If you are developing a plan to build and operate a sports facility and you need to bring in partners, you must decide what type of ownership you are going to offer them. There are several ways to split up the ownership of this business. Some pieces are more valuable than others, and some require more risk than others. In this article I will discuss the three major components of this business and the pros and cons of each.
The largest and by far the most secure piece of the sports facility puzzle is the real estate and building itself. As an initiator and principle of the project, you want to do everything you can to make sure you are an owner in this piece. In addition, if this is a building you are building from scratch make sure you build it as such so that it can be easily converted to another use outside a sports facility. A distribution warehouse structure is the most common alternate use. This may sound like I am asking you to plan to fail, but you must have a plan for every possibility.
The second piece is the business itself. This carries the most risk. It takes a great deal of start up capital and there is usually little to show for it if things don’t work out. The tangible assets you are left with are not very liquid assets. Things like sport court flooring, artificial turf, rink dasher boards, and basketball hoops are not easy to sell off, and usually have to be just about given away. However, this is the meat of the business. This is what generates the cash, I would require any partner to anti up and become part of the operations. This is where you can see great financial gain or really get your nose bloodied. It also helps to have other people involved when there is a need for cash infusion, whether it be personal money or collateral for a bank loan.
I have seen many different structures and you can split it up in countless ways. However, you can get in trouble if you have too many people involved. One such facility had 13 owners just in the business operations itself. Needless to say it was a nightmare trying to get something done, and when it came time put more money in it was very difficult to get an agreement. In situations like that the only ones making the money are the attorneys. My suggestion would to keep the business operations ownership to between 2 to 4 people. Three would be best because there would be no tie votes. If you have to go beyond 4 people make sure the additional owners are silent partners where they have no say in the day to day operations.
So be cautious as to what you offer people to join you. Make sure you understand the value and the risk/reward of what you are offering and above all else, use an attorney and get things down on paper with a solid business plan. That’s where we can help, there is no need to reinvent the wheel in writing a business plan. The Rink Smart Sports Facility Business Plan Manual will save you time and possibly a lot of money. It’s simple to use, just replace the sample data with your information and you can complete your plan in a short period of time.
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