Wednesday, February 15, 2006

For Sale: One Golfer's Future

There's a story in my local paper this morning (by Richard Oliver, who writes the Oliver's Twist blog) about LPGA Tour rookie Christi Cano's preparation for her first tournament as a Tour member, this week's SBS Open in Hawaii.

Oliver writes:


In addition to intensive practice, Cano has spent most of the past two months drumming up financial and equipment support for her first full professional season. She has selected a management team, settled on clubs and rounded up enough sponsorship backing to keep her on the road through the first three events.


This reminded me of an article I read in Business Week a while back, an article about how many aspiring golfers find the seed money they need by selling shares in themselves. Or shares in their future earnings, to be exact.

I don't know if Cano did this, but it's pretty common for young golfers who aren't named Tiger Woods or Michelle Wie to take this approach. The mini-tour life is a struggle. You're playing for peanuts (compared to the prizes on the big tours) , yet you have all the same expenses: plane rides or long drives, hotels, equipment costs, training costs. And most mini-tours cost quite a bit in tour membership fees and tournament entry fees.

So the golfer gets together a group of friends and family members and makes a pitch: buy a share of stock in my future earnings. Just like regular stocks, there is a share price, and a certain number of shares are offered at a certain price. A contract that conforms with Securities and Exchange Commission rules is recommended, and any contract should spell out the percentage of future earnings the investors are entitled to, and how long the contract stays in place.

A golfer might raise $50,000 to $100,000 this way, but the contracts are often frontloaded. For example, up until the investors have earned back their initial investment, the golfer might get to keep only 10-percent of his tournament winnings.

If the golfer catches his dream, the shareholders will make quite a bit of money on the deal. If the golfer never makes it to the big-time, the investors might lose everything.

The Business Week article, titled "Backing a Tour Pro," makes it clear just how expensive it is for young golfers who are not yet established:


Players once required investors well into their PGA Tour careers. That is no longer true. Minor circuits such as the Hooters Tour are where players start out with financial backers. Many if not most players will also need backing for the next steppingstone: the Nationwide Tour. For women, there is the Futures Tour before going on to the LPGA Tour. While you can figure it costs a minimum of $150,000 a year to play the PGA Tour, $100,000 for the Champions Tour, $75,000 for the LPGA Tour (where players often stay in private homes), and $55,000 for the Nationwide Tour, on the Hooters Tour, it's considerably less. A season consists of about 22 events primarily in the Southeast, with entry fees of $850 per week. Figure the total expense -- travel, meals, motels, caddies -- for a 22-week season at $35,000. This is staying at Motel 6, not the Ritz, by the way, and eating at, well, Hooters.


On the PGA Tour, those expenses can be covered by endorsement deals, pay-to-play equipment deals (some companies play players up to $5,000 to play their driver in any given week), and traditional sponsorship deals (take a company's money, wear its logo on your cap).

But look at what Cano is facing: $75,000 in likely expenses. LPGA Tour players don't have nearly the opportunities for endorsement cash as PGA Tour players do. Pay-to-play equipment deals are exceedingly rare for LPGA players, and sponsorship deals - if they can be found - pay peanuts compared to those on the PGA Tour.

Further, given the much smaller purses on the LPGA Tour, only 94 women earned at least $75,000 on Tour last year. Such familiar names as Hilary Lunke, Se Ri Pak, Patricia Meunier-Lebouc, Charlotta Sorenstam, Beth Bauer and Kelli Kuehne were not among them.

Now you know why it's so important for Cano to spend the two months leading up to her debut chasing financial backing, and why after doing so she still has only the first three tournaments of the year covered. A strong finish in one of those tournaments will make finding future financial backing so much easier for Cano. Poor finishes in all three, and she might have trouble finding the money that will keep her on the road for the full season.

3 comments:

  1. Bogey
    Well done. Great info that many fans don't understand. And female golfers have the most difficult raising money.

    ReplyDelete
  2. This was an interesting post to read and I agree there was good information here. This answers a few questions I have had.

    ReplyDelete
  3. Anonymous12:35 AM

    Finding the funds to compete has been difficult. It is disappointing that LPGA Players have difficulty in landing corporate sponsorships. Without the support of the San Antonio fans and local business men/women I would have watched the 2006 LPGA season from my living room. I am facing the same dilemma this year I am exempt for 2007 but am in need of funds. I am looking forward to getting off on the right foot this year.

    christi cano
    christicano.net

    Christi Cano

    ReplyDelete

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