Anything may go inside the mixed martial arts octagon, but if an MMA league hopes to succeed it needs a solid business plan. That's why World Extreme Fighting is looking to a man whose background is spreadsheets, not drop kicks.
Russell Slappey can analyze a financial statement forward and backward. Asking him to describe how to execute a perfect flying scissor-heel hook is another matter.
Slappey is the owner and founder of Nperspective, a CFO consulting firm that counts law firms, banks and privately held companies among its clients. He's also an investor and chief financial adviser in World Extreme Fighting (WEF), an Orlando-based mixed martial arts league.
“I didn't know anything about mixed martial arts before I got involved with WEF,” Slappey explains of how a buttoned-up business consultant gets involved with a fighting league. “The attraction was making this organization into a successful business.”
Slappey's clients at Nperspective typically fall into one of two categories: high-growth or turn-around.
“Our main point of contact is with the CEO of the company,” says Slappey, adding that most clients have between $5 million and $50 million in annual revenues. “They're calling us because there is a pain point. They can't forecast their sales, for example, or they're seeing big swings in their margins or having inventory issues.”
Mixed martial arts as a sport falls squarely in the high-growth category. The Ultimate Fighting Championship (UFC), the largest and most successful MMA organization, held 15 events major events in 2010, with average pay-per-view sales of 620,00 orders per event. At $50 per sale, pay-per-view sales generated $465 million in gross revenue for UFC in 2010.
As a point of reference, the entire UFC organization was bought in 2001 for $2 million by Zuffa LLC.
Started in 1997, World Extreme Fighting is the second-oldest MMA organization in the U.S., behind UFC. Its founder, Jamie Levine, is a former MMA fighter and considered one of the legends in the sport.
In 2006, Levine approached Eric Delisle, WEF's current CEO, about helping him with WEF as a business. Delisle wasn't interested at the time, but he stayed in touch with Levine. Two years ago Levine made another pitch.
“Jamie has an undying belief in this sport, but he needed help with the business side,” Delisle says.
A serial entrepreneur, Delisle has worked with Slappey on several business ventures during the last decade. Delisle contacted Slappey for advice about how to turn WEF from a just-getting-by organization into a thriving business.
“The hyper growth that has occurred in this sport was the main reason to pursue this opportunity,” says Slappey. “We think we can grow WEF organically and avoid some of the mistakes other MMA organizations have made.”
Attracted by the success Zuffa has had with UFC, dozens of companies have jumped into the MMA promotions game, most notably Affliction Entertainment and its celebrity investor Donald Trump. Affliction and most of the others have struggled for one primary reason: excessive spending.
“Instead of focusing on a real business model, they have blown through millions of dollars chasing the big pay-per-view pay days,” says Slappey. “To build their brand, they pay huge purses to attract the top fighters. The money eventually runs out.”
Slappey is approaching WEF as he would one of his typically clients. He and Delisle raised $300,000 from friends, family and business contacts allowing WEF to host three successful hosted events that netted several key sponsorships, including Sharpie and Metro PCS. The events also helped WEF land a deal with Fox Sports Net and Fight Zone to broadcast WEF events to 100 million households. The televised events would help WEF build its brand, eventually allowing it to host pay-per-view events.
The next step is to raise $1.5 million in venture capital, which will help WEF host more events and increase its marketing.
Part of Slappey's plan includes leveraging WEF's vast video library. Many of the top UFC stars got their start at WEF, and it has recordings of those early fights. Creating a “Before They Were Stars”-type television series would open up a new revenue stream for WEF. Delisle says the company is making a presentation to Spike TV in the near future.
In addition, plans call for WEF to establish its own minor league feeder system called King of the Streets. The idea is to create a business plan that would include insurance documents, fighter and venue contracts and marketing materials that would allow local promoters across the country to put on their own MMA fights. The promoters would pay a licensing fee to WEF, and up-and-coming fighters would get at shot to participate in WEF events.
“We don't have to go head-to-head with UFC to be successful,” says Slappey. “We're OK being the Burger King to UFC's McDonald's.”