According to the Small Business Administration, approximately 500,000 new businesses are formed every year in the United States. Obtaining financing is often the biggest roadblock for an entrepreneur. Many turn to family and friends for start-up funding but what about a professional athlete? Many professional athletes earn 160-times the average American income and have funds to invest.
There are three key things to know before approaching a professional athlete to invest in your business.
1. Passive investors. The Major League Baseball season is of 162 games, the National Basketball Association season is 82 games. Add in pre-season and playoff games, travel, training and practicing. The schedule of a professional athlete is jam-packed, making them better suited as passive investors. If you are looking to form a business partnership or secure an active investor, don’t expect a year-round, full-time, 24/7 commitment. Understand that during the season, a professional athlete’s time and resources are very limited.
2. Increased due diligence. Expect a professional athlete to scrutinize your business proposal as thoroughly as any serious potential investor. Countless stories pervade the media about athletes in financial despair but an emerging generation of professional athletes is extremely business savvy.
Related: Getting Started With Angel Investing
Athletes are learning the inner workings of business investing through such programs as the National Football Players Association’s “Investing for Impact.” Karen Slaggert, associate director of the Gigot Center for Entrepreneurship at the University of Notre Dame, works with Investing for Impact. She stresses the importance of athletes conducting due diligence. Professional athletes rarely make a business decision without the counsel of the managers, agents, attorneys, accountants and wealth managers they trust. When dealing with a professional athlete, your business plan and proposal is likely to be even more heavily scrutinized because of the myriad of channels it must pass through before final approval.
3. Expect to be investigated. Athletes are likely to include in their due diligence a background check of who is offering the business proposal. While an active player in the NFL, cornerback Eric Thomas invested in a custom wheels shop not knowing his partner had a checkered past. That eventually led to the dissolution of the business.
Many professional sports organizations now perform investigatory services at the request of an athlete, including a thorough examination of potential business partners. Make sure your past is clean and, if it is not, be forthright with the athlete about it beforehand.