The Athlete's CPA
Understanding the Business of Sports professionals
Business planning in professional sports
From player contracts to revenue optimization, to thrive in the sporting business, professional athletes must have a deep understanding of the business of sports, including the critical aspect of managing their finances well. Here are some of the business considerations for both sporting organizations and professional players alike:
1. Maximize revenue streams
Professional sports generate revenue from various sources. Ticket sales, merchandise, broadcasting rights, sponsorships, licensing agreements, and concessions all contribute to the financial success of a sports franchise. Each revenue stream requires careful management and analysis to optimize profitability. As a sports manager or sporting team, it is important that you have systems in place to effectively track and analyze revenue streams to maximize the most popular revenue streams and continue growing your sporting business. As for individual players, they too need to consider the business side of their sport. Professional athletes sign contracts that outline their salaries, bonuses, incentives, and contract lengths. Sportspeople need to consider the financial implications of proposed contracts and look into the long-term financial impacts of various contract scenarios to ensure that it aligns with their financial goals.
2. Consider the financial risks
Professional sports organizations face financial risks associated with player injuries, unpredictable revenue fluctuations, and changing market dynamics. It is crucial that these be factored into the financial planning, budgeting, and risk management of the organization to ensure long-term stability and sustainability. At an individual level, professional sports players face various financial risks that they need to take into account. These include income volatility as earnings may fluctuate significantly throughout their careers. They would also need to take into account the devastating risk of career-ending injuries. Furthermore, individual players need to plan for post-career transition that can be challenging, both emotionally and financially, and would need to build into their risk management plan the ideal of securing post-career employment or pursuing entrepreneurial ventures to stay afloat once their sporting career expires.
3. Ensure tax and regulatory compliance
The sports industry operates within a complex tax landscape, both at the individual athlete level and the organizational level. Sophisticated income statements and expense records need to be kept to ensure accurate tax submissions to the IRS. This is required both for the individual player and the sporting organization. Some of the common things to consider when tax planning is to ensure that athletes and teams are in full compliance with tax laws while maximizing available deductions and credits. Considering tax implications related to endorsement deals, international competitions, relocation, and retirement planning is an important part of the tax planning of professional athletes and sporting organizations. It is also important to understand residency rules and requirements for traveling sports people as regular travel to certain states can impact your tax liability in each state. Adequate research and planning in this regard is crucial to not only ensure more preparedness, but also to reduce potential liability.
Partner with an expert
The business of professional sports is a multifaceted arena where strategic financial planning is imperative to an athlete’s success. Leveraging the expertise of a CPA that specializes in professional sporting can help you ensure financial stability and long-term wealth. At S.O.Speaks CPA PLLC, our CPAs offer guidance and support to professional athletes. We look at sporting contracts to help individuals and organizations optimize their earnings. We also implement effective tax strategies and establish a financial foundation that extends far beyond your sporting career