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Interesting Story

There is an interesting story (to me anyway) about a race team losing a million dollars a year in this current market. Most of you may want to stop reading, as it is of little interest for most people not in professional racing. Of course I found it interesting ... because I was in a similar situation two years ago (2012). I say similar, because my 9 race teams ran in lower ranks of racing on a regional level (4 states on the West Coast) ... and my operating budget was much lower than the team in the story.

To run all 9 of my race teams (6 USAC Midgets & 3 NASCAR Modifieds) competitively, took $1.75 million a year. When we had this revenue (primarily through sponsors) as in 2010, we won 24 races & made money. The next year (2011) when we had 3/4 of that budget ... we won 18 races. That year I spent only a little less ... so I lost $250k. Two years later, when we had half that $1.75m amount & cut deep on all expenses ... staff, overhead, operational, R&D ... we only won 3 races ... and I still lost $150k.

That is when it stopped being fun for me & I sold all my teams, rigs, retail inventory (Oval Racing Parts Store), etc. The challenge is not how do you cut back expenses & carry on. All good businesses do that as the market ebbs & flows. The challenge is to perform at the same high level with half the budget. Like Brad says in his story, he's not interested in doing it if they can't win. Neither was I. This economy challenge is effecting professional race teams everywhere ... big & small ... but you don't often read about it. You can read Brad Kesoloski's story about his NASCAR Truck Team HERE.

P.S. Please don't think I'm complaining. I loved my time racing & winning with our young development drivers. You can read what some of them said recently on Facebook HERE & HERE. And I love what I'm doing today helping car guys with their ProTouring projects, autocross & track cars ... plus a few race teams.

P.P.S. A funny coincidence is Brad Kesolowki's old Busch/Nationwide crew chief (from when he ran on a low funded Chevy team) worked for me in the 2010 year I mentioned above.

:cheers:

There's some that have it and some that don't. Some that need it and some that wish they had. The level of competition draws down to one thing. How much do you wanna spend. Hell, even a hobby racer like me gets out classed (budget wise) but you do it for fun. No sponsors to keep happy.

I always say, look where you are now. Are you happy? And if the answer is "yes" then its all good. You always want more but with caution.

We should always be proud of our accomplishments and hope to do better tomorrow.

"The best way to become a millionaire racing cars is to start as a billionaire"

I heard that somewhere along the way in the 20 plus years I've been around racing and there is a lot of truth to it.

Quote:

Originally Posted by Valve Lash (Post 584211)

"The best way to become a millionaire racing cars is to start as a billionaire"

I heard that somewhere along the way in the 20 plus years I've been around racing and there is a lot of truth to it.

And it's STILL TRUE!!

Thanks for sharing that bit of history from your past Ron. Your presence at the track make my track days so much more enjoyable. Nothing beats our round table chats in between sessions.

I'm just glad your here with us now and wish you great success moving forward. :cheers:

Quote:

Originally Posted by Valve Lash (Post 584211)

"The best way to become a millionaire racing cars is to start as a billionaire"

I heard that somewhere along the way in the 20 plus years I've been around racing and there is a lot of truth to it.

Absolutely, this says more about racing than anything else

Ron,

If you don't mind me asking, what was your business model? Did you have/own the sponsor relationships or did the drivers bring their own money/sponsors?

Quote:

Originally Posted by Neil B (Post 584323)

Ron,

If you don't mind me asking, what was your business model? Did you have/own the sponsor relationships or did the drivers bring their own money/sponsors?

Hi Neil,

My team & I were the pros at raising sponsorship. I have quite of bit of experience at it, as I've had sponsors fund my racing most of my life. But we also partnered with a motorsports marketing team & separately a racing sponsor veteran Andrew Waite (Author of the Great Money Hunt) ... who was/is awesome.

I don't mind sharing in a general sense. I built my racing business to have multiple revenue streams, as I have with all of my businesses. My Race Team business model had 5 major revenue streams & a few misc ones.
1. Companies that provided my team sponsorship.
2. Pro Race teams that provided us financial support to develop drivers, from their sponsorship revenue.
3. Personal funds from drivers' families.*
4. Company sponsors our drivers & families raised, with our help, training & marketing materials.
5. Profit from my retail racing parts store.

*Very few of the families we worked with had the money to fully fund their racing programs.
Each year we put on a national talent search called Ron Sutton's Winner's Circle Shoot-Out. 700-900 drivers across the nation (and some from around the world) would apply. I narrowed it down to 25-45 with the most impressive, winning resumes. They came & participated in an intensive 3-day evaluation that included 2 workshops, body fat testing, IQ test, psych eval & five 20-lap sessions on track in my race cars (controlled environment). They worked with our driver coaches, veteran drivers, engineers & me. In the end, we picked the ones we thought had the most talent, regardless of their financial situation. If their family had the money to fund it ... ok ... but there were very few who did. Most could "contribute funding" but needed to use our sponsorship & raise funding through our sponsorship strategies.

While this varied year to year, in 2010, the share of revenue from each stream broke down as:
1. 30%
2. 6%
3. 17%
4. 33%
5. 11%
Misc 3%

The interesting thing is, even though the economy turned down in 2007/2008 ... we continued growing our sponsorship revenue all the way through 2010. The leaders of these companies said ... at that time ... "Oh, we've been through economic downturns before, but we must keep marketing."

We saw it catching up with NASCAR Cup Teams in 2009. But it didn't affect us until 2011. Streams 1, 2 & 4 shrank dramatically as the poor economy dragged on longer than anyone expected. The same leaders of sponsoring companies said, "Wow, we didn't expect this economic downturn to last so long. Consumer confidence is at an all time low & our experts can't tell us when it will actually rebound, so we need to cut back." It was an across the board thing with racing sponsors tightening their belts. Dale Earnhardt Jr ran 12 of the 36 races unsponsored in 2012. John Force lost Ford & Castrol at the same time. Things ebb & flow ... just the nature of the beast. I could have shifted our business model to a typical rent-a-ride race operation & only worked with drivers with full family funding, but the talent pool didn't interest me.

I hope everyone is clear, even though we're discussing a negative result, I'm not complaining at all. Just sharing insight. I was quite clear when I started my multi-car team to develop young race drivers that we were seizing an opportunity that have a limited life span & had an exit plan. The key is knowing when to get out. When there wasn't enough money to race competitively ... it stopped being fun for me ... and that was when I got out.

So now after taking a year off ... I'm back to having fun helping my new clients design bad to the bone cars to build, improve their current car's performance & consulting to ProTouring Parts Manufacturers & Shops. The people I've met in ProTouring are AWESOME. I love that most everyone wants to help each other & are genuinely happy for each others' success. That doesn't exist in professional racing. Just think mean, hardcore, cut throat. :bigun2:

:cheers:

Great story and background Ron. Thanks for sharing with us.

Thanks for sharing Ron.