Floyd Mayweather The Business

Last night Floyd Mayweather earned between $32 Million and $70 Million.  Over the years he has done what any smart business man needs to do, he found a formula that works, and that is repeatable. Without repitition you can’t win in business for very long.  4 months ago I wrote about how Mayweather as a boxer earned a $70 million paycheck, but I barely scratched the surface on Mayweather as a business.

The majority of fighters earn a prize if they win. Mayweather earns the same prize of $32 million regardless of if he wins or loses, as part of his 6 fight contract with Showtime.  Maidana will earn $3 million, even if he loses the fight.  Both men will walk out of the ring with more money then most of us will make in a lifetime.  What interests me the most is that Mayweather will potentially earn more money from his business Mayweather Promotions, than he will as a fighter.

Mayweather Promotions:

Mayweather demonstrates more smart business sense when he developed Mayweather Promotions. Yes having a promotion company allows for him to potentially earn more money, but starting one doesn’t happen overnight, and it is a complicated business. Mayweather learned for years working with Oscar De La Hoya’s Golden Boy Promotions before seeking a promoter license on his own.   When he filed for a promoters licence with the state of Nevada, commissioner Bill Brady remarked “This is the best packet I’ve seen put forward in terms of completeness.”

Being the promoter means you run the show. The promoter controls literally everything about the fight.  Mayweather Promotions decides who will be in the fight, where it will be, what the tickets will cost, how much each fighter will be paid, etc.  By controlling every revenue stream Mayweather ensures that he not only gets paid well as a fighter, but even better as a business, a business that can still run after he is done as a boxer.

In his own fights, Mayweather Promotions receives 50% of Pay Per View revenue.  In a deal with MGM Grand, MGM buys 3,500 seats at $1,000 a pop from Mayweather Promotions. Mayweather Promotions then receives large banks of seats to sell.  A sold out house can mean $15 million to $20 million of revenue. Mayweather Promotions also earns a few million in selling international TV rights.

By being a promoter, Floyd may be able to continue to earn tens of millions of dollars even after his fighting days are done.   Mayweather Promotions also offers tax advantages to Mayweather, by keeping some of the money in the corporation rather than having it sent to Mayweather as a paycheck saves tons of money on taxation. The cars he drives, the hotels he stays in, the entourage, all deductible business expenses. Mayweather Promotions has several other fighters signed, even though Floyd Mayweather is the main draw, it isn’t inconceivable that Mayweather Promotions will be holding events with future title holders.  And of course, TMT (The Money Team) Merchandising, hats, shirts, even phone cases all sold under Mayweather’s own brand, add another revenue stream.

Showtime Contract:

After last nights fight, Mayweather has two fights left in his contract. In 2013 Mayweather and Showtime signed a contract worth a minimum of $200 Million to cover 6 fights over 30 months. The contract is set to expire in mid 2015.  Even if Mayweather is no longer undefeated at the completion of this contract, he will still be the most in demand boxer in the world.  He may only have a few years left of being a competitive boxer, and the deals he makes to cover the next 30 months after the Showtime contact, which will bring him to Age 40, will certainly make him hundreds of millions of dollars. If he can stay competitive, it may even make his 5 year earnings well over $500 Million. With last nights’s fight Mayweather’s total career earnings topped $400 Million. If he can continue to earn around $70 million a fight, it would only take 9 fights to top $1 Billion in career earnings, leaving only 7 fights needed post Showtime contract.

Endorsement Refusal:

It is well known that Michael Jordan has earned WAY more from endorsements than he ever did playing basketball. Even in his prime Jordan’s top salary was only $33 million in 1997.  Over 10 years after exiting professional basketball, Jordan is bringing in in excess of $90 million a year.  Jordan has sold underwear, batteries, hot dogs, coke, cars, and of course shoes. George Foreman has also made way more money selling grills than he ever did throwing punches. Even Muhammad Ali has done his share of endorsement deals.

Floyd Mayweather’s decades of refusal to do endorsements will certainly make future deals worth more money to him. Even if he finds only one product to endorse, as George Foreman did, it could be worth hundreds of millions of dollars.  After being paid a large royalty for a few years, Foreman took a one time $174 million payment for his name to be used to market the grills into the future.

 

Applicable Life And Business Lessons From Mayweather:

  • Work at learning a business from someone ahead of you before starting on your own: By learning from De La Hoya on running a promotion company Mayweather Promotions is raking in the money, and will continue to do so for many years.
  • Own your job: Being a boxer working for a promotion company may make a select few rich, but not Money Mayweather rich.  By effectively owning his own job and the entire event Mayweather is able to earn far more per fight than any fighter looking to earn only a winning purse.  Employees can make a comfortable living, but business owners can make fortunes.
  • Have an exit strategy: Mayweather Promotions is his exit strategy.  Mayweather knows he will not be able to compete with men half his age in the near future.  Although George Foreman fought well into his 40′s, he was past his peak.  Mayweather has a strategy to continuing to earn money after his days of commanding $70 Million paydays are gone.
  • Switch Contractors to get a better deal: In the same light that people who switch employers frequently to take on more responsibility can keep their careers and pay from stalling, by switching from HBO to Showtime Mayweather showed that he not only controls his own destiny, but was able to greatly increase his earnings as well.

Although I couldn’t see myself ever spending money the way Floyd Mayweather does, I certainly respect his business sense. What do you think about how Floyd Mayweather has positioned himself over the last few years? Do you think he will reach $1 Billion in career earnings? For more on Mayweather check out this book: Floyd Mayweather: The Inspirational Story of Boxing Superstar Floyd Mayweather, Jr. 

John C. started Action Economics in 2013 as a way to gain more knowledge on personal financial planning and to share that knowledge with others. Action Economics focuses on paying off the house, reducing taxes, and building wealth. Check out the Action Economics archives section for all past posts.

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