Monday, June 20, 2005

Where Does All The Money Go? (Cool Runnings)

Found this on Cool Runnings from Dave McGillivray at DMSE. Great article.

- SD

Where Does All The Money Go?

By Dave McGillivray
Posted Sunday, 12 June, 2005 on Cool Runnings

Where Does All The Money Go?

Ever wonder exactly where your entry fee goes after you enter a road race? Producing road races has become a significant business that comes with a lot of risk along with a lot of hands in the till. The days of simply throwing down a chalk mark in the road, yelling out “ready, set, go”, letting the 200 or so runners fend for themselves as they weave through traffic jams they actually caused themselves and then finally handing a popsicle stick with a number (place) on it to runners crossing the finish line…are long gone.

Here, however, are the days where producing a road race is more about insurance, liability, medical coverage, media, security, technology, computers, charities, food and entertainment and less about road cones, ribbons and tear off stubs as in the good old days. And, of course, all this “new stuff” just costs more and more and more money. Additionally, where and when the race is held also contributes to the ever-increasing expense of an event. The days where “everyone” involved offered his or her services free of charge are also gone.

How many road races have you gone to in the last few years are just that…road races? Most, if not all, are fundraisers for one cause or another. This is not necessarily a bad thing, it is just a fact. As such, there is a lot of pressure on event directors to either increase the revenue or decrease the expenses (or both) in order for the event to be deemed successful. Interestingly, nowadays many races are being measured by not by how well managed they were or whether the participants had a positive experience but rather by how much money they raised for their beneficiary. It’s a whole new world with much different objectives and much different priorities.

When I am approached by a prospective client to produce a race for them, my first question is…. why do you want to do this? The most common response nowadays is “to raise money for xyz cause”. My typical reply usually is that it is a lot less painful and much less risky to hold a car wash or cake sale and you may even raise more money doing that then delving into the complexity of road race management.

Without corporate sponsors, whether cash, product or services, it is virtually impossible to “make money” conducting a road race. Each race is different, of course, and as such, incurs different expenses. However, every race must deal with standard expenses in order to produce a half decent product. Typically, some of those expenses include but are certainly not limited to:

Advertising Port-o-johns
Bib Numbers Printing
Equipment RentalRefreshments
Management FeesSupplies
Medical Timing and Scoring

I have found that generally, entry fees can usually cover reasonable event expenses. It’s the cash sponsorship that ultimately makes the difference in an event generating proceeds or not and giving the event the capability of possibly paying management fees. Without cash sponsorship, the chances of the event making any money is pretty slim in most cases.

If you do an analysis of how a $20.00 entry fee is expensed out per person in say a 500 runner field size race, it might look like this:

Direct Costs/RunnerIndirect Costs/Runner
* T-shirt $4.00* Printing $1.50
* Chip timing $1.00* Police $2.00
* Chip rental $1.00 * Medical $1.00
* Chip mats $1.00 * Port-o-johns $1.00
* Bib number $0.30* Advertising $2.00
* Postage $0.50* Equipment $2.00
* Insurance $1.00
* Food $2.00
TOTAL: $10.80TOTAL: $9.50


So, as you can see, that $20.00 gets gobbled up real fast. Now, this is just a sample, not an actual. Every race is different but this should give a little clarity as to “where all the money goes!”

The somewhat difficult decision many times that event directors face from year to year is what to actually charge for an entry fee. You need to cover costs but you don’t want to charge so much that you will actually be scaring people away. That delicate balance sometimes is the difference between the race surviving or the race going in the tank. It doesn’t do anyone any good if a race “loses” money as the end result is that the race is simply going to disappear, never to return. It is very rare that an event makes a “killing” off of entry fees and thus the need for corporate sponsorship.

When you think about what it might cost to go to a ball game or to a concert these days, a $20-$25 entry fee seems to me to be a pretty reasonable investment in return for all the items and services mentioned above…plus the opportunity to participate in an event that is very challenging to organize but one where when you finish you usually go home feeling so good about yourself. Arguably, that single return in and of itself is priceless.

Dave McGillivray
DMSE, Inc.
(Dave McGillivray and Cool Runnings, All Rights Reserved)

1 comment:

  1. Hi Scott,

    I like your research posts and I have learned a lot.

    On the other hand, will you write something about FREE running events, such as Stevens Creek 50K, Epiphany Ultra etc.?

    Reading through all your blogs....



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