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Mazda Raceway Laguna Seca is often host to many well-known professional racing events. The month of May brought us American Le Mans Monterey, where 35 cars in 5 classes prepped by some of America’s finest racing teams get on track for 6 hours of wheel to wheel action.  Given this track is in my own local racing region, being here so often for other reasons gives me both a certain level of familiarity and interest–especially when you are able to stand track-side and photograph the amazingly fast ALMS prototypes roar by you with great urgency!

A series like the American Le Mans is a complex venue that attracts a range of spectators, fans, corporate hospitality groups, and supporting race series. It is merchandised, ticketed, and positioned to provide a unique racing experience for teams and spectators alike. Racing, like many professional sports, is also a business, and like all businesses certain financial factors need to be taken into account for the good of the sport.

Operating a racing team is an incredibly expensive proposition, and the costs can run into the millions of dollars, particularly when you reach into the GT and Prototype classes. In many ways and for a variety of reasons, the ALMS series is often more expensive to run versus its Grand-AM counterparts. From cost of the cars, maintenance, fixed overhead, and travel expenses, it adds up rather quickly. But who is paying these bills? What are the driving forces in the business behind an ALMS event or team?

Sponsorship

I dislike using the word “sponsorship” these days because it has somewhat of a gratuitous connotation. Those in the motorsports industry know that the days of a racing hand-out’s have been long gone, and that business transactions are critical to economic survival in the sport. Both drivers and teams have to be smart about how they balance their expenditures and available funding, often requiring some creative methods of sustaining their racing programs, all while keeping both drivers and partners appeased.

ALMS doesn’t have the same advantages as NASCAR, especially from a traditional advertising standpoint. The world of road course racing operates very differently, as the teams and drivers can not bank on stands being filled with spectators, nor is the outreach and demographic the same.  Traditionally, companies pay–and pay very well in the case of winning drivers/teams–to have their logos and products emblazoned on a race car and team uniforms. Even the events themselves may be sponsored, noted in many races throughout the Sprint Cup and Nationwide Series.

In today’s non-NASCAR racing world in the US, different tactics are needed. Methods for achieving success in this sport is becoming more like everyday business–where partnerships (not traditional sponsorships) are paramount, and transactions take place out of sight and away from the paddock.

How does a driver or team do all this successfully? Find money.

Show me the money

Regardless of how much talent a driver might possess, one must find the funds to cover his or her costs to run. Even a few of today’s Formula1 teams have drivers who pay to drive, or are being supplied funds through business transactions that are separate from the team itself. As in Grand-Am and ALMS, finding the funds for a “ride” can be a difficult journey if you are not independently wealthy. With seat costs reaching 40-60-thousand dollars each/per-race, and total annual car costs nearing 1.5 million dollars or more, a driver is going to need serious backing to make a successful season-long campaign at this level.

Gentleman drivers clearly have an advantage in the sport, as they can easily participate simply because their economic situation enables them to do so. They do not have to hustle for the next marketing partnership or business-to-business deal. All is needed is a pen and a check to write on. These drivers have the advantage to join teams with hired professional drivers, whereby running with the faster more experienced co-driver betters their overall finishing chances. While gentleman drivers are sometimes the slowest on the team–despite the lack of experience, they are an integral part of the economics of racing. Without them, paid professional drivers wouldn’t have a car to drive.

There are instances where gentleman drivers use racing as business leverage to achieve better business deals. In meeting with several executives, drivers, and teams at this event, it became even clearer to me how this cycle works and how important it is if you want to survive in racing. These intelligent CEO’s, Sales VP’s and other C-Level executives are often racing because their companies and their clients want to celebrate the transaction–racing was a part of the deal and was put into place to facilitate interactions in an exciting, hospitable environment. They have successfully used their contact base to not only solidify partnerships, but have done so in such a way where the transactions had both ROI (or potential ROI) all while accommodating for a racing budget. What trouble would it be to spend 2-million to ultimately make 12-million? I have often said that in racing, the best deals are made over happy-hour. Having stood next to corporate leadership with a glass of wine in-hand myself, I am leaning to say that this is undoubtedly true in many cases. Business-to-business programs are becoming more dominant in the sport than ever before.

Hospitality in hospitable conditions

Because the audience is economically and demographically different than NASCAR, teams and drivers in a series like ALMS have to use other tactics to drive successful funding programs. Offerings must be delivered in a sophisticated way, and provide the means to have successful business opportunities within the context of racing. In the US, audience numbers cannot be the only driver to justify motorsports-related advertising costs. When these programs are not as effective as desired, the solution cannot be to “run more ads” or “increase advertising efforts”. In this environment where business-to-consumer transactions aren’t a primary focus, traditional marketing tactics need to be rendered appropriately. Still, compelling marketing approaches are essential for successful B2B partnerships and lead acquisition.

This is not to devalue the presence of brands on the race car itself. In general, I see it as less of an important factor since we eliminate the NASCAR-effect of leveraging the hundreds of thousands of spectators. In cases where a B2B transaction had become the foundation for the racing program, the “benefactor” may be the face of the team–on the transporters, the body of the car itself, and on suits of the crew and drivers. Hospitality can package it all together, providing an environment by which partners, guests, and the team can meet, mingle and experience the benefits of the “racing program”.

The sport of auto racing, despite its massive popularity, clearly faces a number of key business challenges–not least of which are how it develops and grows in the future and how it can retain the interest of those who follow its twists and turns both on and off the race track. It is also clear that drivers must leverage their contacts and ability to conduct business.

These days, drivers have to be smart both on and off track–and possess capabilities beyond turning the wheel and stomping the gas pedal. Leveraging the right business opportunities and placing them into effect is going to better their chances of securing the ever so coveted race seat, while building themselves up as a savvy racing professional.

 

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  • UAN

    was this written by NC (Todd) or PC (Paul)? Either way, many thanks for providing some insight into a part of the sport that we rarely see, but which is so important — and harder to see/understand with series like ALMS than with NASCAR or F1.

    • Geri Amani wrote it. She covered the race for F1B and took the pics and wrote the words. She’s awesome like that. :)

      • UAN

        thanks Todd for the update. And thanks Geri for a great article!

  • Tim

    Excellent post . . . very well written! Great insight into the financial part of the racing equation. Thanks Geri!