Welcome to the Merchants of Dirt Podcast Episode #9, hosted by Reckoneer.com founder Kyle M. Bondo. This is your insider’s guide to practical recreational engineering where I teach you the art and science of building, promoting, and directing off-road races. In this episode, we’re going to talk a lot about money, budgets, and getting your race expense under control, I’ll introduce you to racing financials in an attempt to put the fun back into race budget fundamentals, and we’ll learn how to apply the principles of a profitable racing to your budget.
In This Episode
Putting the fun back in race budget fundamentals
And Now You Know
Call to Action
Putting the fun back in race budget fundamentals
How good are you with money? Better yet, how good are you with managing the money your races need to run? Race budgets are tough when you’re first starting out, especially if you are bootstrapping your event with a bankroll of less than $1,000 in your pocket. Often the difficulty lies in precisely predicting the total cost of an event when you cannot control how many people will show up. As the saying goes, “if it was easy, everyone would do it!”
But just how much does the average racing endeavor cost? To understand the answer, you need to first gain an understanding of how a race budget works, and know how to apply those fundamentals to a budget that makes sense to you and your business. This includes accounting for all of your expenses, realizing where all your revenue is coming from, and measuring your expectations against some goals.
Let’s figure that out in three easy steps:
Step 1 – Determine your expenses
One of the first things you for each of your events is get your hands around the three (3) key factors in your expenses: initial, fixed, and variable costs.
Initial Costs: If you plan on hosting more than one race, you are going to have to put some money down on a few items that you will need throughout the year. These initial costs or “capital investments” are usually one-time expenses that make to buy equipment and supplies for your event management projects. You do not repeat these expenses once you make the initial investment (unless the break a table or punch a hole through your tent).
Fixed Costs: Every race that has ever been held includes a laundry list of costs that repeat over and over again. These costs are predictable. Often referred to as operating expenses, these are costs that you cannot lower and may be obligated to pay before your event will be allowed to move forward. If you can safely rely on a cost not changing (or not changing very much), then you can include these as fixed.
Variable Costs: These are the race costs that start to move you from the “need” into the “want” category. Some of these variable costs will be required. However, the key word is “variable”. What cost you one amount one race, may not be the same amount in a different race. Because no two variable costs are the same each time, these are the costs that can ruin your budget, and potentially bankrupt your business. These costs are unpredictable. As a result, variable costs must be watched closely.
Step 2 – Determine your revenues
Next you need to figure out how much revenue you need to make in order to just break even. Having a break-even point figured out will be one of your first metrics in determining the success of a race. It would really suck to only break-even. But it would suck worse to produce a race that lost money. Before we can worry about breaking even, we need to determine where our revenue is going to come from.
Revenue can come from more than registration fees alone. You could have money already saved away that you can use to finance your event. This is often called “personal” or “out-of-pocket” financing. However, when it comes to bootstrapping your race, your main sources of revenue are going to come from only four (4) places:
- Pre-registration sales
- Race Day registration sales
- Sponsorships or in-kind donations
- Personal savings or loans
This is where the realization will suddenly set in that the more expenses you have, the more revenue you will need to go beyond the break-even point and make a profit. The good news is that everything you make above and beyond the break even point is profit. This is where efficiencies related to reducing costs and getting more with less impact your bottom line. Conversely, making less revenue than your break-even point is considered a loss. Taking a loss on your race would be painful if you are funding it out of your own pocket. However, if you are bootstrapping your event, any type of loss is considered a disaster!
So what is the solution to avoiding a loss? The strategies are simple when you think about it. You can do one of the following:
- Cut back on expenses – the less expenses you have, the less revenue you need to fund it
- Get some financing – this is where your own money, loan money, or sponsorship money can impact your races bottom line
- Get more registrations – Increase your marketing efforts and find more customers
When it comes to bootstrapping, you should think back to the principles that were laid out in Principles of a profitable race, that suggested that if you start small, your races can potentially earn a large profit. This in turn can fund your growth into the next race, and allow you to build bigger and bigger events over time. The Start Small strategy is designed to make sure you keep some funding in the bank to work with if a loss should occur. Take too many losses in one year? Simply return to the Start Small principle and re-establish your racing war chest in year two.
Step 3 – Determine your targets
If you have been playing along at home, you should have a good idea of what your expenses are, and where your revenue is going to come from. Now you need to write down some goals based on those numbers. Goals that deal with measuring the success of failure of your budget are called targets. For your race, you should focus on these targets as good indicators of how you are doing:
- Maximum Expenses: A limit to how much you are willing to spend on your race. You should always have revenue targets and constantly monitor how much you need your business to make, versus how much is does make each race.
- Break-Even Point: How much revenue do you need to equal the cost of your expenses. Your break-even point is an important revenue target that you determine by taking your price per registration (price), and dividing it by all of your costs for producing, marketing, and selling your race (expenses).
- Sales Goals: How many registration sales to you need to be successful
- Profit Goals: How much of a profit do you want your business to make. A good way to factor in your profit goal is to think about how much additional money do you need to build the exact same race again — if all your prices and expenses were the same. Take that number, and add it to your total expenses for this race. Subtract your break-even goal. That is your Race’s Profit Goal.
Whatever the result, the point is to have a metric that you can use to make intelligent business decisions. If you do not measure anything, how can you know if you succeeded? That is why you create targets. You owe it to yourself, and to your racing business, to always be relentlessly measuring everything you do.
Coffee’s for Closers
It’s not Christmas without a good cup of coffee! And right now Ricks Roasters has a new coffee in stock for the holidays called Christmas in Stafford. This is a medium roast coffee flavored with tastes of the Holiday Season! Now unlike other coffees, I can actually taste the chocolate, mint, citrus and caramel in this one. Sean Ricks wants it to remind you of cold winter nights waiting for the Old St. Nick or afternoons relaxing by the fire after skiing or sledding all morning.
You can find Ricks Roasters in Stafford, Virginia, just North of Fredericksburg, or visit them online at ricksroasters.com. Again — they’re not a sponsor (not yet). I’m just a fan paying it forward!
Get your FREE 90-Day Roadmap and companion eBook
Speaking of enjoying what you are building, would you like to get a Head Start building better races?
What if you didn’t have to figure out all out all the steps it takes to build just the race part of the business?
What if you could follow a simple map — a roadmap — that showed you what each of the steps… and in what order to take them?
Wouldn’t that free you up for other things?
Couldn’t you then go work on the things you really like to do: like course design?
Or getting out there and selling your race to actual racers?
I’m almost finished writing a short eBook that will help you identify the steps, structure, and timelines you need to create your own off-road racing roadmap. But with it comes a premade, easy-to-follow roadmap that you can use right-out-of-the-box. This eBook — together with the roadmap — will show you the exact path you need to use to build a race in 90 days.
Yes, 90 days! It doesn’t sound like a long time, but it is the minimum amount of time you need to get a small race off the ground. All you have to do is follow the steps laid out in my 90 Day Roadmap eBook, and you can build your first race in just twelve short weeks. But it’s not only for beginners. This is for you Serious race promoters out there too!
Stop struggling to build better races. This 90 Day Roadmap eBook will give you the tools you need to get your races back on track. It will streamline your process, remind you of what comes next, and give you a resource you can use it to build races again, and again, and again.
Are you already ready start building better races?
If you are, go to Reckoneer.com/roadmap and sign up with your email address.
If you register before December 31st, I will give you $10.00 off the 90 Day Roadmap eBook. Just in time for Christmas holidays, pre-register at Reckoneer.com/roadmap and get the 90 Day Roadmap eBook for only $29. After the first of the year — this eBook will go on sale at its full price (expected to be $39.00). But if pre-register at Reckoneer.com/roadmap, you get the 90 Day Roadmap eBook for only $29. This deal will expire on the last day of the year!
Act now and get $10.00 off your 90 Day Roadmap eBook today!
And now you know
Have you tried to build something that was too big to manage, or too complex to control? Do you find it difficult to engage with your racers?
Reach out to me or comment below. And, as always, if you like what you read here, let me know!
Coming up in next weeks Merchants of Dirt Podcast:
Can I make any money building races based on niche or fringe race disciplines? This time the answer is, unfortunately, No.
On the next Merchants of Dirt podcast… we’ll answer that question. Here’s a hint: It has to do with the trifecta of why things do and do not sell. Also known as Market forces, competition, and customers. Oh, my!
Call to Action
Thank you so much for listening to Merchants of Dirt Podcast. If you have questions or comments, please reach out to me @MerchantsofDirt on Twitter.
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Now go build better races!