2008/09 Offseason Primer

Have you ever noticed how supposedly rational people respond so differently to adversity? In what has been called the worst recession since the Great Depression, some teams, like my Houston Astros, are buckling down and eliminating any unnecessary spending. Despite being located in the fourth largest city in the country, the Astros decided Randy Wolf (?!?) was too expensive, and signed Mike Hampton instead. The same Mike Hampton whose seven year contract finally expired, with him making 13 starts in the last 3 years. Although the Astros are probably going to finish in fourth place next season, so it doesn’t really matter who our number three starter is.

New York, on the other hand, decided the best response to a bad economy is to party like it’s 1999. The Mets, realizing that it’s a buyers market for relief pitchers, stocked their roster with three (3) All-Star closers: Francisco (K-Rod) Rodriguez, Billy Wagner and JJ Putz, who will make a combined $24 Million next season. Perhaps the Mets figured that if each closer can save just 35 games next year, they should make the playoffs.

The Yankees, meanwhile, set the market for starting pitchers. Actually, they are the market for starting pitchers. In a time when the next highest offer for CC Sabathia may have been $100 million from Milwalkee, the Yankees raised their offer from $140 to $160 million. Maybe their initial offer of $20 Million per season was based on the assumption that Sabathia would win 20 games per year. After some extrapolating, they decided to invest another $3 million annually to buy a couple more wins as insurance, just in case Tampa Bay wasn’t a fluke last year. I wonder if anyone in their front office even considered that there may be an inverse relationship between salary and motivation. (See Carl Pavano, the aforementioned Mike Hampton, Hideki Irabu, Barry Zito, Darren Dreifort, Chan Ho Park, ect, ect).

Ironically, this “spend first” mentality caused both the Mets and Yankees to miss the playoffs last year, while the Phillies and Rays, who developed most of their own talent, played in the World Series. But rather than examine their philosophies, both New York teams decided the problem was not the approach but rather their intensity, and stepped up spending another notch. Even at a time when they were often only bidding against themselves.

Looking forward, here’s what I expect to happen if the current economic downturn lasts much longer. Mid market teams, looking to trim payroll, will dump productive, high dollar veterans to anyone willing to assume the contract (like the Phillies giving Bobby Abreu to NYY). Small market teams, who usually throw their loyal fan base a bone every off off-season by signing a Matt Stairs, Doug Mientkiewicz, or Reggie Sanders, will find that their $2 million, one year offer attracts a slightly higher caliber player. Mid-tier free agents are going to be scrambling for contracts, as teams decide to play home grown players rather than pay $5 Mil per year for “proven veterans” like Ray Durham and Sean Casey. The owners will collectively cry “poor” while Boras and other agents claim collusion, and the New York owners will keep writing big checks no matter where the Dow Jones closes.

2008 Astros preview

“Hi, my name is Michael. I’m a Houston Astros fan.”

My therapist says that all sports fans are delusional. Every spring I believe that this is going to be our year. “Yes, of course,” he responds, “and when was the last time your Houston Astros actually won a World Series?” When I answer, “Well, never, but…” he always gives me the clinical definition of “insanity”.

My therapist also says sports fans are all moderately bi-polar. The highs are typically euphoric, the lows always exaggerated. Like my insomnia and general anxiety after the 2006 season when an 82 win Astros team missed the playoffs. He responded by asking me, “Even if your team had made the playoffs, who would you have trusted to get those tough outs late in a game? (As you can tell, he’s not your average psychologist. In fact, he’s also a recovering Astros fan.) I know just saying the words “Brad Lidge” will open up a whole other can of post traumatic worms. So I just shrug.

As part of my treatment, this year I’m not going to tell Houston fans that this is our year. I’m not going to say that things are going to get better next year, or the year after. Instead, I'm going to do what I've been fighting for the last couple years: give in to my cynicism and bitterness. So here are my seven reasons the Astros aren’t going to win this year.

If you're a fair-weather Astros fan, you may want to avert your eyes, or else grab a life vest. Because by the time we're done, you'll be looking for the quickest exit from this sinking ship.

1) You don’t have to be a statistician to recognize this trend. The last four years, the Astros have won 92, 89, 82, and 73 games. In 2007 our starting rotation was Roy Oswalt and a bunch of guys with names like Woody and Wandy with ERAs over four and a half and more losses than wins. Our offense finished thirteenth in the NL and other than Hunter Pence was made up of a bunch of veterans on the decline. So we brought in

2) Ed Wade to fix the problem. First, I need to talk about the Astros GM from 1995 to 2004, Gerry Hunsicker. During his tenure, the Astros made the playoffs five times and were rarely involved in trade rumors, but somehow often swooped in at the last minute to land a big name player like Randy Johnson, Jeff Kent, Carlos Beltran, Andy Pettite, or Roger Clemens. He also oversaw a farm system that produced Lance Berkman, Roy Oswalt, and Bobby Abreu. Any baseball fan in Philadelphia will tell you that Wade was the GM whose Philly teams missed the playoffs for eight straight years. They’ll also tell you how he traded Curt Schilling for Vicente Padilla and Scott Rolen for Placido Polanco. They might also mention the David Bell signing if they’re not already frothing at the mouth.

3) Ed Wade’s first big move to stop our downward spiral was to trade for Miguel Tejada the day before the Mitchell report was released. This is like buying a horse and buggy ranch the same day Henry Ford is planning to unveil his new Model T factory. Or sinking your entire life savings into the Russian stock market when there’s a big political rally taking place in Berlin. If the Astros had waited 24 hours until Tejada was officially linked to Deca-Durabolin and human growth hormone, they could have had him for pennies on the dollar. Instead, we traded Troy Patton, our 2007 minor league pitcher of the year, and Luke Scott, who had the fourth highest OPS on the team, for a "31 year-old" shortstop with limited range and a slowing bat from a country known for falsifying birth certificates.

4) Don’t look down, because there's not much help on the way. In 2007, the Astros minor league teams were 26^th overall in winning percentage. And we aren't doing much to replenish a barren farm system by giving away first round picks to sign free agents like Woody Williams and then losing our next picks because we refuse to budge from Bud Selig’s slotted bonus system. In 2007, the first player the Astros signed was the 171st overall pick. Our fourth round pick decided to go to the University of Arkansas on a golf scholarship. Seems like we should have done enough research to find out what sport he wanted to play before wasting a pick on him.

5) Not only are we failing on the big things, we’re also behind the ball on the little ones. Every year teams bring a bunch of guys to spring training as non-roster invitees. These are players who’ve fallen on hard times and can be had for the bargain basement price of a couple meaningless at bats. Smart teams like the Cardinals bring in players like two time MVP Juan Gonzalez to see if they still have anything left in the tank. Can you say big upside and little risk? The Astros, on the other hand, bring in players like Branon Backe, who once had ten wins in a season. Oh wait, nevermind. He’s actually our number three starter.

6) The Cardinals manager Tony LaRussa has been to the playoffs a dozen times and is willing to try innovative tactics like turning failed pitchers into hitters (ala Rick Ankiel) and batting his pitcher eigth to put more runners on base for Albert Pujols. The Astros manager Cecil Cooper is hitting Michael Bourn and Kazo Matsui at the top of the order to see if teams really need baserunners to score runs.

7) And finally, the Pirates’ ballpark is named for a bank. The Brewers and Cardinals’ stadiums after beer companies. Meanwhile the Astros’ field carried the title of the business involved in one of the largest corporate fraud cases in history and now is named for an orange juice company. If you were a free agent, where would you want to sign?

Hello, my name is Michael. And I have a problem.

Investing in your own start-up

Before asking other people to invest in your business idea, you need to be willing to spend your own money. Just don’t risk more than you can afford to lose.

After I’d made several baseball wallet prototypes and had a design that I liked, the Vanderbilt MBA students I was working with conducted a market survey. They went to a little league practice and asked the players and their parents what they thought of the wallets and if they would buy one. The responses ranged from “I think my son would just lose it, so I’d want it to be cheaper” to “Oh, (her son’s friend) would LOVE this. He’s a baseball fanatic.” But the truth is that what someone says they will do and what they'll actually do are often two very different things. The only way I could really know if there was a market for baseball wallets was to put some on the market and see if people would actually buy them. So I paid to manufacture 1,000 wallets. I chose this number because it seemed like enough inventory that if the wallets were successful, I wouldn't run out immediately, but not so much that I’d go bankrupt if I they didn’t sell (and I spent the rest of my life giving baseball wallets to friends and family as Christmas gifts).

I’ve met people starting businesses who would not invest their own money and others who spent more than they could afford. The first group included an entrepreneur who designed a Halloween costume that had received very positive feedback. He had to keep turning down orders because the only models he had were his display samples. He refused to spend any money upfront with the faith that his costumes would sell. Instead, he was waiting for a guaranteed order of 10,000 items from a wholesaler like Wal-Mart. Then he would have made those 10,000 costumes and turned a nice, safe profit. But the problem with waiting for a large order is that they rarely come, and typically only after the business first sold one at a time to individuals, then 10 or 20 to small stores, and finally worked their way up to orders of several thousand items. Besides, most start-ups don’t have the infrastructure in place to fill an order that large.

On the other end of the spectrum was a woman in her fifties making disposable ear and mouth-piece covers for the tellers at drive through windows. She had quit her regular job to give her more time, taken out a second mortgage on her home, and cashed in her retirement plan to get this business off the ground. When we spoke, she was excited about a contract from McDonald about a year ago. Unfortunately she was losing money on the deal because it only gave her the right to sell to individual stores. She was responsible for convincing each store manager to carry her product. The best way to do this, she decided, was to travel around the country and personally meet each owner. I said that if she was losing money on a customer, no matter who they were, she should consider ending the partnership. Because she had already spent so much time and money, she refused to change her strategy. I declined her request for several thousand dollars in exchange for part ownership of the company. She believed that with enough money to pay for her travel costs, her business would become highly successful. I didn’t have the money, but even if I did, I wouldn’t have invested. She had thrown so much money at her company (way more than she could afford to lose), and it had become a financial black hole. I don’t think she will be profitable unless she changes the way she’s running things. And being so close the retirement age, she’s put herself in a vulnerable financial position with almost nothing to fall back on.

Before launching your company, it’s imperative that you learn as much as you can and plan carefully. But at some point you will have to take a leap of faith. You won’t know if your business will succeed or not unless you just go for it. And this step will likely require you risking your money, as well as relationships, ego, and everything else of value. Just make sure that if you fall, it’s not too far, and the landing isn’t too hard that you can’t recover.

The first five percent

If success is five percent inspiration and ninety five perspiration, then deciding what type of business you’re going to start is the inspiration. Putting in the long nights to get it off the ground and keep it running is the perspiration.

I’ve had numerous people see my wallets and say “I could never come up with an idea like that” as an excuse for not starting a business. So how do you decide what type of business you want to start? I’d begin with my dreams. What do I want to create that the world needs? Is there some type of work I’ve always wanted to do? Maybe opening a neighborhood bicycle shop. Or book store. Working as a professional photographer. Starting a business doesn’t usually require a new idea. Often a creative twist on an old one is plenty. Or simply take an existing idea and bring it to a new location.

Another route may be partnering with someone who has a great business idea but lacks the motivation or time. Alternatively maybe you have an older friend who's already running his own business. My landlord in Nashville ran his own mortgage company and took on a young assistant a few years back, which allowed him to work less and spend more time with his family. In a couple years, when my landlord retires, his assistant will take over. Not only will he receive passive income during retirement, but the company he built will continue to operate as his legacy. Either partnering with someone else to start a business or helping them transition out of it lets you work with their idea while benefiting both of you.

One of my friends wants to open a restaurant that serves the dishes he grew up eating in the South Pacific. Since he doesn’t have any experience in the restaurant business, he’s considering opening a franchise of an already successful cafe. Franchising can be a great way to be your own boss and it requires less upfront knowledge or risk. Basically you’re working with an already established brand, like Subway or 7-Eleven, that has a vested interest in you being successful. You’ll owe an initial franchise fee of $10K to $100K and have to pay 2 to 10 percent of your revenues as royalties, but they will train you and help you negotiate deals with suppliers that you couldn't as a startup. And even though restaurants are the most popular franchises, you can work in almost any industry you want, from cars to computers to fitness. Entrepreneur.com lists the top 500 franchises and has lots of other information if you’re interested in going this route. Or simply search for “franchise opportunities” and you’ll find plenty of sites.

Another option is to buy an existing business. They're often listed in your local classifieds and you’ll already have a customer base. Plus you can see how the financials look before getting started, so you have some idea what it will cost to run and how much money you can expect to make. The drawbacks are that if the company is doing well, you'll need a lot of money upfront to buy it and even though you can obviously change whatever you want after buying the business, you'll probably be somewhat limited. It’s like buying a house and remodeling it versus building your dream home exactly to your own specs.

I want to caution you about two potential pitfalls in choosing a business idea. The first is being so focused on the first opportunity that comes along that you rush into it. In a sense, starting a business is like getting married. You wouldn’t marry the first girl you meet without at least looking around, and you should treat a business idea the same way. You’re going to be spending a lot of time on this company (ninety five percent of the work still lies ahead) so make sure you’re going to enjoy and be proud of what you’re creating. Choosing carefully will help you persevere when things get tough and you’re thinking about divorce.

The other danger is waiting for the perfect time to start your business. This is like having kids. There’s always a reason to wait a little longer, and pretty soon your window of opportunity has passed. A friend has been wanting to start a Thai restaurant for years. She’s a great cook and would make a wonderful host, but everyone tells her to wait until she has more money, or wait until her kids are older, so she keeps postponing her dream.

Coming up with an idea is the fun part. Enjoy talking about it with friends, planning how you’ll lay everything out, imagining being your own boss. Let your imagination wander during this stage, but get ready to start working, because trust me, it’s going to take a lot of hard work to marry this kid.

(that last part didn't come out quite right)

Getting Started

I’ve decided to use my experiences with Pro Style Sports and life in general to create a column about starting and running a business. This blog will probably cover topics from marketing and product development to philosophies about money and life. I’ll be as honest as I can without putting the company at a competitive disadvantage. Which means you can expect me to reflect back on past events rather than look forward to future ideas or products.

For this first entry, I’d like to explain why I’m launching this project, given that my life is already too busy. First, I think it will be interesting to give other entrepreneurs, sports fans, and business people an inside look at what goes on starting a business in the sports world. I’m a teacher by nature and hope to use this site to share some of the wisdom I’ve learned to anyone who’s interested enough to listen.

The day after I had the idea of starting this series of columns, I met one of my friends for coffee. She’s a dance teacher and immediately began telling me about a web site she’s designing that would allow her to reach a wider audience. She plans to write health and fitness articles and make money by creating a virtual store to sell products she endorses. Most sites, she said, begin with content to bring visitors, and once they have the traffic, they start selling or advertising. Bottom line, I needed content to supplement my products. The fact that she said all this before I told her that I had thought the same thing confirmed that I needed to start putting articles on baseballwallet.com.

The second reason I’m writing this column needs to be seen from a business prospective. Because I have a very limited amount of both money and time, every "investment" of either needs to bring some sort of return. My perception is that most visitors come to this site from a search engine, see the products, either buy something or don’t, and then leave. The only reason they come back is because they later remember the site and want to make a(nother) purchase. But if I can give visitors a reason to visit this site regularly, the products will stay fresher in their memory, and when their old wallet dies or their cousin’s birthday comes around, they’ll be more likely to buy a baseball wallet. I learned that the technical term for this is to create a more “sticky” site. Basically be a good host and give visitors a reason to stay longer and come back more often.

The other business reason I’m writing these columns is to give an identity to Pro Style Sports beyond its name and products. I prefer to shop at a local store or eat at a family owned restaurant because I feel more connected to the business. National chains, on the other hand, feel so distant and impersonal. So I’m hoping that giving visitors some insight into this company will help them feel more connected to it, even though they may not know me personally. Hopefully I won’t just be selling a product, but rather a product with a story. Let me give a quick example to illustrate this idea. I have an autographed Nolan Ryan 1988 Topps baseball card. But when I show it to someone, it isn’t just a signed piece of memorabilia. Instead it's the card he signed for me at Book Stop, just after releasing his autobiography “Throwing Heat”. The same book in which he says admits that he’s bad with faces, so he watches the shoes of every autograph seeker to see if anyone is coming back for a second signature. I always wonder what shoes I was wearing the day I finally saw my idol up close, after watching him for years from the Astrodome bleachers. To me, my card isn’t a commodity that can be valued on Ebay, because it’s worth much more than whatever its current selling price.

The last reason I decided to write about my experiences at Pro Style Sports is because I love business. I enjoy reading about it, discussing it, and conducting it (although there are definitely parts that I struggle with). By understanding business, we are able not only to have more freedom in our lives life but also to change the world. Business gives us the ability to create, and as we are successful in our endeavors, everyone involved benefits.

These are the reasons I’m starting this column, and I hope you’ll find it both interesting and beneficial. I would love to hear any ideas or feedback you have regarding either the baseballwallet.com web site or this column. And so we begin.