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OWN A YACHT RACE TEAM, FOR LOVE OR MONEY?

Updated: Feb 11, 2020

By Chris


If the Sydney to Hobart yacht race was just about winning and losing, there would be no sponsors, media coverage, or 100 foot monsters fighting for line-honours. There wouldn't be hundred thousand fans lining the start area cheering. It would be more like the first race in 1945 where a handful of yachts raced in obscurity.


Thankfully , yacht racing is a global business, into which corporations and participants pour billions. It nourishes recreational sailing, clubs, marinas, e-sports and associated industries. Never before has yacht racing been a larger business than it is today.


Yacht racing for the romantic purist is for love while the for the sports entrepreneur it's for the publicity, lifestyle, and money. Those chasing the money are dominating. But those that do it for love and treat it as a business will do better.


Yacht racing requires more than a fast boat and knowing how to sail. Building a successful yacht race team requires business acumen as well as the ability to recruit a variety of professionals and brand sponsorship. And most importantly being social media savvy.

Innovation in broadcasting and social media platforms has intensified yacht racing interest by beaming to millions of households around the globe over TV and through the internet.



While not the size of the Olympics the audience size for yacht racing is considerable. The 2019 Sydney Hobart had over 730,000 TV viewers just in Australia, with a peak over 1.5 million Australian viewers. Social media amplified these numbers.


Social media has extended the reach further. And sports like yacht racing can now be consumed everywhere and anywhere.


These large yacht racing audiences attract brands wanting to reach potential customers, who through sport sponsorship, have turned yacht racing into a massive business.


THERE’S GOLD IN THOSE HILLS


Contrary to popular belief ocean racing doesn't always become a money pit.


While there is no prize money for winning the Sydney Hobart there are considerable corporate sponsorship dollars up for grabs done right. Since most competitors do a poor job of this, an opportunity opens up for those that can work out how to leverage the needs of sponsors.


How much money? Well, winning the Sydney to Hobart is undoubtedly worth more than $50 million in publicity for sponsor brands connected with the winning line honours yacht. There is a media frenzy throughout the race surrounding the key boats fighting out line honours. This is true of any race of reasonable stature.


It's less for the handicap winner which attracts fewer media attention. The handicap winner gets around $5 to $10 million in publicity value for their sponsor brands.


This doesn't mean yachts get $50 or $10 million in sponsorship.


For a sponsor brand the maths is straight forward, the value of the sponsorship is roughly worth the odds of winning multiplied by publicity pay-off. And because winning isn't certain sponsors can't just "blow" all their sponsorship budget on a single yacht. Prudence forces them to limit, or cap, the size of any single sponsorship bet.


Aside from brand and strategic alignment, sponsors mostly look for the attractive payoff at very good odds backed up by some credible evidence. Like, an amazing yacht, rockstar sailors, or podium finishes.

 

As an example, if a yacht needs $500 thousand in sponsorship and has a 25% chance of winning on handicap. The pay-off for the brand would be around $10 million or 20 times their initial sponsorship investment. So how much should they in this bet?


One way to work out how much to back, is the Kelly criterion. Using the Kelly criterion on the above example, a sponsor shouldn't bet more than 21% of their total sponsor budget to back such an opportunity, that would be foolhardy.


This means the brand would need a total sponsorship budget of around $2.5 million. From a sponsors bet perspective they could back 5 yachts with like chances with such a budget. At 25% odds they should get a handsome payback.


As the chances of winning drop, the number of sponsorship bets a brand must make increases, which makes sense. If they were backing a yacht, say with 10% chance of winning, they will need to make something like 18 similar sponsor bets to win a payout (each bet no more than 5.5% of their total budget) and this means that their total sponsorship budget would need to be around $9.1 million.

 

The simple take away from the above example is the more you can improve your chances of winning the greater the number of sponsors who can make the bet on your yacht. The more races you win, the more publicity for the brand, and the more sponsorship dollars you attract.


There are very few corporate sponsors willing to step up for a race yacht with less than 10% chance of winning, none when you have 5% or less. This is of course unless the yacht has something innovative or unique to offer the brand. This could include on board use of a sponsors product or technology


GET PROFESSIONAL


You're either learning or earning.


Enhancing the chances of winning means paying for a professional crew, there is no getting away from this because your odds are very low of winning the Sydney Hobart without a core pro crew.


And it can get expensive as experienced pros will want to be rewarded well for allowing you to benefit from using their skills, name and reputation. It's the entry price to play in this game, just like buying a race yacht. You pay for talent or pay for torn sails while learning.

You need money to recruit pros, so financial management and budgeting is also an essential piece needed to successfully operate your yacht race team.

Being realistic, every yacht owner has underestimated what it takes to build and run a successful campaign. For every successful owner, there are hundreds who aren't successful. And every successful owner has taken more effort, more money, more people than what was first sketched out.


A word of advice. Unless you have a lot of experience running a offshore yacht campaign a good rule of thumb when budgeting is to make your best estimate of the total cost for a season's campaign, then add another 50%.


The best place to find yacht pros is during regattas or races, this can be hit or miss. Also sites like sailor.com.au do help by providing statistics and a database on sailor performance. Sailor.com.au is a good first step to identify those sailors worth targeting.


WHY HAVE PROFESSIONAL SAILORS?


The biggest challenge in building and running a successful business is getting the right people involved from the very start. Running a yacht race team is the same, but less complicated.

Just like business, talented people are the key to a winning ocean racing. A critical challenge you will face in building and running your race team will be to attract, select, hire, and then manage the right people. The best pro people attract the best amateur people.


Professional sailors always occupy the key positions such as navigators, tacticians, helmsmen or crew bosses.


These professionals enhance their own reputations by making campaigns successful. Professionals shouldn't be confused with the rock-stars, high profile sailors, who serve a different purpose in attracting marketing attention.


Professional sailors are usually contracted as regulars for a complete season. They become the backbone providing a foundation on which to build the rest of the team.

A pro crew on a yacht for a season has time to learn the yacht intimately and figure out

  • how to tune it,

  • make it hum,

  • what can or cannot be done,

  • how far to push the boat before bad things happen, and

  • define its strength and weaknesses.

All this becomes vital during racing.


Skills are enhanced for the rest of team by having a core profession sailors from which to learn from. Also minimising changes to team composition reduces the amount of practice needed before the Sydney Hobart. Choreography in manoeuvres become graceful and smooth.


The other benefit is that the yacht moves through the "J-curve" faster and with less expenses, such as breakages and repairs.

 

Sponsor

 

BOOTSTRAPPING THE REST OF THE TEAM


Once the experienced professional crew have been recruited the rest are filled by the crew boss. These positions are usually the amateurs wanting to become professionals soon.


The crew boss head-hunts from other boats, usually causing angst, from other yacht owners possessive of their good crew. They have a great eye for talent and how to get it.


The pro crew should be contracted for a season where possible this makes them loyal to the campaign and quickly gets off the table what their next paying gig will be. Having pros on standby arrangements leads to turnover.


This means the racing campaign must be well defined, planned and organised 12-18 months in advance as a minimum

Before the head-hunting/poaching process starts, the core pro team decides on the remaining roles/positions required, skill levels and abilities needed. This usually evolves as and when talent with different skills mix join the team. Ocean tryouts are held where crew are assessed and a final short-list produced.


Sailing is notorious for bullshitters wanna-be ocean racers. Especially when first time owners come onto the ocean racing scene. The pro's screen, or filter, the good from the not ready sailors.



SHORE CREW, THE OVERLOOKED


The other important role for a race team is someone who provides ground support. This is very important and often overlooked management role. This role handles shore support, race administration and logistics for races.


It’s a mistake not to have shore crew. The regular crew shouldn’t be burdened with ground/shore responsibilities as it dissipates and distracts them from their core mission which is to race well and win.


Shore crew are the interface between the yacht and the outside world particularly suppliers and race officials. The more complex the campaign the more involved and more important this role becomes.


Those owners new to racing don't appreciate the extent of back-office that needs to happen to keep their yacht in racing condition with crew and race officials happy.


Sometimes it can feel like the hardest part of ocean racing is getting to the start-line.

Important in this process is regular communication between key leaders in the team, shore, operations, crew and skipper. It is imperative to manage and coordinate the team based on a detailed Strategic plan and concise operational program.


SEEING & ACTING ON HIDDEN INFORMATION

Fast, highly skilled sailing teams must see around corners using hidden information. More importantly, they must take the right actions, quickly. Skippers, masters and navigators play a vital role in a race. They are key in presenting hidden information in a way that the crew can debate and consider.


There are processes and team organisation structures you can use on a modern yacht to distil the “best” decisions and then act using emergent hidden information.


The importance of maximising gains and minimising losses against competitors is critical. Just knowing something doesn't automatically translate to gains. You need to act on it.



SPONSORSHIP, SHOW ME THE MONEY


Putting together the yacht and team is one part of the puzzle. Funding is the other.


The owner needs to work on the sponsorship proposition while building both the team and yacht’s reputation. This needs to be integrated with social media and the generation of original content like images, footage and stories.



The best example of how this is done is Alex Thomson Racing who have mastered the art of blending sponsor brands with offshore single-handed sailing. The ex-CEO Stewart Hosford was brilliant at how he connected Hugo Boss and Nokia with Alex Thomson Racing.


Sponsorship is not advertising but often yacht racing teams confuse this. Companies don’t use sponsorship to replace advertising, they use it as well as advertising.

The benefits are quite different and it works best as part of an integrated marketing effort. Sponsorship offers access to a live audience, on-site data and opportunities for the entertainment of clients as well as the recruitment and retention of employees.


Ocean yacht racing is strongly linked to attributes like: adventure, bravery, and determination that capture the hearts and minds invoking powerful emotions. But all yachts competing can also claim to have these qualities in their sponsorship pitches.


Businesses are looking for more tangible and measurable returns on their investments, something more aligned to the bottom line. Something that allows them to tap into the audience. Sponsorship is undertaken for the purpose of achieving business objectives.


Yacht racing offers a substantial opportunity for businesses to out-innovate their competitors by connecting audiences to the things that they love and in ways they never knew were possible. Like 24/7 video streaming, real-time weather routing and analysis, e-sport emersion.


Race teams need to 'crack the formula' to make it work for sponsor brands and their audience. Sponsor brands get credit for bringing something new and better to the fan experience. They are rewarded for improving the lives of the audience.

Examples include innovation in technology, e.g. Team NZ bikes vs traditional grinders, clothing, food, construction materials, data management, communication and systems.


Sponsorship for the race team is more likely when the proposition is playing a major part in helping a company achieve on its strategic goals and is aligned to its stated values. The more you know about the potential sponsor the more you can shape your pitch to authentically align with them.


Value alignment can include: strategic thinking, decision making models, communication systems, physical fitness, diet, tracking effort, energy, decision impact’


When formulated correctly major sponsorship deals do get signed. But still, no-one will award a corporate sponsorship deal without a credible business case to back up the yacht team's proposal. This business case is often developed by marketing. (But some of which should be written by the race team.)


It can take a long time for a company’s marketing team to put together comprehensive business case formalising the compelling argument for sponsorship. What marketing need to do is also weave in the additional costs associated with leveraging the sponsorship, this can sometimes be an extra $2-$4 for each $1 of sponsorship provided. And show the benefits from this total investment.


While sailing is a highly appealing sport for business there are many hurdles to be overcome when looking for sponsorship, having the pitch backed up by a credible yacht and team improve the odds.


Past success is gold but the “killer” idea will clinch the deal. Tethering the idea to the race team will allow brands seeking to associate with the idea to want to be part of the race team.

THE VIRTUOUS CYCLE


In summary,

  1. Increased audience due to increased traditional and social media is an opportunity for race teams to secure sponsorship;

  2. Sponsorship money opens the door to get onto the virtuous cycle;

  3. Professional sailors build skill image and success, its the fastest way to building the team;

  4. Sponsors are attracted to audience, success and creating value;

  5. Financial management is necessary to ensure scarce resources are used wisely;

  6. Integrated shore management and communication is critical and often overlooked;

  7. Sponsorship is assessed on a business case, this needs to be thought through by race team;

  8. All this creates a winning formula, that feeds on itself;

  9. Success creates more awareness and hence the cycle self perpetuates

Once the team is in place backed up by a core group of professionals the odds for the yacht improve. The story is told, like reality TV, it is broadcast to the world via social media. This allows the fans to become intimate and share the excitement as well as the trials and tribulations.


And as crew practices and competes in offshore races leading up to the Sydney Hobart the yachts odds continue to shorten. Supporters start to notice and the fan base grows.


To kick-off this virtuous cycle the owner needs to make an upfront investment. And investing doesn't stop at launch of the race yacht it continues with a focus on building engagement with a crack team and a growing fan base.

This can only happen by bringing in the professionals to bootstrap the operation.


A well-managed race yacht with a great team, increases the odds of a win. It attracts better amateur sailors, positive publicity and gains momentum racking up wins. Everyone wants to be part of that winning team.


People want to sail with you, sponsor brands seek to be associated with your success to leverage it commercially.


Winning, or getting close to winning, the Sydney Hobart, or any major race, will unquestionably land sponsorship deals, providing more resources to improve crew, yacht and performance.


Start with a killer sponsorship concept and boost it with an audience grown through social media. The execution of social media is just as important as having the best racing yacht and race team of professionals.


Be business smart - do it for the love AND the money.


 

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