Eight hours before the Idaho Stampede face their archrivals, the Sioux Falls Skyforce, Stampede owner Bill Ilett is signing paychecks and sealing them into envelopes with two wetted fingers. His team practices a few feet away.
“No one else to do this. If there was, I’d be rigging with them,” Mr. Ilett says, glancing toward a maintenance detail hoisting an advertising banner at one end of the empty arena in Nampa, Idaho.
No task is too small for Mr. Ilett here among the potato and sugar-beet fields 12 miles west of downtown Boise — he often drives the bus to meet the team at the airport after a road trip.
The Idaho Stampede compete in the Continental Basketball Association, the country’s highest level of minor-league basketball.
The 54-year-old Mr. Ilett, who used to own a trucking firm, is one of a number of entrepreneurs who have bought into minor-level professional franchises in basketball, baseball, hockey and a host of other lower-profile team sports.
Some see this as a sound investment, others who have made their money in other fields see this as a fulfillment of a lifetime dream. “It’s the sports nerd’s revenge,” says Gary Christensen, a Boise area real-estate developer, describing his 11% stake in the Stampede. Adds Bob Hope, president of an Atlanta sports-marketing company that once owned the now-defunct Colorado Silver Bullets women’s baseball team: “There’s a coolness, a grooviness to owning your own team. You become a celebrity. It’s a thrill that you don’t get in any other business. All you need is a passion and a little understanding about putting money together to make it happen.”
But passion isn’t enough to make a success of it, and those who stray from the discipline that helped them succeed as entrepreneurs usually founder. Those who stick to what they know and approach sports-team ownership as a business endeavor are the ones who end up in the best shape.
“This is a business,” Mr. Ilett says. “We have receivables to collect. We have billings and hirings. Our employees happen to be 20- to 26-year-old athletes.”
Mr. Ilett and his nine partners paid $900,000 in late 1996 for their entry into the CBA, which would cost about the same today. A new franchise in the Northern League, a 16-team baseball league founded in 1993, costs $1 million. A Western Professional Hockey League entry goes for $500,000, while World TeamTennis charges a paltry $60,000.
All cost a pittance compared with the recent purchase prices of new franchises in the top-tier National Basketball Association, National Hockey League and Major League Baseball, which have ranged from $80 million to $130 million — or to the astronomical $530 million bid for the Cleveland Browns, the National Football League’s latest addition.
Despite the bargain-basement prices, smaller-scale teams can be lucrative. Spurred by a loyal core of fans, the Sioux Falls Skyforce basketball team, of Sioux Falls, S.D., has turned a profit for each of the past five years, topping out at $300,000, according to a league source. “You have to get the right situation and the right deal,” says Miles Wolff, the owner of hockey and baseball teams for almost three decades and the founder of the Northern League.
But it takes time to understand the business of team ownership. Ask Mike Plaman. The Albuquerque chiropractor and businessman discovered a rash of unexpected start-up costs after he bought the Shreveport, La., franchise in the Western Professional Hockey League for the bargain price of $250,000. Dr. Plaman, who called his team the Mudbugs after the crawfish found in nearby waters, found that the cost of critical equipment — including the purchase of a $714,000 ice-making system, scoreboards, Zamboni ice-resufacers, swirling laser lights and a jazzy uniform design — totaled nearly five times what he paid for the team, $1.2 million. That was about $200,000 more than he had expected and, he says, roughly what he lost in his first season, despite strong attendance.
“I paid tuition last year to learn about the sports business,” Dr. Plaman says.
Pat Sweeney hasn’t enjoyed a profitable season yet in his first three years as owner of the Madison Black Wolf of the Northern League. Mr. Sweeney, a lawyer who grew up in the Wisconsin college town, has contended with a decrepit stadium and spates of nasty weather that occasionally blow down portions of the outfield fence. Attendance has suffered as a result. “If this were my day job I’d be worried,” he says.
The Stampede, on the other hand, have done substantially better, earning a return on investment of about 40% last year — despite the fact that basketball has never been much of a big deal in Nampa, a town where rows of tractors park next to a local diner. Boise State University football, outdoorsmanship and the annual five-day Snake River Stampede, one of the country’s oldest and largest rodeos, dominate the local sporting scene. The city of Nampa built the 13,000-seat Idaho Center, where the Stampede play its games, in part to serve as the rodeo’s permanent home.
“My wife called this team my hare-brained idea,” says Mr. Ilett.
Before buying the Stampede, Mr. Ilett, who grew up in Boise, spent nearly a half-year talking to league officials and visiting teams. He was startled by some of what he learned. One owner walked into a locker room at halftime to offer each of his players $100 if they won. Another considered leasing his team Jaguars. “I saw some grim situations — bad crowds, badly managed teams and owners who treated their teams as a hobby,” he says. “I didn’t want to do something stupid and burn up my net worth.”
Sharing the Risk
In April 1996, having also decided that he didn’t want to assume all of the risk, he drew up a 20-page business prospectus and began circulating it among friends and members of the business community. Within 10 days, the ownership group — an eclectic mix that included Gary Michael, the chief executive officer of Albertson’s Inc., a grocery and drugstore chain, and Carl Woodburn, a large-animal veterinarian — was complete.
“I heard about the plan from a neighbor,” says Mr. Woodburn. “I didn’t think about it as a good investment. I just thought it would be fun. I was excited about us getting a pro team.”
By August, the group had worked out an agreement to play in the Idaho Center and made a $50,000 nonrefundable payment to the league guaranteeing that no party could trump their bid to place a team in the area. The one catch: Mr. Ilett and his partners needed to sell 2,500 season tickets by the end of the year.
Working with six temporary salespeople, the group sold the tickets within a month at an average of $427 apiece and paid the remaining $850,000 of its franchise fee. “It was like picking low-hanging fruit,” Mr. Ilett says. “People were throwing money in our laps.”
Next to be done: Hire a front office that understood basketball talent as well as the dynamics of running a profitable team, and build a base of corporate sponsors.
Sioux Falls had succeeded in this regard by signing up any organization interested in supporting the team. Sponsors now number about 200, who contribute anywhere from $500 to $50,000.
But Mr. Ilett worried that such a strategy might prevent the Stampede from providing sponsors with enough individual attention to help create long-term relationships. He and his partners settled on a different approach: fewer sponsors, none offering the same products; and a carefully controlled marketing program in which companies are offered options from a list of promotions and advertising space. The results are often entertaining if undignified.
Flurry of Discounts
Albertson’s, which is one of the team’s largest sponsors, signed on for more than $40,000. In one of its occasional promotions, the so-called shopping-cart extravaganza, fans use a grocery cart to catch gift certificates and discount coupons that flutter down from a circling miniature blimp.
A Budweiser frog race requires two fans to don flippers, stomp the length of the court and sink a basket.
By the end of the first season, the Stampede counted 35 sponsors, who paid a total of roughly $370,000 — almost 20% of the team’s revenue. Ticket sales, which amounted to about $1.4 million, brought in most of the rest. The team averaged a respectable 4,552 fans a game — third-best in the league and due in part to brisk game-day purchases by people who had never before seen a professional game.
Meanwhile, the team spent about $250,000 in player salaries, 17% of its total expenses. Another $130,000 went for travel. Much of the league is based in the Midwest but the Stampede also journeyed to Connecticut on two occasions. Advertising amounted to about $100,000 and workers’ compensation insurance to approximately $60,000.
Along the way, the Stampede group adhered to rules that helped ensure that the operation ran smoothly. The owners couldn’t interfere with daily team operation. Mr. Ilett met often with the Stampede’s general manager Clay Moser, a former senior vice president of the CBA, and reported regularly to his partners. Nor could the owners enter the locker room.
“You have to have a chain of command,” says Sioux Falls’s Tommy Smith, who has instituted the same policy. “Owners have to be like umpires. If you notice them, it’s a bad thing.”
Game Time, Party Time
Mr. Ilett treats his team less as a sports venture than an entertainment business. “As a minor-league team, we’ll never have a Michael Jordan to build an image on,” he explains. “We have to build a full house of entertainment cards.”
And so, Stampede home games have the air of a carnival. Throughout its match-up with Sioux Falls, rock music blares from the speaker system. Mountain bikers soar and twist in an acrobatic halftime routine. During a timeout, two fans try to win a recliner from a local furniture store — a sponsor — by sinking a foul shot while lying in the chair. They fail. At halftime, another fan takes a series of four shots in an unsuccessful attempt to win a Dodge truck.
And when the third quarter ends, a sizable chunk of the crowd of 4,997 pours onto the court for the Stampede Dance Party, two minutes of rock music hoofing.
Smack in the middle of the dancing mob — most of whom are children — is Kipp Bedard, vice president of corporate affairs for Micron Technologies Inc. and one of the Stampede’s owners. “It looked like fun,” says Mr. Bedard. “The investors are just regular guys. We like to have a good time and sometimes that means getting up and dancing.”
Andrew Osterland has edited various financial websites at QuinStreet for a span of four years. Because of his talent and hard work, he was raised to the role of senior editorial manager of the company’s insurance sites and was a contributing writer at CNBC.com. He is also an entrepreneur and has been the editor manager of Insure.com. Full profile here.