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What are the economics behind a racing team?

Discussion in 'Car Forum' started by TurboRocket, Aug 2, 2007.

  1. I've always wondered how some of the lesser-known racing teams in lesser-known racing leagues get funded. My guess is that it is from sponsorships, but still, it's gotta be really expensive to operate these teams - and I just don't understand how sponsorship money covers everything.

    For example, http://www.michaelshankracing.com/index.cfm. It's not exactly a house-hold name, yet they have two semi trucks, two $750k proto-type cars, and full race teams. Perhaps I am under-estimating just how much money sponsors are willing to pay.

    Does anyone know?

    The one thing I do understand (I think) is that, in these lower leagues, the drivers actually pay the owners to get the privilege to drive, and the drivers pay the owners if they wreck the car. So, that probably means they have sponsors themselves, or the drivers are all a bunch of rich kids.
     
  2. 220-9er

    220-9er

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    Yes it is confusing if you don't know the behind the scenes story.
    Sponsorship pays the bills in top level racing, up to a point. Then there are the drivers who bring sponsors along with them to pay the way. Then there are drivers who just write the check. Or their company or their fathers company writes the check. That way they don't have to use after tax dolars to pay the bill.
    In the case of Mike Shank's team, there is a driver who pays a large part then others who pay lessser amounts. Often there is a driver with real talent who doesn't pay or who gets paid a smaller amount that carrries the team in terms of speed.
     


  3. Rob1035

    Rob1035 Skeet Surfer

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    "To make a small fortune in racing, start with a large fortune"


    :tongueout:
     
  4. Tennessee Slim

    Tennessee Slim Señor Member CLM

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    I’ve known guys who took a second (or third) job, sold their kids’ Christmas gifts and pilfered from the offering plate at church to finance their racing habit, all in the hope they’d have enough success to attract a sponsor.

    On the other end of the scale, there’s Ferrari. Ferrari spends not one red cent on advertising. They do, however, field a Formula 1 team and campaign two cars to the tune of an estimated 250 to 400 million US dollars a year. That comes to 8 to 10 million dead presidents per car per race. I guess they still believe in Win on Sunday, Sell on Monday.
     
  5. epsylum

    epsylum Boolit Hoze

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    In the end their racing teams are their advertisements. Porsche advertises, but then again their cars are half the price or less than that of a Ferrari and they probably make more money from car sales than Ferrari. However, they need not advertise to get recognized in the racing circles.

    Really from a business aspect, racing is just a form of entertaining advertisement anyways. Race teams don't usually make a profit from racing, even the big boys. The advertising they do for their company and sposors and resulting sales is where the money is made.
     
  6. 220-9er

    220-9er

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    F-1 teams are a whole different story and a different level money-wise, than domestic racing series.
    Ferrari, Mclaren & Williams pay the bills through sponsorship and still make money. Honda has no visible sponsors this year & is promoting the environmental image (& paying for it). BMW & Toyota have sponsors but also pay for a lot themselves as part of their marketing.
    Toyota is rumored to have the biggest budget. The numbers you hear are anywhere from 400-700 million per season. Even the smaller, "budget" teams have several hundred employees, the big teams more like 1000. Check out the web sites for the top teams & look at the facilities they have and you can start to understand where some of the money goes.
     
  7. epsylum

    epsylum Boolit Hoze

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    OT

    but as a Toyota F1 fan, I was loving it when Alonso couldn't get past Ralf and had to do so in the pits in Hungary. :supergrin:
     
  8. 220-9er

    220-9er

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    I hope Ralphie has been saving some of that 20 mil he has been making. He says he will be driving at the F1 races next year but it may be in valet parking for Bernie.
     
  9. epsylum

    epsylum Boolit Hoze

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    I gotta agree. I am not a huge Ralph fan, but I was surprised he was driving as well as he was (and didn't wreck on the first lap as usual). I actually prefer Jarno as far as Toyota's drivers go, but they desperately need a driver that can take that team to the next level (what they hoped Ralph would be unfortunately).

    I am glad McLaren is beating Ferrari again. I despise Ferrari F1, if for nothing else than for the mindless sheep that buy all their crap to wear. I do like their drivers though.... well okay.. I am not a Massa fan at all and think he is a whiner (especially after the Alonso/Massa spat at the Nurbergring), but I have always liked Raikkonen and have liked Michael since his days at Benneton. So in my eyes, as long as Ferrari looses, I am happy. :supergrin:
     
  10. Tennessee Slim

    Tennessee Slim Señor Member CLM

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    There's always NASCAR.:rofl:
     
  11. 220-9er

    220-9er

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    I think Ralph had the raw talent but seems to have a motivation problem. Now he's getting older and has the dough it's even harder. He was always in the shadow of his brother and a lot of athletes with talented older brothers have had the same problem.
    Not sure what to think of JV's NASCAR thing. I guess time will tell. Seems like a fall back because he fell out of the limelight before he was ready. Seemed to think he would continue to get the good rides based on reputation (dad's in my opinion).
    The good news is that it has been a competitive season. Just when you think one guy or team has it figured out, the other comes back and spanks them. Lots of drama off the track also to keep it interesting between events.
     
  12. You fellas really need to start your own F1 thread. I really don't care because it seems like no one knows the economics of a racing team in detail. Just thinking you guys may get more traffic if you had your own.
     
  13. 220-9er

    220-9er

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    Sorry, we did kind of get off track from your original question. However, I thought I gave a general answer to your question in my first post. I would be glad to give a more specific answer to a more specific question though. Each team in each different series is probably financed a little differently. They are all some combination of paying drivers and/or sponsors.
     
  14. Tennessee Slim

    Tennessee Slim Señor Member CLM

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    I think you've failed to appreciate the truth in what has been offered. There is no single formula. Sponsorship varies by locale, racing league and vehicle. Snow mobile racing attracts different sponsors from mud buggy racing or tractor pulling. Racing that takes place on a world stage has a bigger budget than street racing in East St. Louis. If you want to know specifically about Michael Shank Racing, you should ask them directly. Otherwise, I'd say the answers offered were no less vague than your question.
     
  15. If you really wanted to find out how people/teams get STARTED in the sport, you could head over to Mid-Ohio Sports Car course on Sept 13-16 for the NASA Championships.
    A cheap spectator entry fee ($15-20?) gets you access to the pits as well... you're free to roam around and talk to the racers... most of the time we're happy to talk/brag about what we do.
    There are more than a few drivers and teams at that event that are hoping to gain the attention of corporate sponsorships so that they can move up to "pro" racing.

    Or maybe you were just curious and spending a day watching a dozen different races would not be your idea of fun :)