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Preparing a Business Plan (15%) – Due September 30 at 11:59pm
Students will generate a business plan for their fantasy franchise. Within the
business plan, the franchise will outline the stated objectives, mission, and
purpose of the franchise. The mission should indicate whether the owner expects
to be profitable, successful on the field, or both. The business plan should also
include a detailed projection of season-total revenue and costs.
1. Discuss Business Plan
The paper should be written in the format of a business report, not as an academic
paper. This includes short and concise sentences free from academic jargon. It
should be styled and formatted as a business plan accompanied by relevant charts,
graphs, and images.
Preparing a Business Plan (cont.)
Students should use the Excel workbook to present a series of charts and graphs
representing their revenue, costs, and total profit in a stylistic and visually impressive
manner.
Students are expected to complete three sheets in the Excel workbook: “Financial
Forecast”, “Forecast Charts and Graphs”, and “Forecast Team Salary and Contracts”.
1. Financial Forecast: This is a week-by-week running total of revenue and expenses.
Use your best judgement to estimate these values to project a season profit/loss. This
chart will appear in the final section of the paper “Summary of Franchise Financials”
2. Forecast Charts and Graphs: These graphs should automatically populated based on
the values entered into the Financial Forecast sheet. They will be included in each of
the sections under “Projected Revenue Sources” and “Projected Costs”
3. Forecast Team Salary and Contracts: This chart will appear in the player auction
section.
Revenue Projection:
Cost Projection:
Using the revenue-sharing arrangement and the four Demo classes at
EconFantasy.com, students will develop a forecast for their season revenue. It
should be noted that sponsorship offers are made to franchises beginning in the
third week of the season.
Using the revenue-sharing arrangement and the four Demo classes at
EconFantasy.com, students will develop a forecast for their season costs.
Each franchise receives a fixed $2 million sponsorship for the first two weeks of the
season and then receives sponsorship offers in subsequent weeks based on market
size and team performance.
Your Revenue will be generated from the following eight principle sources: ticket
sales or gate revenue (RG); Local and National Broadcast Revenue (RB);
Concession Revenue (RC); Merchandise Revenue (RM); Sponsorship Revenue (RS);
Luxury Tax Revenue (RT); Revenue Trades/Deals (RD); Revenue from other sources
(RO).
Each franchise has $9 million in fixed costs for the season: $5 million in
administrative costs (CA), $1.5 million in travel/road costs (CR), and $2.5 million in
game day costs (CG). Keeping in mind the revenue forecast, $9 million in fixed costs,
the franchise market rights fee (CM), each owner will develop a budget for player
salaries (CS). Moreover, teams will have to calculate their expected luxury tax cost
(CT), any costs for trades/deals (CD), and teams may be fined for certain actions
throughout the season (CF). Lastly, they must account for unexpected costs (CO)
Your formula for projecting Total Costs is:
TC = CA + CR + CG + CM + CS + CD + CF + CT + CO
Your formula for projecting Total Revenue is:
TR = RG+ RB + RC + RM + RS + RT + RD + RO
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Sections of the Business Proposal:
Sections of the Business Proposal:
1. Introduction with statement of a franchise mission (1 page).
2. Investment Strategy & Risk Assessment (1 ½ pages)
Background: Franchise must explain the market background and why it was chosen.
Mission Statement: The franchise owner must declare whether they are trying to buy a
championship, whether they will try to make a profit, or whether they will attempt to do both.
You mission statement should resemble that of a generic company.
Purpose: The franchise owner must declare whether they are trying to buy a championship,
whether they will try to make a profit, or whether they will attempt to do both. And why?
Within this section, you will address two key aspects of your management decisionmaking.
First, you must explain your investment strategy, both in the short-term and long-term.
This includes your decision to finance your market rights. Will you pay off the debt in
year 1 (with no interest)? Or will you amortize it up to 4 years? What factored into this
decision? What is the value of your team assets?
Second, you must conduct a risk assessment of your investment. Do you have prior
knowledge of the industry, and how did/will that factor into your investment strategy.
Will you be aggressive in your investment strategy, or will you be risk averse?
Sections of the Business Proposal:
3. Analyze your Franchise Market and League Structure Negotiation Strategy (2 pages)
As the commissioner of your league, I want to know your plan entering the franchise market
and league structure negotiation class period. How do you think the results will affect your
franchise based on your market size? Would it be in the best interest of your franchise to
negotiate more things individually, or collectively? Why or why not? You are expected to reflect
on your franchise market negotiation and League structure organization (broadcast revenue,
ticket revenue, merchandise revenue, concession revenue, and salary cap/luxury tax).
Sections of the Business Proposal:
4. Analyze your performance during the player auction – (3 pages)
State your overall draft philosophy/strategy (i.e. does it relate to your mission
statement). What was your budget? Provide logic and reason behind the drafting of
particular players. Players you wanted vs. players you got. You may even want to
compare your draft auction values vs. salary paid to identify surplus value.
Note: this is not simply a player-by-player summary of the bidding process. It should be
more about your overall philosophy and how certain players contribute to, or detract
from, this strategy.
This section is expected to include the worksheet: “Forecast Team Salary & Contracts”.
5. Projected revenue sources. Provide a detailed explanation for each of the following (3-5
pages):
6. Projected Costs: Provide a detailed explanation for each of the following (3-5
pages):
You will begin this section by introducing your total revenue formula and follow it with
a detailed breakdown and analysis of each source of revenue.
You will begin this section by introducing your total revenue formula and follow it with
a detailed breakdown and analysis of each source of revenue.
See course syllabus for a detailed breakdown of each sub-section. In short, you will
analyze all sources of total revenue: RG+ RB + RC + RM + RS + RT + RD + RO.
See course syllabus for a detailed breakdown of each sub-section. In short, you will
analyze all sources of total costs: CA + CR + CG + CM + CS + CD + CF + CT + CO
You will conclude this section with a summary of your Total Revenue according to the
following formula (TR = RG+ RB + RC + RM + RS + RT + RD + RO), filling in the
appropriate data.
You will conclude this section with a summary of your Total Costs according to the
following formula (TC = CA + CR + CG + CM + CS + CD + CF + CT + CO), filling in the
appropriate data.
This section is expected to include: “Forecast Charts and Graphs”.
This section is expected to include: “Forecast Charts and Graphs”.
IMPORTANT: Be sure to include the actual figures from your charts and financial
forecasts for each section. Use section breaks for each (sub)topic.
IMPORTANT: Be sure to include the actual figures from your charts and financial
forecasts for each section. Use section breaks for each (sub)topic.
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Business Proposal:
7. Summary of Franchise Profit: (2 pages)
A short summary of your expected financial forecast. What is your expected profit/loss?
Does it match your state mission statement? Include your total profit/loss chart here.
This section is expected to include: “Financial Forecast”.
EconFantasy Team press Release (10%) – On-going, due Sundays at 11:59 pm
In addition to facing one league-wide issue each week that will affect team and league
financial performance, each team will, at least THREE times during the semester, be
confronted with an team-specific issue.
2. Press Release
These issues will involve any number of aspects in the sport industry: economics,
finance, facility management, public relations, marketing, strategic management, sales
and sponsorship, public policy, and moral/ethical dilemmas. Team personnel must meet
to address the issue and arrive at a consensus. Once a consensus is reach, team
personnel must issue a 1-page press release to announce the franchise’s decision.
Within the press release, the team is expected to achieve the following:
Include relevant background information on the issue:
Explain the alternatives
Announce their decision in a clear manner
Provide a rationale for decision
Explain the significance of the decision
Use appropriate team letterhead with a corporate logo
The press release is limited to one-page. It should be professional and written on
organizational letterhead with appropriate headings, salutations, and team logos.
Regarding the latter, teams must choose a logo for the purpose of representing their
team.
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Our ownership collective had a clear understanding of the three franchises we
considered for our market. Those markets were Atlanta, Seattle, and
inevitably Boston. When it came to deciding who to bid on it was the voting
index that was most crucial to our decision making process. We wanted a
team with a slightly higher voting index for us to have more of a voice when it
came to deciding revenue agreements for the season. We also wanted a city
that can uphold a strong caliber of players while also being able to turn a
profit.
Our mission is to bring the strongest caliber of players to our city to uphold
tradition of winning championships in Boston.
In order to hold up our mission, we plan to spend a responsible amount of
money to bring in the players we need to win a championship even if it means
paying luxury tax for the best possible squad. When you think Boston you
think of the words “Franchise” and “Success” which is unchallenged with
examples like the Celtics, Patriots, and Red Sox. Furthermore, the Bruins won
a championship this decade meaning there is an expectation from our city to
show results. We are willing to spend the money for a championship and
anything less of that endeavor will be considered a failure not only to us but to
our City. By bringing the strongest caliber of players to Boston, people will be
more influenced to buy a ticket and buy concessions and merchandise to
watch the star players.
Section 2
We developed our investment strategy before drafting and auctioning for
players. Our investment strategy was to go for Boston, a large market city,
and for the big players. We decided to go for the big players because of the
size and success of Boston sports. We were willing to pay more for a good
city and good players for the potential of winning a championship. We paid
$25 million for the city of Boston and decided to amortize it up to 4 years at a
5% interest rate. In order to pay off the debt, the weekly payment came out to
be $132,497.20. By amortizing the $25 million, we are projected to make a
profit. Since we have prior knowledge of the English Premier League, we
adopted the strategies of Liverpool and Manchester City. Liverpool and
Manchester City have been the most dominant teams in the English Premier
League for the last 3 years. Liverpool and Manchester City adopted the
strategy of getting the best players and then getting good players to surround
them. We adopted this strategy by being willing to pay more for the better
players while not paying as much for the good players to surround the stars.
We felt that this would be the best recipe for our team’s success. That being
said, the value of our team’s assets is very high. The higher the value we
place on our assets, the more likely players will play better.
As a team, we decided to be aggressive in our investment strategy. We
decided that going for the big cities and the star players will bring success to
the organization as a whole. With star players on the team, the attendance is
likely to be higher because people want to come to the games to see star
players. With a higher attendance, there are more people willing to buy
concessions and merchandise. With more people going to games and buy
concessions and merchandise, revenue and profits will increase.
Section 3
We chose Boston in order to maintain voting power but to also be a force
within our league. While our voting index does not reflect that of a New York
or San Francisco we felt that we should be considered as one of the big
market teams in our league. During the discussion of the revenue agreements
for broadcasting it became clear that the other teams were dedicated to
reducing our value by classifying us with the smaller end teams for
percentage divisions. Because of this we developed a serious chip on our
shoulder and did our best to make it clear to the other teams that we should
be taken more seriously as a big market franchise when the discussions of
merchandise came into play.
With teams continuing to disregard our voting index and overall power we
decided to suggest a merchandise agreement that extremely favored bigger
teams (including us) to draw more votes for in our favor. We thought with the
help and agreement of markets like New York, San Francisco and others we
could use our voting power to install a merchandise agreement that benefited
big markets. This proposal quickly challenged the integrity of the league and
was outvoted, but it did force the other teams to associate our franchise with
bigger markets resulting in higher percentages for Boston in almost everything
but the broadcasting.
With other teams trying to categorize us with the smaller half of teams we
decided that larger salary cap would be beneficial for our approach to
spending. Our strategy for the auction included several $10-12 million dollar
players meaning that a higher cap would allow us to get players we scouted
and to not be taxed for it. We want to make sure that what happened with the
broadcast revenue does not become a pattern and because of this, a higher
salary cap would allow us to spend more money on the players we wanted
without having to pay a huge tax to get them here. We wanted a higher roof
for the soft salary cap but $60 million has proved to be an acceptable amount
for our current budget. Originally the thought of going well passed the soft
salary cap seemed to be inevitable. But since our player auction we now have
the opportunity to field a team we think is capable of a league title and with the
right moves it may be possible for us to turn a profit even if that isn’t a primary
goal for Boston.
When the discussion turned to Ticket and Concessions we knew that one of
the perks to Boston’s market is that we receive 100% of ticket sales, parking,
and concessions which will be a major bonus at times where it may feel that
we are strapped for cash. As one of the only teams whose money sharing
agreements involves 100% of our takeaway after the home/away split, we
wanted all of the revenue sharing agreements to be split 50/50 as opposed to
the 80/20 that is currently agreed on. The reason we wanted 50% home vs
away is because this would give us the highest and most stable form of
revenue no matter where we happen to be playing that week. As the only
team in the league with this level of benefits associated with our franchise the
original suggestion would have been ideal for not only Boston but also the
smaller markets who can easily sink behind when only receiving a mere 20%
for their away performances.
It is safe to say that the 80/20 split did not originally sit well with our franchise,
we wanted more revenue generation week to week instead of big and small
weeks depending on the location. It was only after we looked further into our
schedule that we noticed a three week home stand that turned our opinion
around. With the current agreements for concession and ticket sales we now
have a major opportunity to gain a head start in the league not only in the
standings category but also in generating a solid income to support a late
season push of buying up key players and working towards the less important
goal of balancing our budget.
Section 4
Prior to the auction our team sat down to discuss the players that we felt
would be the strongest assets to our franchise. We knew going in to the player
auction that there were several players we wanted that would certainly eat up
a majority of our budget. These players which we will discuss were nobrainers when it comes to our overall goal of winning the league outright.
Because of this our strategy for buying players began as a “stars and scrubs”
plan of action. By this we mean that we planned to spend whatever it takes to
bring in our star players, even if it meant that we would have a luxury tax
imposed as a result of our spending. After we acquired the players who are fit
and ready to bring home a title then we would begin to plug the gaps with
players whose contracts don’t go over $1,000,000 dollars.
The three players we decided that we had to have were Virgil Van Dijk, Kevin
De Bruyne, and Pierre Emerick Aubameyang. As three of the Premier
League's top players we knew having just one of these players would show a
cataclysmic difference in point accumulation. Our goal entering the draft was
to spend a maximum of $80,000,000 in our chase for top of the table. We
also wanted to have the highest rated star index by the time the auction had
concluded and to also remain within $5,000,000 of the closest team to our
budget, in order to not spend ourselves out of competition.
We had an understanding that there were players with big names starting the
first round of the auction that we had no business purchasing. For example
Mo Salah who was the first bid in the draft has a huge amount of hype around
him. We did not see him as a guy we needed but we wanted to make sure
that he went for a fair price that would be similar to what we thought he was
worth. We began to push the bid higher and higher before dropping out of the
running at $40. A fair price for a player that we did not want. This was our
attempt to bring other franchises closer to spending the money we intended
to.
The second pick in the draft was Raheem Sterling. One of the most reliable
midfielders in the league but again, we did not envision him on our roster. We
took the same strategy of trying to push the bid higher and higher, but once
our bid hit $40 all other teams dropped out and we had outbid ourselves. Our
punishment for this? An extremely creative player and a consistent producer
of points in the midfield. While our plan to bring other franchises to our
spending level technically failed, we had no problems adding a player of his
stature to our squad.
As the draft continued, the name Kevin De Bruyne showed on the screen. De
Bruyne was our ultimate must have and we were literally going to spend any
amount of money to have him on our team. We had done our research on this
player and his numbers suggest that he is the most bang for your buck no
matter how much you spend. De Bruyne is one of the few players who can
pile up points in assist category. In just 126 appearances in the EPL he has
compiled 53 assists, making him the fastest player to 50 assists in the leagues
history. On top of his teamwork skills Kevin also finds the back of the net
similar to a top striker. He has 25 goals in his Premier League tenure. During
the bidding we made it clear that we were bringing this top player to Boston.
We immediately jumped the bidding to $25 forcing other teams to try and
outbid us. He eventually sold for $50 or $12,500,000 matching the two other
most expensive players in our league. He has quickly shown his worth by
putting no less than 20 fantasy points for every appearance so far. He even
logged a 46.5 point game against Watford. Kevin De Bruyne is the perfect
example for our Boston franchise and he is without a doubt worth more than
we are paying to have him here.
We had spent a good portion of our budget for these two players, so when
Van Dijk appeared we knew we had to sacrifice buying him for our next key
player, Pierre Emerick Aubameyang. Aubameyang is one of the premier
strikers in this league and we were prepared to bring him to Boston too. As a
serial scorer Aubameyang has amassed 38 goals in just 55 caps in the EPL
and a respectable 9 assists. Again we took the same strategy of pushing the
bid to $25 and again we were prepared to outbid anyone that challenged for
our top tier striker. We eventually won with a bid of $50 meaning that we had
acquired two of the three most expensive players in the draft, consistent with
our mission entering the 2019-2020 season.
The auction kept moving but our franchise agreed that we needed another big
name to help carry the load if we are going to be a force. Paul Pogba who is
one of the biggest superstars in England is who we scoped in on. We were
aware of the injury to his ankle, so we made sure not to overspend for a
player that could end up on the IR longer than anticipated. It seemed other
franchises were scared away by his current state so the bidding moved slower
and not as jurastic for other stars on a similar level. Our strategy was to hang
back and wait until we could sneak in and add him to our roster. We did
exactly that and acquired him for $32 or $8,000,000. This was a huge success
for Boston because we had brought in another ginormous superstar who
could easily have matched the $50 ceiling.
We acquired some serious star power as a result of our spending. Once we
had gotten our gems we retracted our spending habits and only purchased a
few players after Pogba that we felt were good deals for their talent level. We
even acquired a top goal keeper, Dean Henderson as the first player to be
sold for under $10. After those players had passed and it got later in the draft
we began to use our knowledge of the Premier League players to our benefit.
We began queuing players that were not starters, hurt, or are just not quality
talent and watched as teams spent $10-20 on a player they are not familiar
with. Some may see this as conniving or sneaky but we wanted to make sure
other franchises had done the same research we had.
After it was all said and done, Boston had spent $68,500,000 total on player
salaries. We had reached our goal of staying under $80,000,000 and have
even managed to spend less or the same as Cincinnati, San Diego, and San
Francisco. This was a huge win for us because our team that we have
accumulated is the clear front runner in our opinion. This auction was a
success and we look to the future with a positive point of view after the money
we shelled out. Our goal after the draft concluded is to now win the league
and manage to get under the $60,000,000 soft cap by the end of the season.
With the kind of hot start already this season it appears to be an attainable
goal for our franchise.
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