Tuesday, March 31, 2009

Between A Rock And A Hard Place

As noted yesterday the two most common causes of failure for new businesses are under capitalization and misjudgment about the target market. I'm sure you've heard the joke about how to make a small fortune in paintball--start with a big fortune ... Unfortunately the USPL didn't have a large fortune to begin with, they had a relatively modest investment of seed capital required from each team--and not all that cash is yet in hand. Or the USPL bank account to be more precise. In essence the seed money was intended to get the ball rolling, pay initial expenses of the start-up, fund the auction purchases and offer some cushion for ongoing expenses.

Going in the USPL placed an early cap on the event of 160 teams (and I wonder if they thought that was a conservative estimate because it was, after all, an HB event.) Anyway, those numbers were revised down to the final 120 team limit which was not reached either and wouldn't have been come close to without pump teams and 5-man teams to bulk up the turnout. (But not so much the entries compared to 7-man prices.) The simple fact is this is (and always was) going to be a tough year economically across the board. Couple that with the real numbers of year-to-year decline in 7-man event turnouts in the NPPL and the notion that 7-man is (and remains) a viable national level format was always wildly optimistic. And if the league ends up needing more than token 5-man and pump turnouts to sustain the league isn't that a serious problem?

The owners group of pro teams is already divided but not in a way that is readily apparent. They are divided by commitment (or the lack thereof.) And beyond that a number of them are surviving on a shoestring budget. There is a core that is putting their blood, sweat and tears into the league and a group that wants it to succeed but is more or less waiting to see how it shakes out. Not everyone is a true believer and not everyone can afford to be a true believer.

The end result is not a recipe for success. With the decision to go this season the USPL also committed itself to a routine schedule of operating expenses independent of running events. That's month in and month out. Perhaps not normally a big issue but what if the USPL begins their season in the hole after running an HB event?
Nobody is predicting a profit. The real debate is over the scale of the losses. And just what does the USPL bring to the table on a regional basis? This is the offspring of a league dedicated to style and pizazz and that is where the focus remains. And in its last incarnation this conception of tourney paintball as spectacle and party the paintball part suffered. If you don't agree just look at attendance numbers. Something wasn't working. Either it was the format or it was the execution. And the USPL is using the same peeps, more or less, to do the same jobs predicated on the same conceptions.

Somewhere in this process the bottom line will be the need for fresh capital. That either comes from outside the company or from the owners group. While not impossible the likelihood of funding the league on the fly from outside sources doesn't carry the kind of odds you'd want to bet your future on. And a cash call to the owners will fracture that group as there are teams that are either unwilling or unable to pony up more money. Particularly in the face of a "plan" that is in constant flux because the original conception of the league had no realistic chance to succeed. (That last is, of course, just my humble opinion.)
What exactly happens when that cash crisis arises--and it will--is open to speculation but it won't be good, for the teams or the league.


Reiner Schafer said...

Yep. It's one thing to have a dream. It's totally a different thing to have a realistic dream. I have a feeling that many of the "investors" have more "wish for success" than they have business knowledge.

I do wish them luck as I don't like to see anyone's business dreams fail, but in the end, it's all about cashflow baby!

Hippo said...

Did the "owners" (teams) form an LLC?

If not, I wonder if they have any real idea as to what they've gotten themselves into?

Baca Loco said...

Yes they did, Hippo.

Don Saavedra said...

These are the thoughts I had when I wrote my recent blog, but I just didn't quite have the chops to go into detail. Ok... maybe not chops. More like: courage.