Is The Reward Worth The Risk?
I feel as though a lot of agents spend a good amount of time trying to dissuade potential new entrants into the industry from actually pursuing their dreams. It is evident in many of our Interview with the Agent pieces along with agent interviews outside of the confines of this site. And truthfully, there is good reason for agents to provide this type of advice. One, it may prevent a potential competitor from entering the existing agent’s space. But truthfully, an agent’s words on this site, or any other site, will not have any overwhelming effect on the vast majority of people interested in breaking into this industry. Truthfully, I think the main reason that agents provide this type of advice is because they see the requirements of succeeding, or trying to succeed, in this very competitive and demanding business, and genuinely want people to understand the business before they decide to put at least one foot through the door.
As I have mentioned many times, I find it very difficult to understand how many football agents, in particular, survive in my industry. The costs leading up to the NFL draft, per player, is exceptionally high, and agents pretty much have to assume those costs to have a reasonable shot at signing any potential draftees. In fact, many players will have their costs paid for by agents and never get a shot in the league. What then? Money out the window. But even if a player is drafted, the commission on that first contract will barely even pay for that one player’s pre-draft costs (time spent by the agent not included). And then you have to worry that if the client is drafted by Miami, Rosenhaus might get him before his 2nd contract. That’s one example, but something to definitely consider.
Besides having a pretty cool name, Storm Kirschenbaum of Metis Sports Management agrees that the risk is very high in football, but also notes that the reward could be very high – and he says the same is true about baseball as well. He has a new column at The Sports Network, and his first piece talks all about the split between high risk and high reward in the business. Here is an eye-opener from his piece,
Most certified agents are unable to support their practice with the commissions from clients’ earnings. If you are a “rookie” agent, your chances of representing a player drafted in the NFL is less than 1%. Even with the percentages so slim to succeed, agents will likely invest $10,000- $25,000 in NFL Combine training on prospects that may never play a single down in the league. Now, if a “rookie” agent beats the odds and lands a drafted player, it is time to clink the glasses and say “cheers,” right?!? Not exactly! Let’s say that “rookie” agent signs a prospect that is selected in the 7th round of the NFL Draft. If that player makes the 53-man active roster out of training camp and plays the entire season, an agent will earn a commission around $11,550.00. Again, no algebra required…an agent still loses money that first year. You might be saying “why would anyone get involved in a business model like this?” The goal is that a player may one day sign a contract for $35 million and you just made a commission of $1,050,000. High risk, high reward.
When I became a NFLPA Certified Contract Advisor, the NFLPA had around 1400 certified agents. Then came the “one in three” rule. The rule stated that if an agent had not negotiated at least one contract in three years, he or she would lose his or her certification. There have been over 150 agents decertified because of this rule. Additionally, the NFLPA announced that each agent must now carry individualized malpractice insurance at a cost of $1,750 a year. NFLPA agent fees are around $1,200 a year, on top of your malpractice coverage.