Sports Agency Business Model
When most people think of a sports agency, they think of massive company headquarters, signing all star clients to million dollar contracts and expensing staff meals at swanky steakhouses in Beverly Hills. I can't speak for everyone, but at Kreation Talent Agency, we're not quite at that level yet. We'll get there!
The truth is, there are massive differences between boutique sports management firms and large sports agencies. For visual purposes, the diagram below shows a few smaller agencies vs a handful of the big boys. I have been lucky enough meet agents and leaders from almost every single agency on here, and they are all winners. One is not objectively better than the other. They are just different! And like anything in life, before you try to argue why one is better than another, you need to identify exactly what you are looking for if you are a player. And exactly what type of client you are looking for if you are an agent.
I've identified three main differences between boutique agencies and large agencies.
So we will split this lesson into those respective parts -- capital, number of clients, strategic model.
Capital is just a term for financial assets. And in this case we are only going to be referring to cash available. I think most of us can agree that the old saying, "money speaks," has some legitimacy.
If you have money, or access to money, you have more leverage than those who don't. Large agencies typically have more capital than small agencies. And that opens the door to be able to pay for some of the operating expenses that lead to revenue production.
We will save the operating expense deep dive for another time. But for now, take a look at a few things that agencies need capital for. Next time you see someone get their name called on draft night, please start to understand how much time, effort and capital went into that process! Depending on the size of the agency and the level of player, these costs could vary. But trust me, some of them add up quickly!
- Recruiting (flights, hotels, meals, player loans)
- Pre-draft Training (skills coach, accommodations, nutrition, strength & conditioning)
- Salaries/Administrative (some agents on salary + commission, additional internal positions)
- Marketing (website, social media management, PR, graphic design, video production)
- Other (office space, gym rentals, everyday travel & entertainment, legal costs, etc)
Just to give you a cashflow reference, take a look at the top 3 most valuable sports agencies as of last fall (via Forbes).
Excel had $3.6 billion under contracts, with maximum possible commissions of $172 million.
Wasserman had $4.2 billion under contracts, with maximum possible commissions of $209 million.
CAA had $10.9 billion under contracts, with the potential to earn $65 million in commissions last year alone!
That's enough capital for some top notch client servicing if you ask me.
#2: Number of Clients
Over the three years that KTA has been in existence, I have never had more than 10 clients at one time. I learned as quickly as I started that client turnover fluctuates rapidly. Unfortunately thats a reality in this business. Some guys just don't reach the level you hoped for. Some guys identify passions outside of putting the ball in the hoop (shoutout CJ, Mike and Isaac who all used basketball as a stepping stone to something bigger than themselves). And then there are some guys just believe they are better than they are, and place the blame on the agent for not making enough money. I'll be doing a deep dive on what happens when players fire their agent later this month. You definitely won't want to miss that ;)
As you go up the ladder, mid size agencies might have anywhere between 10-25 clients.
And once you start talking about the mega agencies, it's not uncommon to see 40+ players under representation.
[ New Trend Alert ] I will say that I've seen a trend over the past two off-seasons for some small boutique agencies to sign a few dozen rookie clients. Which shifts them into the category of representing 40-50+ players. And these are definitely not mega agencies. As mentioned several times throughout the series - to each their own! There's no textbook formula for success.
The question you have to ask yourself as an agent is, "how many clients can I have while still making sure I service each guy properly." This is a time consuming business. There is a point where you just can't divide the hours in the day by the number of clients you need to take care of.
Side note: not all players need to be best friends with their agent and on the phone with them 24/7. Everyone has their own strategy and needs. Some operate better with lots of agent involvement. Some operate better with little.
#3: Strategic Model
The strategic model of each agency can mean very different things. Especially with the overseas market.
Here in the states, the model is pretty self explanatory. If you recruit and sign a NBA prospect, you are most likely going to interact directly with NBA front offices on behalf of your client.
The overseas strategy is quite different for most agencies here in the states. Most US based agencies have partner agencies overseas. Some partnerships are exclusive to specific markets, which means your clients technically could have 5 agents in addition to you. Some partnerships are more widespread, and include exclusivity in multiple regions.
Personally, my strategy overseas the past three years has been to go direct to team. Why? A few reasons.
For starters, I have spent most of my time living out of a suitcase, boots on the ground, developing face to face relationships with teams in 30+ countries. The second part involves trust and efficiency. If you're playing a game of telephone, would you rather speak directly to the source of the information or have that information passed along through a middleman, sometimes multiple middlemen? The last part is pure business. If you had the ability to receive 10% commission or split that commission with a partner, which would you choose?
Remember, that is the 30,000 foot view. There are plenty of reasons to use a partner agency. And most of the time it makes your life easier! Personally, I have met some really impressive agents overseas, some of which have turned into close friends and a few have even helped me obtain a contract for my clients! But so far I have found the attempt to make agency partnerships has proved unsuccessful more times than successful. As a businessman and a leader, it's imperative that I have an open mind. So as I continue to grow and scale my business, maybe my strategy will change. Bottom line, no matter what your strategy is as an agent, you must understand how the business works.
The majority of players who want to become a pro dream of signing with a big agency because they are "safe" -- they have the brand name, the high profile clients, the resources and most importantly, a history of getting the job done! All of those things are very true! But the majority of players don't realize that smaller agencies often have the same skills as larger firms, and in addition they can usually work more closely with you.
Remember, this is not about recommending one type of agency over the other, it's simply pulling back the curtains so you can explore the business yourself. Alright.... fine... this is also a little bit about showing the small agencies some love, because they are often overlooked and under appreciated ;)
If you like what you've been reading, and still want to learn more, check out the Sports Agent Educational Journey!
During "The Sports Agent Educational Journey" You Will:
Understand the basic framework of a day in the life of a sports agent
Comprehend the business models and strategy of sports agencies
Learn where to go and how to apply for your agent certifications
Identify where your skill sets can add value to an agency
Be given access to tools used by current sports agents
Differentiate yourself from other aspiring agents
and much more...
If you missed the previous parts of this series, check out the links below:
Part One: So You Wanna Be An Agent?
Part Two: How Do Agents Make Money?