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The whole depreciation and write off deal is a miss belief to the general public. Depreciation is a formula that only allows a certain percentage to be written off each year and would have to be written off for a long time to even account for half of your value in which in the write off game you only allowed a certain percentage of that. You can’t write off more than you take in, you can but at that point you are not what is considered a lucrative business. Atleast thats how I understand it. If there is another way, please do tell as I have been waiting for that secret handshake for quite some time...
The Shop
I promise you they looked at spending $3mm, $50k, $1.996mm, and everything in between before they pulled the trigger.
If they didn't need it, they wouldn't have it.
Anybody remember when Tabasco came into NASCAR in the early 2000's? Yeah, they didn't like how their money was being spent by the team, but had no recourse as the deal was essentially 'we will put your logo all over everything.' The McIlhaney family is conservative and were blown away by the excesses they saw. Tabasco lasted 1 year as a sponsor and blasted the team and NASCAR on the way out the door.
Some sponsors care and will pull stakes (Tabasco) if they see waste and inefficiencies; other sponsors have a CEO who is a big fan of the sport and they don't seem to care (GoDaddy), until they too run out of money.
I wonder if J-Bone and crew could reach a larger sponsor audience by presenting something completely different than what everybody else is doing (huge semi's and the pseudo-Nascar presentation).
As an aside, I hope JGR pulls it off. We need them in the sport and thinking about their situation lead me to create this thread for discussion. I really appreciate the civil discourse with my Vital Brothers!
I dont think selling 20-25 bikes a year is very much to ask for. When you factor in selling thousands of kx450s and 250s over the years its not a big deal to upgrade the semi every 10 years. Especially when its for your racing team.
You and I see this differently. KHI owns Kawasaki Monster Energy team. They sell bikes. Racing is a huge value-add for their core business. JGR doesn't sell bikes----nor energy drinks, nor chilli dogs. Come to think of it, JGR really only spends other people's money to race. Kawasaki can race with or without Monster, at some level. Same as Honda, who lost Red Bull and Muscle Milk and never missed a beat.
There is a distinction that I can see.
As it's already been stated, there's accounting tricks to amortize the cost over many years so it's not $2M hitting that very first year. Plus once they head east these trucks are basically on their own so they need enough room to fit everything to be a satellite HQ without the need to head back west to pick up more spare parts.
Not to mention if they have the CEO/CMO/etc. of a major sponsor visiting for a race, it wouldn't be the best experience to have them chilling in the garage of a box van vs. in the perfect climate controlled lounge of these state of the art trailers.
These are also home away from home for teams. Factor in all the build days that are spent largely out of sight from the public.
I don’t know that drivers (or other staff) spend a lot of time sleeping in the rigs on weekends, but I’ve known some of them to do it.
Pit Row
Just guessing, but if $6500 is break even on a sale, 70 bikes is what it takes per year. Either way, theyre selling way more bikes than that anyways to cover it without much worry.
Remember, the Ring Master utilizes independent contractors for acts. The Circus only owns the show (contracts, copyrights and TV rights---stuff on paper). Feld doesn't sit at the table with teams hunting sponsors, so they are like a grifting stripper urging everybody to "go big or go home"----or in this case "go big semi or go to the back of the pits."
I dunno, if you've seen the Honda rig once, you are probably pretty much over the "WOW" factor of seeing a huge trailer. All the fun happens in the back of the pits anyway. 😁
I've been around a shit load of finance/accounting managing multi-million dollar marketing budgets for brands, including being a sponsor for teams, both factory and private teams, in everything from AMA SX to MotoGP, from $50,000 deals to $3+ million dollar a year deals. I'm very well aware of the dynamics of motorsports sponsorships, though I should have stated in my original post "privately owned team" compared to "factory run team". In the original example I thought the line "including the factories" was clue enough that the team referenced was privately owned.
Post a reply to: Would You Spend $2-Million of Sponsorship Dough on a Trailer?