Obstacle Racing Media recently published a story about Tough Mudder’s financial problems. This story that relates to several previously published blogs we have published, as well as to the fundamental way we run our business.
One side of the story became public when one of the founders, Guy Livingston, filed a $4.3 Million lawsuit. Of course we feel bad for Tough Mudder and their creditors. However, there are several lessons from this:
First, RunSignup does not pre-buy registrations or make loans to customers. We have been asked by several races, who then opted to go with other providers whose business practices include upfront payments. From our perspective, this is a potential warning sign about the liquidity of an event. We can see the need for financing an organization, however sources like banks or sponsors are much preferred to taking on higher processing fees or forgoing part of the registration price. The good news for our customers is that we do not open ourselves up for risks of losses from illiquid loans.
Second, this is yet another warning of an overextending race or business. The simple fact is that our community’s growth over the past decade has waned. Races that experience declines in participation and/or sponsors have lower revenue, yet a large percentage of their costs are fixed. This leads to more cancelled races. As that blog states, race cancellations cause problems not only for the participants who signed up for the race, but also the network around them – timers, registration companies, shirt vendors, etc. To help races control costs and keep their finances in check, RunSignup provides tool to track your relative registration rates on a year to year basis, as well as RaceInsights to help you measure the exact payoff of marketing programs.
We urge races to take similar caution in their business models as RunSignup. Don’t overextend, and if you are facing issues – face them. Cut costs, be more proactive with marketing, and invest in low cost viral marketing methods. Don’t take a quick cash hit, use funding from current registrations to pay off expenses from a past race, or hope Facebook ads alone will get you through tough times.