SMR: Can you tell our readers a little bit about yourself and maybe some background information on how you got the position that you're in today.

Bill Yates: I started my career in minor pro-hockey, managing professional hockey teams. I started out, actually, just selling sponsorships and worked my way up through the system, eventually was running the business operations for a couple of teams. I had the opportunity to join Sports Advisory Group in 2012 and jumped right on it. What we do, is put together ownership transactions for pro sports teams and minor teams, in pretty much any sport all over North America and beyond even. We are typically retained by the seller to help them identify potential buyers, help connect with them, and present them with information about the teams and about the opportunities.

SMR: What are three things that our readers could do to increase the value of their franchise if they were looking to sell?

Bill Yates: First of all, make sure their books are in order and making sure that you have all of your ducks in the row. You must ensure that you have a solvent strategy for your business, that you're holding your employees accountable for achieving their objectives in their various positions, and operating a smooth operation or smooth company. That's probably the first step in making your company most valuable. I think it's difficult to just flip a switch and make your team more valuable. I think it really has a lot to do with how you've operated over time. If you can continually show success in your business, you can justify a higher valuation than some other teams might. Really, unfortunately, it's not just one or two things that you can do right away. Typically it's a multitude of things that you need to work on over time.

SMR: In your last five years, what are the trends that have deeply impacted the buying and selling of sports franchises?

Bill Yates: I think the world economy is probably one of the most important aspects. The economy here in the US has been on the rise and steadily improved here recently since our low point. In and around 2008, we are seeing quite a few more people who are willing to invest, who have money, and who are willing to invest those dollars in probably more non-traditional investments, such as sports teams. Typically the sports investment, for a lot of people is something that they do as a luxury. When the economy's not doing so hot, they're a little bit slow to pull the trigger on those types of investments. Now that we seem to be doing much better and the outlook seems to be pretty strong for our economy, we're seeing a lot of action. Especially over the last twelve to eighteen months, we're seeing a lot of people who are willing to invest their money into the sports industry.

SMR: What sport that has shown a growth in value over the past five years?

Bill Yates: First of all, minor league baseball has never been stronger. They continue to do a great job in maintaining the value of their organizations. The team values are continuing to increase and we don't see any sort of a bubble or a ceiling that the team valuations might be soon. Teams that sold five years ago for five or six million are now selling for eight to ten, or even more in some cases. That is without an improved, or significantly improved anyway, business operation. Minor league baseball is and will continue to be very strong. We are seeing a significant increase in the amount of interest that investors have in soccer here in the US. The popularity and the respect, I think that this sport is getting is being led primarily by the efforts of major league soccer, and is really attracting the attention of a lot of investors.

SMR: In your opinion, do you think the increase in interest was due to the World Cup, with how well the states did?

Bill Yates: Yeah. Immediately before and shortly after any sort of major event like the World Cup, it's common to see an uptick in interest amongst the sports fans, but we're seeing it stick. The last four to eight years we're seeing a steady increase, as opposed to just the seasonal, I guess you could say, once every four years deal. You can look around the country and you can see the number of teams that are just getting stronger and stronger, the number of soccer-specific stadiums that are going up around the country. It's always been the number one fixation sport in the US, but it's now gaining more and more momentum amongst fans. The attendance at the games are increasing, the ratings on their broadcast and the strength of their broadcast continue to grow. Those things make it obvious that the sport is growing and, from an investment standpoint, obviously it's good to get in sooner than later. You want to get in before the growth starts to end and that's why I think a lot of investors are really taking some serious looks at soccer as its still growing.

SMR: For someone looking to sell their franchise, what are two to three pieces of advice that you would give to them during the negotiation period?

Bill Yates: When I'm representing a team and when we first enter into an engagement with a team, I sometimes seem a little bit too negative, but I always look at it from the investor's standpoint. I try to find every reason that anybody would not want to invest in a company. Typically the reasons are that they don't know enough about the company. A lot of times, an owner will not know the very specific details regarding their budgets. Unless they're involved on a day-to-day operation, they won't know how many season tickets they have, how much revenue they generate in sponsorship, how much they spend on travel expenses, or even rent in their facility. I think them being educated is one thing that's very important. It just shows that they care about their business when they start talking to investors.

Another thing that I think is really important is selling for the appropriate reasons. It's tough sometimes. Some owners are just sick and tired of it, and have been around it for long enough, and the novelty has worn off. Others might be losing money and not willing to continue to cover the loss of the team. Some others may be ready to move on, or felt that they've improved or have done all they can do with the team, and it's time to cash-in on their investment, and that's why they're selling. There are a multitude of reasons of why people sell. Sometimes that's one of the best questions that a buyer could ask is, "Why are you selling this team?" A lot of times it depends on the objective of the buyer. We talk to buyers all the time, some who are very interested in distressed situations and want to buy a team for cheap and fix it up and sell it. We also find others who don't want, at all, a team that's going to be losing money. They want something that's shown year after year, success. Every situation is different. We've sold teams that are losing money and that are struggling and that do not look like great businesses to invest in, but when we do take on that assignment, when they do hire us to sell the team, we will not do it unless we think that there is an opportunity for them to turn the ship around. We don't want to spend a lot of time finding investors or buyers and selling them a lemon, and then walking away counting our money. That's just not a good way for business.

There are enough teams out there that are successful that can be sold, and there are enough teams that are out there that are, unfortunately failing, but that can be turned around. We'll look at the strategy of their business. If they're focused on selling and generating revenue and maintaining a responsible budget, and we think that they're doing a good job of that but they're still losing money, it might be time to think about just shutting the doors and calling it quits, unfortunately. We see that, we all see that, across the board. Minor and pro sports. It's just part of life in this business. If we see somebody who's losing money who just doesn't quite get the sales game, and doesn't bust their butts to get out and make phone calls and get people to buy tickets, and do group outings, and do all those things, and sell sponsorships ... That's not an easy job and we realize that. I think some owners are either not willing or, for whatever reason, not able to do that.

If we think that they've got a poor strategy and they're losing money, then we're interested in selling the team because I think we can show some investors that some smart team owners or smart investors who understand that a decent strategy, can go a long way. A team that might be losing two- or three-hundred-thousand dollars a year, but has horrible sales staff, or a horrible lease that can be renegotiated, or just an irresponsible manager of the budget who's spending ridiculous amounts of money in areas that they don't need to be spent. If we can see that happening, we may not call them out on it. We may actually use that to our advantage and we may say, "Look, we're asking for this much money. The team lost that much money. Here are the shining points. The shining points are that they're horrible. They don't know how to manage their business. Let's tell you the good things. The good thing is somebody who knows what they're doing, who gets in here and works hard and isn't afraid to roll up their sleeves, is going to be able to make things happen."

Unfortunately in those cases, we will sometimes decline the assignment. We'll say, "Look, you really need to take a look at how you're doing the business and figure out how you might be able to move this team or adjust very specific things, whether it's renegotiating the lease or figure out other ways that you might be able to change your situation. It seems like you're doing a lot of things right, almost everything right, but you still can't make money. We got to think about some other options."

SMR: In your experience, what is the ideal profile of a sports owner who's looking to buy?

Bill Yates: I think the ideal sports owner who is going to be successful is obviously going to have the passion for the game, but is going to understand that it is an entertainment business and is going to run it as such. They're going to love what they do on two different levels. Number one level is they love baseball, or soccer, or hockey, or basketball, or whatever the sport is, they love it. Number two, they love business. They love the challenge of generating revenue and maintaining a responsible budget. Assuming they can have a strong passion for those two, I guess maybe a third area would be just a willingness or ability to adjust. As those of us in the sports industry already know, there are a lot of people who have the wrong perception of what we do when they're looking in from the outside. What we do is very difficult from an operation standpoint, and it's not nearly as easy as many people might think.

It does take a lot of blood, sweat, and tears, and a lot of rejection, and a lot of frustration to be able to throw these parties that we throw. If we're going to throw an event, put together a party, or put together a sporting event, it's not so much the sporting event, it's the entertainment of it. Going out to sell that is not an easy thing. If an owner understands that, if they realize that to be able to squeeze money out of the sponsor, it's a highly competitive world. There are a lot of options for a sponsor to spend their money, there are a lot of options for a company to entertain their clients, there are a lot of options for Boy Scouts to go and do things on the weekend. To be able to sell the team is something that they've got to be willing to do. A good owner is going to have a passion for the sport obviously, but more important probably, is just a passion for the business of it. I think those are probably the most important aspects for an owner in the sports industry. A new owner, for sure.

SMR: Is there a difference between things that make a single owner successful and a group of partners successful?

Bill Yates: Obviously, an individual's going to have to have the confidence themselves to be able to put the team together, get a strong GM, and a strong sales staff, and put together that team and also confidence in themselves to make the right decisions to move forward. I would imagine that character trait is what has made them successful in their lives, in their business lives. I had one investor one time, I asked him to join a group and he said he's not a good partner. He wants to make the decision and he's not all that interested in relying on others to make things happen. He wants to make them happen himself.

Then there are other people who, assuming they can work together and have the same or similar objectives with their investment, usually it makes for a good relationship. If they understand and trust one another, then they do have a good future together. We're seeing both scenarios. We're seeing a lot of people who want to take on partners, and then we'll see some people who will make that investment and then over time, as the valuation increases on their team, would be willing to add partners in smaller chunks. Five percent here, and ten percent there, and eventually they'll get to a point where they want to sell the entire team. There are many different scenarios and what works best really is based on the group or the individuals that are involved.