may accidentally question a lot of GREAT charity-related activities that go on in racing (and, there are a LOT)....I have Charity:Water and Special Olympics on my car and our team transporter...

To attempt to be clear, the issue I was mentioning seems to be around the round-tripping element, or so I've been told and counseled by a variety of accountants and lawyers!

As for CTF, I'm not familiar with them so can't comment.

I have been around a few people who ask for pledges for charity (donations, per-lap donations, etc), and most are totally legit, to promote giving to a good cause. I've also seen a few that will raise $25K for "charity", spend $20K of it putting a car on track with the charity's logo, and end up donating $5K. It's the latter case that raises some eyebrows.

As good examples, Camp Boggy Creek and Hole-in-the-Wall are totally legit and really well supported, among others.

 

What is the business case for a company to sponsor a team on the Mazda Road to Indy (Pro Mazda, Indy Lights, F2000)? I can't imagine exposure is significant enough to generate any B2C revenue. Is it mostly on the B2B side? I don't see the hospitality offerings being very prominent at these races (when they are not coinciding with an Indycar race).

I was in talks, along with another member of this forum, to purchase a formula race team, but the returns are just too low to justify the risk/volatility (as a stand-alone entity).

 

that's mostly a funded driver endeavor too, whether that money comes from scholarships (MRTI, etc), friends/family (beware the super wealthy Type A racing dad), or if the driver/his marketing team puts together a program. similar to running a pay driver sports car team, but probably not as glamorous

not sure which team you guys were looking at but I think the cheaper/lower formulas (USF2k, Star Mazda) are probably the best opportunity to make money, something like Indy Lights probably not.