9/24/18 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 1 9/24/18 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. 2 9/24/18 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. 3 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.
Purchase answer to see full attachment