Many races charge upward of $100 to participate. But turning a profit off them isn’t that simple. At least 100 race companies have failed since 2012, by MudRunGuide.com’s count.
“There’s this myth that you could put on a race for $10,000 and make $100,000 and walk away,” says MudRunGuide.com’s Stewart, a consultant for dozens of race organizers. He estimates that the average large-scale event costs at least a quarter-million dollars to host, after accounting for the venue, building, marketing and staffing. At traditional races, like marathons, municipal closures account for most of the expenses.
“If you put on a marathon, or a run, or an ultrarun, or an Ironman, you don’t have to build anything,” says Joe DeSena, a former trader who worked on Wall Street for about a decade and started the brokerage firm Burlington Capital Markets. He quit in 2005 to enter the race business and, in his own words, “failed miserably.” DeSena estimates he’s burned $5 million on races that flopped, including $600,000 on the first event alone.
He founded Spartan Race, now one of the biggest obstacle run brands, operating in 20 countries, in 2010. By midway through the year, his bookkeeper told him they were going to go bust.
So he called five old Wall Street buddies that weekend and asked for $1.5 million. On Tuesday, they sent him $1 million.
“People look at this company and they think, oh my god, Spartan is a billion-dollar business,” DeSena says. “It’s only five years old. It’s only a baby. I was just in the office yesterday and we were talking about, ‘we need money.’ Running a business is harder than having kids.”
At the first Spartan race, DeSena says the company hand-timed the 750 or so racers who showed up. This year, about 1 million people will partake in Spartan races. With registration fees usually over $100, the assumption would be that the company is a money machine.
Despite the company’s growth, DeSena says profit margins are thin, after factoring in course-building costs, payroll for employees, time chips, medals and shirts for finishers and big capital expenses like trucks, trailers and wood. Spartan Race declined to say how much revenue the company draws in and the average cost to stage a race.
“Anybody who’s done a kitchen remodeling, ask them how it went,” he says. “Try doing 30 kitchens on the side of a mountain for a race, with heavy equipment and lumber, and guys running out of screws.”
And some races offer winners hefty cash prizes. Spartan gives the top elite male and female finishers at its world championship a $15,000 cash prize. McIntyre, the professional obstacle racer, wouldn’t say exactly how much he makes annually nabbing podiums. But he says rockstars who compete throughout the year can rake in six figures.
Regardless of the costs, entrepreneurs looking to pull off their own race series are entering the field in droves.
BattleFrog, the brainchild of three ex-Navy Seals, staged its first race in March 2014 in Atlanta. The courses range from 400 meters for children to an 8-kilometer run with more than 22 obstacles. At its Pittsburgh race, participants run and swim through a mine shaft while wearing hard hats and lights.
Battle Frog isn’t turning a profit yet, its co-founder and general counsel Michael McAllister says. He expects to hit that marker next year as registration picks up. At their early races, about 1,500 racers showed up. That figure has since hit 4,000 for some events.
“We believe that this is really the place where sports are headed,” he says. “The demand for participatory sports has barely been touched.”
The most well-known obstacle race series, Tough Mudder, expects more than 2 million participants worldwide this year. That’s about double the number Spartan Race, also considered one of the largest brands in the business, projects it will reach. DeSena has loftier plans.
“This is going to sound ridiculous, what I’m about to say: Let’s touch a billion people,” DeSena says. “I mean, the couch got to over a billion, so why can’t I get to a billion?”
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