Today on the Merchant Center episode number 9. Number 9. Number 9. We're gonna talk about money. Money. Money. Money. Money. Money. Money. We're talking about budgets. We're gonna get into those race expenses and get those race expenses under control. I'll introduce you to the racing financials and attempt to put the fun back in the budget fundamentals, and we'll learn how to apply the principles of a powerful race to that budget. Are you ready? Get set. Go go go.
Thank you for joining me for the merchandiser podcast. I'm your professional recognier, your teacher, your merchant of dirt. Your host and thinker of 6 impossible things before breakfast, Kyle Bondo. Our website is mercysadirt.com. And if you're new to the mercysadirt podcast, welcome aboard. This is your personal trail guide through the complex world of recreational engineering, where I help you simplify the business
off road race promotion. And we also try to make the art and science behind building commoting and directing off road races understandable Along with my cohost Mr. Murphy of Mr. Murphy's Law Fame, I'm here to show you how to build better races. Right. So I hope everyone's doing great out there. We're heading into December here in Virginia. December starts to get a little cold.
So racing starts to to whittle down. Right now, it's the cycle frost season for off road racing, which is kinda like the road guys attempt to be off road without fully committed. I know. I I kid my Cyclacross folks out there all the time. You know, I'm not much of a cyclic cross guy myself. If I cycle cross, I cycle cross with the mountain bike. So I'm I'm a mountain biker who doesn't want to fully commit to road. There we go. Caesar works both ways.
Also, some the little, you know, little news about the the podcast, I figured I told myself after so many episodes, that I would upgrade the microphone. So if you've noticed a difference from the first 8 best episodes to this episode, number 9, number 9, number 9. You know what I guess where that's from. I've I I put a little bit of money down on this new microphone called the Audio Technica ATR 21100. And not a bad little microphone. I mean, it was less than a $100, which is really good.
But I told myself, time to get rid of the I had a blue snowball. Anyone knows who that is. It's great for music recording in a bigger room. Not so great for podcasting. In fact, I had to like build a little cave in order for that podcast microphone to be of any use. This 1 however sounds really good. In fact, it sounds so good that I had to go back to school to learn how to use the dang thing.
I mean, we're no longer we're we're we're a long ways from from USB ports now. Now we're using things called XLR, and if you're familiar with any kind of audio equipment, XLR is kind of the 3 pong plug that you plug into your your amps and your guitars. Yeah. And I had to learn what that that was too. So hopefully, this starts to sound better. And I think it's a good investment. And as a good investment, this episode is about money.
And we're gonna talk a little we talk a lot about the basics and the fundamentals of your budgeting within your races. And how to kinda get some of those budgeting and and raise expenses under control. And that's what this whole episode's about, and I hope you enjoy it. Which leads me into the question, how good are you with money? Betty, how good are you with managing the money your race needs to run?
I mean, race budgets are tough when you're first starting out, especially if you're bootstrapping your event with a bankroll less than a $1000 in your pocket. And trust me, most beginner race promoters, 1000 bucks or less, that's kinda where you're gonna be starting from. Maybe even less than that. Big borrow and plead equipment, you'd be surprised what you can get accomplished with even less than $200.
Anyway, often the difficulty lies in precisely predicting the total cost of your event when you can't control how many people will show up. So how much effort do you put in? How much money do you put in it? You have no clue how many people show up. If 5 people show up to a race that you put $5000 in, You're not gonna make your money back. Even if you have a $1000 in and only 5 people show up. So it goes without saying,
If this was an easy job, everyone would do it. Right? I mean, ask how many people, how many racers, they would like to put on a race. Chances are, the answer is gonna be none of them are. Why? Because they know it's hard. If they don't know it's hard, they will if they try. So this is not a job that is, you know, comes easy to people, which means the numbers and the money and all the guessing work and the stress and the risk that comes with that, is also something
that is difficult, but it's overcome. You can overcome it. Right? So let's just let's kinda ask this question. Just how much does the average racing endeavor cost? Well, to answer that question, you kinda first need an get an understanding of how a race budget works. And you need to know how to apply the fundamentals to that budget that make sense to you and your business.
This includes accounting for all your expenses, realizing where all your revenue is actually coming from, and then measuring your expectations against some goals. And since this isn't a podcast about how to be an accountant, we're gonna focus on the budgeting jargon needed to give you some just some insight into Ray's financials. Just enough to be dangerous. Right? So let's ask yourself, what are raise financials. Well, there are 3 things. Their expenses, their revenues, and their targets.
That sounds pretty simple. Right? Revenues, expenses, and targets. Expenses, things I pay for, revenue, money I get, targets, numbers I need to hit in order to consider my race a success. That's it. So let's get into this. Let's talk about expenses first. Because expenses are probably the 1 thing that actually, you'll kinda be able to get your hands around more or less. Versus revenue, which is always a tough 1 because that, you know, that equals turnout. So expenses.
So 1 of the first things you need to do during each and every race is get your hands around the 3 key factors of your expenses. What are those? Initial, fixed, and variable. Seems pretty straightforward. Okay? Initial. Initials are just exactly like I said what they what they sound like. I mean, you plan on hosting more than 1 race. Right? But if you are, maybe more than 1 race, maybe more than 1 race season,
maybe an entire business built upon racing that goes on for years years years, You're gonna put some money down on a few items you're gonna need throughout the year and throughout your entire lifetime of your business. I mean, these are your initial costs. These are your Capital Investments. Usually, they're 1 time expenses. Equipment and supplies that you'll use to manage your actual racing projects.
I mean, you do not repeat these expenses once you make an initial investment unless you break something. So these are things like tables, tents, chairs, sound equipment. Heck, it could even be something as advanced as trucks. It could be technology like laptops, printers, and monitors. Could be office supplies. Which yeah. I mean, the office supplies were talking about, or things like the cash box. You're probably only gonna buy 1 of those storage containers.
Bins, you're probably going to buy a couple plastic bins to carry stuff in, power supplies. You're probably going to buy 1 generator. It breaks, extension cords, surge triggers. You're not gonna need too many of those, are you? I already said tents, tarps, pops ups. Coolers? I mean, how many coolers you need to buy? Or if I only water, food coolers? How about tools, weed wacker, shovels, pick sacking? How many shovels do you actually need? I mean, these are all your your initial costs
for just starting up your business. Things you're gonna need to clear trail, things you're gonna need to have a registration, things you're gonna need to have for Razer Management. Etcetera. All the money you're gonna spend right the front. And a lot of initial race promoters are probably gonna borrow a lot of this stuff. I know in many of my races at the very beginning, I borrowed a generator from the mountain bike club I belong to. Because why? Well, they had 1, and I could.
And that saved me having to go buy 1. And if you've ever priced generators, they're not cheap. Tense? Hey. Open box stores are fantastic places for pop up tents. Tables, the big box stores like Costco and Sam's Club and BJ's. They're fantastic for these portable tables in in bulk. It's worth the price of of getting the membership. So every race that's ever been held includes this laundry list of costs that repeat over and over again.
And what do you you probably think those are? Bills are your fixed costs. These are predictable. I mean, an option referred to as operating expenses. These are the costs you cannot lower and probably are obligated to pay before your event will even be allowed to move forward. If you can safely rely on a cost, not changing or not changing very much, that's probably a fixed cost. I mean, common examples of fixed cost include permits.
I mean, most federal state and regional parks have a flat processing fee. Usually, it's like 50 bucks. 100 bucks, depending. Right? They want the 15% on the backside. That's not necessarily a fixed cost although it could be, you could probably think about $2 a race or you could probably figure out if you do enough races, get a ballpark of how many people showed up. An idea of, okay. Well, that kind of race gives I have to pay the parks more than any road of 200 bucks.
This race, I have to pay me than 500 bucks, etcetera. Insurance. Insurance is something that provides maybe semiannual or annual coverage for the entire season. We're talking about company insurance. So 2 different kinds of insurances here. You are running a business. You probably need some liability insurance to run your company. To protect your company from liability. Then you need insurance for someone who gets hurt during your event. Sometimes those are 2 different things. These policies
can be pretty stable. Monthly billing is pay each month. However, if your events are more sporadic, you mean your insurance policies, they can be purchased on just the event event by event basis. So if your attendance goals are roughly the same for each race, then these 1 off insurance policies should cost you about the same each time. Same thing with with trail running or mountain bike races. A lot of times, you're gonna be holding a race less than 200 racers.
Less than 500 racers. You're gonna get a pretty good idea on what those permits are gonna cost you each time. Online services. I mean, If you use an online registration service, this cost is usually the same each event, and often the registration cost of the service is paid by the racer.
It can be a source of frustration between you and the racer. I mean, as a racer, turn race promoter, take, you know, the the privilege of being able to preregister online, and then have to pay 3 to $5 fee on top of that. Okay. Well, that's a podcast for another time. Trust me. But Chances are that you're not gonna have to pay the online service a changing fee. Like, 1 time, it'll be this cost, and not the time it'll be that cost. There's usually a fixed fee.
And This could also include things like your bank charges or your hosting cost for your event website. I mean, you have to consider, how much does it cost to host a website? Are you gonna do the free thing? The Wix or the Squarespace? Yeah. Guess what? Those aren't free forever. And if you wanna move, well, then that becomes a whole different problem.
So you may need your own website, your own domain name, meaning to hire somebody or get a volunteer to help you out. Your salary is another 1. You're not running a charity. And you're not promoting races because you like getting outside. You need to pay yourself at some point. Not all race promoters can take a salary and they first start out. But you need to consider getting paid for the work you are putting in to your own company.
You can only take earnings based upon how much profit you make But whatever you said to do, you need to work that into your overall expenses. Now lastly, we come to variable costs. Now variable costs are the race costs that start to move you from the need to the want category. So these variable costs will be required. However, the keyword is variable. What costs
you 1 amount, 1 race may not be the same in a different race. Because not too no 2 variable costs are the same each time. That's why they're called variable. These are the costs that can ruin your budget and potentially bankrupt your business. You have to be very careful with variable costs. Why? You have to be careful with variable costs? Because these costs are unpredictable. And as a result, variable costs must be walked very closely. So here's some common examples
of what a variable cost would be. First one's marketing. If you're creating your event for the first time, These costs could include branded materials that you need to create, you know, your unique brand awareness, your logo creation, website development, flyer design, this event was a retread from previous year. These costs may still be required if you wanna change or update your brand from last year year to year. You may wanna change the date or even the part of the name
on your on your flyers. The designer or the printer tried you the same as he probably showed you last time. Gonna give you a benefit on that. And printing. So we go for the printer. Printing, marking materials, t shirts, branded, awards, they don't print themselves. Flyers are always different. T shirts will always have new sponsors on it. You will never know how many branded awards you will need,
you know, have leftover from race to race because you don't know how many people are gonna show up. So depending on how many items you need printed will directly impact the overall cost of your race. And printing prices usually change based on the number of items you need, So think about a race that you have no idea how many people are gonna show up. You have to kinda guess how many people are gonna show up. And if not a lot of people show up to racing with all these leftover stuff,
can you use it for next year? Is it is it called Evergreen? And evergreen is the kind of thing that doesn't really have an expiration date on it. So do you are you planning those things or does it have a specific date place and time for that event. When I said that's past, that printed material, that marketing thing. No longer be used unless you gotta scratch it off. Yeah. Well, I think that through. So market materials, you know, Every venue will require a different amount of course marking.
Survey tape, course tape, arrows, signs. No 2 courses are alike. And even the same venue with the same course from the previous year will have a dramatically different course marking requirements. It could be based off of who marked it before, you know, what lessons you learned from the venue, or just who's marking it now. I mean, it never fails that the number of rolls of tape it takes to mark a course
every year seems to change. Never fails. Why is that? It's always different people doing it. And some people triple wrap it around a post. Some people single rapid. Some people break it off in a weird places. Some people double. I mean, it goes on and on. What's another variable cost? Payroll.
I mean, there are some jobs that just you just need to hire somebody to do. I mean, extra help may only include a limited time, like 10 hours of work. But every race is different. And even if it's just part time, 10 hours can turn into 20 hours, a snap of finger. If you hire a steady part time employees, this cost could move to a fixed category, which would be nice if you got a fixed TV of staff. This is where staff comes in.
You know, that that fixed cost category for staff salary could be could be beneficial. But maybe you need to hire timers. Diamond's costs could change depending on which hiring company you hire. What else? Ementities. Some reasons include that little extra polish, that finish line, the bottle, the can drinks, fresh food, where you're finishing prizes, things you decide to do like metals, beer glasses, bracelets. I mean, these dispensers should also include anything.
You provide your racers in the form of the off the shelf goodies and swag. Or any of the giveaways you purchase yourself. Also think about purses. No. Not the kind that ladies wear. Think about cash. Right? To get those pros to come and attend your event. You need to offer them a cash purse? Well, then you need to pay out that cash or check on race day.
Sometimes the amount is equal to the number of of professionals that actually show up, top 3, top 5. However, the amount could be more if you're using the you know, using as a means to attract elite racers. So you should be prepared for that. Fees. Once the race is over, you have to pay officials license, you know, all the licenses you got purchased, late fees, vendor contracts, nonrefundable deposits,
percentage of the total fills the tails of the park. We talked about that in the in the fixed cost. But that percentage, that 15% for some parks, More for others, that changes. That's definitely variable cost. The more people you have come to your park, the higher the number is. We do not plan on making a large investment in reusable equipment. You know, that stuff we talked about, the initial cost stuff, the stuff we never gonna place. I mean, most of your rental costs could be calculated here.
You may not have a club to borrow stuff from. You may have to go to a renter center or U Haul. Or some other places to rent equipment. When we talked about timing surfaces or services, but if you decide to use an outside company to connect your timing, These services usually have a predictable cost the 1st year. However,
they show up the second year, these things change. Not only do things change, but depending what kind of time you're using, you're using this regular little straight up timing, or using RFID, radio frequency identification timing, the chip timing. And, of course, chip timing and timing services that use that that that kind of technology
all depend on the number racers show up depends on the cost. You may have a flat fee for a timer, but each chip may cost you something, the more racers you have, which would be great, made me more money you have to pay. K? Transportation. This is this is 1 that's overlooked a lot. You'd need to get all your gear to the venue in something We most likely some sort of a cut truck or trailer or SUV,
and we go up and talked about that U Haul. Right? I've seen a couple races where U Hauls not only used to get stuff to the race venue, but they used it for, in particular, in venture races, transfer the bikes to a transition point, which is brilliant
to use U Haul for that, but that cost money. We'll have those bikes in there and drive that U Haul a day. Maybe you don't have to take it back the same day. Maybe you have to keep it an extra day. Maybe the race goes long. Maybe I was like, go find somebody. No 1 could drive the truck back. Kitching. And additionally, you may have to visit the venue multiple times. Clear trailer for weave, plan the course, mark the course, race day cleanup, each trip's gonna cost you gas in your car.
Who's paying for that? Did they come out of your pocket? Or is your company paying for that? Is that part of a race expense or is that part of your personal expense? Maybe you didn't think about that. I mean, now that you have an understanding of what these expenses are, We can kind of see an example of what our race expenses could be, approximate estimates. So let's let's kind of let's kind of think about that. Initial cost.
Tables, chairs, tents, jugs. Say we spend 250 bucks on that. Our liability incur insurance? $900. 50 bucks for our venue permit. That's just the initial cost, not the 15%. Right? 150 bucks for our sanctioning permit. 350 bucks for safety officials if you're lucky. 75 bucks for bathrooms. We didn't even talk about bathrooms. It'd be Porta potty Porta potty. Yeah. Mister Murphy loves the porta potty problem.
Try having a race venue without bathrooms, where the nearest bathroom is a gas station 4 miles away. Yeah. It's not so bad for the dudes. But the ladies, man, that is 1 way to get a female race official really upset at you, not have a bathroom close by. So that is 75 bucks for bathrooms. That is a cost of doing business. That is a peace of mind fee. Have bathrooms. And there's a math to this. It's like something like
20 erasers equals 1 bathroom. You could probably think of it that way. Murphon people have this stuff down pat. But for off road racers, we don't really consider being out in the middle of nowhere, no bathrooms. Well, we just go in the bushes. Yeah. A lot of people don't like to go in the bushes. Especially whatever thing they have to do in the bushes. May not be compatible with bushes. No toilet paper. You know, no 1 wants to wipe with with leaves.
So bathrooms are key on race day. That's an expense you have to put in there. Do you think about those? How about a hundred bucks for tape cones and barricades? Tape's easy. Barricades? You ever thought about barricades? That's sometimes that that winter fence, that that that that storm fence, or maybe cones.
Uh-huh. It's amazing. How many cones I've seen with Verizon or AT and T on the side. Yeah. Wonder where they came from. Right? But cones, you know, at Home Depot or Lowe's? You can buy them online? Cones are amazing boundaries. Tape. How about water water jugs? Home Depot sells those big orange water jugs. They say gatorade on the side. There's about 25 bucks for that. Right? 100 bucks a race flyer printing.
That's a that's not a lot of race flyers if you think about it. You go down to Kinko's or FedEx and get your get your race flyers printed off or maybe you have a printer at home. Ever got out and buy ink? Yeah. You have a little can of printer right here. Last time when I go buy ink, I found out that buying a brand new printer was cheaper than buying ink. That makes no sense. Anyway, You add all that up. Gives you about a total about 2000 bucks.
So where can we cut to save money? $2000? A lot of money. That's the expenses. That stuff you have to pay for before hitting one's actually shown up to erase your race. $2 out of your pocket. So we gotta cut some stuff. Right? So maybe you don't buy so many table insurers. Maybe you find a place to rent or borrow them. I mean, first starting out, that's what that's that's the easiest thing to do is rent a borrow or rethink some of the stuff in your garage.
Ask some friends, maybe even the local church, local UCMA, your local conference or convention center. Community Center. Be surprised, a lot of people have folding chairs and tables all over the place. Then you could ask someone to print your flyers for you. Because he was a favor. Bathrooms are 1 of those things that are just good for your race for reputation. So you might just might have to pay for that. So they really can't cut that.
Permits and sanctioning permits, that those are must haves too. But you might be able to borrow cones might be able to go to to local shops. Retailers might have branded boundary tape. Often, they give that stuff away. I remember a Shimano. Shimano used to give away let's just tape all over the place. Because why? It's their brown freaking brand name is all over the tape. What better marketing can you have than 4 miles of Shimano all over the place.
They love that stuff. So a lot of times, race promoters can go to the outdoor supplies, outdoor vendors, outdoor products, and they have tons of this stuff. And they'll give it to you for free. Because why? Because it it just it's just good business. They're brand everywhere. So definitely, you know, check that box, make those phone calls. You can also find sponsors. That's probably the key right there. Find sponsors to pay for your water or your gatorade. They can even come through with cups.
However, overall, This looks to be like a very bare bones when it comes to race expenses. Now we're on this list. We talk about the actual paying for timing. For example right now, timing staff, office supplies, papers, pens, clipboards, your medical kit Mhmm. Maybe even paying for EMTs. Signs, fence posts, all those other expenses. We're just talking about the basics. Just get the basics. 2 grand. Let me cut some of that stuff. Right? But it's a good first draft.
Some of the need to have items that we need to account for. The next thing we need to figure out is revenues. And in figuring your revenues, 1 of the first things we need to determine is a breakeven point. Why a breakeven point? Because 1 of your goals should be not to lose money, which sounds like a pretty good goal. Having a breakeven point will help you figure out your first metric in determining the success of your race. And what's the success of your race? Did you actually make back
the money you put in? That's called a breaking point. Pretty simple. Right? Because it would really suck if you only broke even. Because the whole point is to make money. But it would suck even worse if you lost money by not making that point. So knowing what that is, is very important. But before we can worry about a breakeven point, we need to determine where our revenue is going to come from. Revenue can come from more than registration fees alone.
You could have money already saved away that you could use to to finance your event. This is that personal out of pocket financing. Over when it comes to bootstrapping your race, which is what most first time race promoters usually do. Your main sources of revenue are going to come from only 4 places. That's gonna be preregistration, race day registration, sponsorships or in kind donations, and loans. Or personal savings,
the loans. Other people giving you money. This is where the realization will suddenly set in that the more expenses you have, the more revenue you will need to obtain, to go beyond your breaking point, and make your profit. You know, not your total profit, the gross profit, the very first profit you're gonna make. The good news is that everything you make above and beyond the breaking point is technically profit. This is where good and good at reducing costs will impact your bottom line.
Because making less revenue in your breakeven point is considered a loss. And taking a loss in your race would be painful if you're funding it out of your own pocket. However, your bootstrapping your event, any type of loss is considered as a disaster. So what is the solution to avoiding this loss? The strategies are simple when you think about it. You can do the following. The first is you can cut back on expenses.
The less expenses you have, the less revenue you need to fund it. See, it's pretty straightforward. You could get some financing. This is where your own money, loan money, sponsorship money can impact your race's bottom line. And I would suggest avoiding the loan money. Banks aren't necessarily gonna invest, not unless you have a track record.
And using your own money. Well, if you're coming this as a new person, you might not have a whole lot of money to put it on your own. Right. But chances are you're not going to. So the financing normally gonna come from sponsorships. Getting those like minded product companies Service companies invest into your race because it gets them marketing, it gets in publicity, it gets eyeballs on their products. So financing from sponsorships
is not a not a bad way to go. What's the other way you can go? Get more registrations. This is the key. More registrations increase your marketing efforts and find more customers. When it comes to bootstrapping, you should be thinking back to the principles that were laid out in the principles of profitable race in episode 8, where I suggested that you start small, your race can potentially earn a large profit. Starting small has its advantages.
A lot of people come to a small race, There is a lot of potential for a profit. This in turn can fund the growth of your next race and allow you to build bigger and bigger events over time. That's kind of the fundamental principle behind it. The smarting small the starting small strategy is designed to make sure you keep some funding in the bank to work with if you do have a loss.
You take too many losses in 1 year, simply return to the start small principle and reestablish You're racing war chest in year 2. That's why starting small is so important. Do small races, incremental, grow, smart. Stay away from the big extravagant. And that will that will that's the biggest way to cut your costs, is just keeping the principles starting small, only doing things that are necessary. Don't buy things you don't need. And that brings us into step 3. Number 3, our targets.
We're talking about 1 target. Let's talk about all the targets. So if you've been you've been playing along at home, you should have good idea on what your expenses are. And where the revenue is going to come from. So hopefully, by those 2 examples between expenses and revenues, you have a pretty good idea on your race and how your race breaks down by the numbers.
Now, you need to write down some goals based on those numbers. Those goals deal with measuring the success or failure of your budget, and they're called targets. Just like they sound. Bull's eyes. Numbers in which you can drive your efforts towards to know whether or not you are succeeding or failing. So for your race, you should focus on the targets that are good indicators for how you're doing And there are 4 of those. 4 targets you need to think about.
So let's let's talk about those. Target number 1. Maximum expenses. This is a limit to how much you are willing to spend on your race and not a penny more. This is the kind of target that lets you know that a potential race, a potential venue, potential opportunity, is out of your price range. What's an example of that? Hey, Kyle. You're doing pretty good races. You're doing pretty well. Can you hold the X Y Z championships? No.
Why? Because I'd crunch the numbers and found out that the X Y Z championships are gonna cost me $10 to put on with a return investment that may not actually equal $10, maybe less. And worse yet, the risk is all mine. What happens when the weather hits? Hey. It just happens to be the time and right time period where there's some good chance of rain. A rain date could be disastrous to a $10,000 event. So maximum expenses,
know how much you're willing to spend and don't spend the pets anymore. This is discipline. Go back to principles. Start small. Work your way forward. Incrementally. And you'll know what that number is. You'll know what too big is for you. You'll know whether or not if the risk is worth it for you. What's the second 1? Well, we already talked about this 1, the breakeven point. This is how much you have to make in order for your race to at least pay for itself. Now,
everyone gets to enjoy the race. You have to have a race. Rep reputation is is maintained, feathered in your hat. You can put that in your portfolio that I did this race. Experience, a crew, etcetera. That's all grand. Maybe even it's the opportunity to meet new people, get your brand out there, get a park to think that you actually know your business. Right?
Did you make any money? No. Can a business make that does not make any money same business? No. The breakeven point is essential to understanding how much you need to make just to stay afloat with the cost of that race. Doesn't pay for anything else. Now, what is reputation worth? What's the reputation capital? That's passive. Might be worth more down the road. Might be worth a breakeven race. Some races, breakeven races might be worth the risk.
But you have to know what that is. You have to know what number you need to hit before it becomes a problem. The goal is to stay in business. The goal is to make money. Because you can't grow a company if you're broke. You can't grow a company if you're always in the hole. So breakeven. What's our 3rd 1 sales goals?
How many registration sales do you need to have to be successful. How many tickets do you need to sell to get your racers in the park and at your race before you can hit your breakeven point. And then how many racers beyond that is a good sign. And that goes into the fourth 1, which is your profit goals. How much of a profit do you want your business to make? Now, this is a tricky 1 because everyone always says, oh, I wanna make bags of money.
Yeah. You could probably think about bags of money, but is it realistic? You should always have revenue targets that are constantly do you constantly monitor how much you need your business to make versus how much does each race make? Much does your business need to make? Year. What's that number? And if you take how much your race does cost because you gotta find out how many your race how much your race does cost, per race each time you race it.
That race cost this much. That race cost that much within a ballpark. Right? I need this many people to breakeven on that 1. And I just these are my sales goals for breaking even on that 1. And my race business cost x to maintain through the year. So add, divide that number the number of races I do and add that to each race, now I need to make x amount of extra over each race, break even point. Boom. That's my profit goal.
That also determines how much my sales goal is. I know how many number of tickets I need to sell to breakeven. And then I know how many number of tickets I need to sell to meet my profit goal. Then everything after that is frosting. So The first, your breakeven point. Your breakeven point is important revenue target to determine, but taking the price per registration and dividing it by all the costs, producing, marketing, and selling, and race expenses.
Let's try an example of that. May I borrow your expenses? That we outlined above. Take your expenses. So for this example, we'll say our expenses are too grand. Right? And we'll take the lowest price. We expect our racers into registration. Why the why the lowest price? In the perfect world, our race will sell out in 30 minutes after all the proration opens. Right?
Yeah. Yes. Way. It could happen. There was a race here last year, a mountain bike race, had a 500 person entry camp, sold out in 29 minutes. It was insane. Why? Well, it's a venue you can only race at once a year. So it's it's special. It's unique. Right? Is your race gonna be like that? Maybe. So let's say it's 20 bucks per racer. Right? $2000 expenses. Divide that by 20 bucks. What do we get? We work that out to be a 100 registered racers. I need a 100 registered racers to show it to my race.
It's the minimum number of razors I need for everything to pay for itself. K? So that's also my sales goal number 1. I need to at least a 100 burger erasers. Right? If I don't sell a 100 registrations, chances are good that it will not recoup my money. It works. You're gonna have to pull money out of my own pocket to pay vendors, park fees, and officials if I don't hit my number that number because you can remember breakeven. Is paying for all that.
K? So getting 100 racers to your event may seem like a challenge that you can't achieve. Then you need to deal with it in a couple of ways. You need lower expenses, cutting, you know, cut something, find a cheaper alternative.
You know, increase your lowest price, and that can be risky, increase your marketing efforts, get more people to see that your race is happening, Regardless what you plan on doing with your race eve and your your breakeven point, the calculation should provide you with something that you can use to make an intelligent decision. The next is that profit goal. We need to factor your profit goals to think about how much additional money do you need to build the exact same race again.
We just, you know, we just kinda just talked about that. If all the prices and expenses were exactly the same, take that number, add it to your total expenses for this race. It's a subtract debt from your breakeven goal. I mean, that's your race profit goal. It's your race profit goal and your sales goal number 2. Now think about doing that with 10 races a year,
just for an example. You can change that number depending how many you actually wanna do in your business. But let's say your business does 10 races a year. So let's multiply your profit goal by the total number of races you're gonna do in 1 year. For example, is 10. Right? So if our if our profit goal for the year is an extra thousand bucks per race, times 10, then the annual profit goal is that number. The profit margin is then computed.
Either race to race for the entire year is how much of your total income that you make in the entire year is profit. And what is that in a percentage of all that stuff? I mean, if you can produce or promote a certain number of races a year, your overall profit earned minus your overall expenses will provide you with a profit margin.
And so I ask, why is a profit margin important? Why is just a profit dollar sign. For 2 reasons. First, it gives you a target to aim for for the following year. It acts as that barometer on how good rapport you're doing compared on the year before. That's the first 1. The measure we can help you see problems before they appear. It give you some early warnings regarding revenue. It knows earnings.
For profit margin is slipping, you could add another race to your calendar to help solve that problem, but you will know that if you don't know what that number is. If it's growing, you might be able to buy something that you're for your company that you couldn't buy before. You know, maybe a trailer Maybe you could do your own timing system. Maybe that profit, since you're the owner of the company, can allow you to do something you ever do before, like go on vacation with your family.
It's your money. Right? You own the company, profit at yours, you decide how it's divided. So as long as you're accounting for it, And, of course, make sure you're paying Uncle Sam too. You know, give on to Caesars. What is Caesars? You can do just about anything you want with it. And the second thing it does, it gives you insight into growth. Are your races getting bigger and bigger? Maybe you need to expand your reach or increase your prices. Are your margins flat?
Maybe you need to try new venues. Maybe you need to decrease your prices. Maybe you're too expensive. Now whatever the result, the point is to have a metric that you can use to make intelligent business decisions. You say that again, intelligent business decisions. If you do not measure anything, how can you know you are succeeding? Let me say that again. If you are not measuring anything and I would even say if you're not measuring everything, how do you know you're succeeding?
This is why you create targets. And you owe it to yourself and your racing business to be relentlessly measuring everything you do. As a finishing thought, understanding your expenses your revenue and profits gives you the ability to visualize how your race is actually going, your race business on a scale of health. It understands how each race costs and how those costs are impacted by your
ability to sell your race, to get butts and seats, to get those registration numbers up to sell those tickets. It also gets you to understand how much things are costing. It keeps you honest with your expenses. It keeps you from buying things you don't need. It also helps you target what you need to target, so you don't go crazy
and overdo things or stress out on on numbers for how many people you need to show up. If you have realistic goals of breakeven, realistic sales goals and sales targets, realistic profit targets, these are achievable. And once you can see it, you can achieve it. Because you'll believe that those numbers are attainable. This is why you start small. Small numbers are easy to obtain. Getting 30, 50, a hundred people to a raise is not hard.
Getting 500 people to a race is hard, but getting it less than a 100 people to race not hard if you start small and build upon those principles, you can build successful races. This is a volume business. During 10 of these a year with hunter racers coming each each race, over time, adds up, and that's how you build a business. You don't go and open a Walmart on their 1st day.
You open your vegetable stand on the 1st day. And then Visual Stan becomes a Visual Store, and the store becomes 2 stores, and then 4 stores. And then you start worrying about whether or not you can become a Walmart. But you have to start small. And you apply these principles to your races, you give yourself control over what is going on inside, going on inside, your company and your races, and allows you to make intelligent decisions.
And now you know, Now, can I make money building races based on a niche or a fringe race discipline? This time the answer is unfortunately no. Go? Why? On the next purchaser podcast, we'll answer that question. Here's a hint. It has to do with the trifecta of why things do and do not sell. Also known as market forces, competition, and customers. Oh, my.
Thank you so much for listening to this episode of The Merchandise Store podcast. I know it was some dense material, so I left all the frills out and just stuck to the topic all by itself.
Of money, of finances, revenues, and expenses because I know it's important. It's very important to reach promoters in particular. Next episode, we'll bring back copies for closers like another 1 I want to tell you about. And we'll talk about Beyond shovels. There's another tool out there that I think that that bridge floaters. Like yourself, we'll appreciate it. If you have any questions or comments, reach out to me at merchandisinger,
no spaces on Twitter. And if you wanna subscribe to make sure sure you never miss an episode, merchants atdirt.com is how you do it. 1 click gets you every single episode for free If you're on I Android, iPhone, whoever you get your podcast, 1 click gets it all for you. Thank you for helping build the merchandising community and for telling your friends how they can help build better races. And I'll see you next episode for the brochures of your podcast.