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The Challenges Of Being A CFO In Sports

Often unappreciated, but one of the most important positions in any team

8Apr

Sports is big business, and the kind of sums discussed when it comes to things like wages, transfer fees, and stadium costs, are often eye watering. Attempting to compete in such a world is largely impossible without substantial investment, and many have failed disastrously trying to do so. Ice hockey team LA Kings, for example, spent lavishly in their quest for success, before financial mismanagement saw them file for bankruptcy in 1995. Financial management is vitally important in sports to ensure these sorts of failures, but it is also one of the most difficult industries for CFOs to work in.

Sports fans are no longer interested simply in what happens on the pitch, they want to know everything that’s going on in the background too. They need to know that all that can be done to ensure their team’s success is being done - and vital to this is their club’s financial situation. This is why the job of a pro sports CFO is so different from that of most other industries. Every decision they make is subject to a tremendous degree of scrutiny, with an incredibly passionate audience ready to jump on anything they feel could negatively impact their team’s chances of winning.

Sports teams’ financial leaders face a particularly complex challenge in that the nature of revenue and success is cyclical. To drive revenue, you need success, yet success requires investment, which usually requires revenue. Much of this depends on the owner. Some clubs - Detroit Tigers, for example - are lucky enough that the owners are also fans and as such willing to sink investment into the club to see success without really looking for a return. Similarly, super rich owners like soccer club Manchester City’s can afford to invest millions in order to see a return later. Most, however, are not so lucky. These CFOs are caught in a catch 22, with pressure coming from the board to ensure that the club is turning a profit, yet also the fans to ensure that money is being invested in the team. This can result in the sort of protests being seen at soccer grounds up and down the UK, with fans at clubs like Aston Villa and Newcastle United boycotting their clubs because of perceived financial mismanagement, which ends up damaging revenue and brand reputation.

Individual sports also have unique problems. The NFL, for example, play far fewer games than other major leagues. They basically have eight opportunities to maximize revenue from tickets, concessions and parking, and must do everything possible to ensure every penny is spent.

Risk management is also a more complex issue for sports CFOs. Insurance to mitigate risks is common in all industries, but the high risk of injury and the financial costs incurred by these can be huge and insuring players limbs complex. Another thing unique to sports is the issue of taxation. In the US, taxation laws mean that a dozen or more cities and states can take a share of players paychecks during a season because they are technically working in their state when they play away from home. Athletes are a particularly easy target because both their salaries and playing schedules are so public.

Ultimately though, while being a CFO at a sports team is an incredibly challenging job, they are often doing it in an industry that they love working in, and the thrill of success and adulation that greets you when things go right can easily make the whole thing worthwhile.

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