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Driving through adversity: First-time team owner uses business fundamentals to help reach the finish line

June 26, 2006

It's been a bumpy ride for Michael Crawford this year.

Scratch that-it's been like driving into a concrete wall at 190 miles per hour. Repeatedly.

The rookie race team owner put his financial livelihood on the line this year to buy two cars and run them in the Indy Pro Series, the open-wheel racing equivalent of AAA baseball, one step below the major leagues.

IBJ is following Crawford's progress in hopes of shedding light on the challenges startups face when it comes time to hit the gas. Although his is a specialty business, the fundamentals can be applied to any enterprise.

So how's Michael Crawford Motorsports doing midway through the season? Let's just say casinos would welcome its owner with open arms. His luck's been so bad one wonders if he makes a habit out of walking under ladders.

One of his drivers got poached after a spot opened up in the big leagues. MTV didn't pick up a reality series that would have featured another. Both losses cost him major sponsorship dollars. A 5 cent part broke during qualifying for one race, costing him critical field position and a shot at a win. His cars have been put into the wall more than almost any others on the circuit, running his repair bills into the six figures-particularly painful, considering his budget for the year is about $1 million and the cars aren't insured.

And to top it off, his crew's truck broke down on the way to a recent event in Wisconsin, forcing the team to put in a 19-hour workday hours before firing up the car for a test.

Despite the adversity, Crawford is nowhere near taking his ball and going home. In fact, his team's picking up steam and batting around the idea of running a car in The Spectacle next year. That's pretty remarkable for a first-timer in an industry with profit margins as slim as grocery stores.

How does he do it? Time-honored business principles, no different than running a trinket shop.

"If you look at the core qualities needed for a successful race team and the core qualities needed for a small business, they're very similar," said Zak Brown, who raced professionally and now runs Indianapolisbased Just Marketing International, a 90-employee firm that helps corporate titans like Subway get into the racing game.

The business of racing

So what are those driving principles?

For Crawford, it starts with trusting his team. The night before what is probably the most-hyped event of the year, the Freedom 100 at the Indianapolis Motor Speedway in May, Crawford was snoozing by 9 p.m. (Sure, he stared at the ceiling for a while, but that's beside the point.)

He thinks his team was still at the track working on the cars when he turned in, but he's not really sure. He had to pick up a shirt at the dry cleaner's before it closed, so he cruised while his crew was still wrenching away.

Crawford trusted his crew to finish up its work before knocking off for the night. That's saying something, considering he liquidated his entire portfolio to buy the cars and still has $120,000 of his own money tied up in them.

"If I could take my life out and hand it to these guys, I would," Crawford said.

Small-business experts say that level of trust is vital for any company.

"It's hugely important," said Donald F. Kuratko, chairman of the entrepreneurship program at Indiana University.

When venture capitalists evaluate proposals, 80 percent of the grade is based on the management team, Kuratko said. Only 20 percent is based on the product.

That's one reason Crawford "hired up," just as some people "marry up." One of his key employees is Tim Whiting, a racing veteran who's worked as crew chief on cars in the big leagues going back to the days before IRL and Champ Car divorced. Whiting's expertise will come in handy if the team reaches one of its goals of entering a car in the Indianapolis 500.

"We often say that you have to make sure you have staff-not for today, but for tomorrow," Kuratko said.

And if entrepreneurs can't hire the best, they should consult with them. Four-time Indy 500 winner Rick Mears, who coaches drivers in the Pro Series, gave Crawford's pedal pushers a van-guided tour of the track before the May race.

That's part of another biggie for Crawford: Treating your employees well. His first move after the Freedom 100 wasn't gloating on pit row or signing autographs. He ran to find plates and forks so the team could dig into the post-race buffet.

"In racing, sometimes it's the small stuff, like the dinners and the beers" that makes the difference, Brown said.

And treating workers well also has a boomerang effect, Crawford added. Employees who think the boss cares about them are more likely to care about the boss.

For instance, when one of Crawford's cars sustained about $20,000 in damage in a recent test, crew members offered to cancel weekend plans to get it ready for the next race.

"You cannot pay people enough to care," Crawford said. "I feel lucky to have run across the people I have."

World peace on pit row?

But as much as Crawford loves his crew, they don't stand around the paddock holding hands. Racing is, after all, a very competitive business-no different than running a hedge fund or selling real estate.

And Crawford likes to win. He just has to make sure his desire for grabbing the checkered flag doesn't cloud his judgment.

"There's a big difference between emotion and passion," Brown said.

Two months ago, while pursuing his hobby of driving go-karts (not the kind that run at the state fair-the kind that go 120 mph), Crawford had a shot at stepping onto the podium for the first time. Then a driver who wasn't challenging for the lead cut him off in one of the final turns.

Crawford's competitive instincts got the best of him. He tried a daredevil pass in a corner and spun out, landing in a sand pit instead of victory lane.

Blame Crawford the driver. Crawford the businessman would have eased it home for the sure payday.

"I try to claim I'm not competitive because I have to think clear-headed and run [Michael Crawford Motorsports] like a business," he said.

So when he's with his crew at the track, he's cool. No ups. No downs. Occasionally he'll crush an empty soda can in his bare hands, but he doesn't kick tires and throw wrenches if something goes wrong.

"It does no good for a leader to kick, scream or get upset with his or her team," Kuratko said. "By his professional image, watching and listening, he's portraying the image of what he wants his team to be."

That's not an easy task, but it's one that comes easier with experience. The MBAholding Crawford has been in the racing game since 1995 and has worked up to owning his own team. He knew that buying two cars right out of the chute could be a quick ticket to Chapter 11.

His time studying balance sheets at the University of Wisconsin has taught him another lesson that can help any business get through its first year: Don't grow too fast.

So he has steered clear of that particular pitfall. After he had drivers lined up for both cars at the Freedom 100, a third driver approached Crawford looking for a ride.

He could have leased a third car for the weekend and made a few extra bucks, but he declined. Entering a third car would have meant stretching his staff pretty thin. And an embarrassing outcome could have hurt his reputation in the racing community and his long-term viability.

IU's Kuratko said it was a wise decision.

"Growth can put you out of business," he said.

So can wasting money. That's why Crawford hauls his cars around behind a bottomline-friendly Dodge pickup truck. All of the other teams in the series travel in semi trucks that cost in excess of $250,000.

"We've cut corners in places that do not dramatically affect the performance of the cars," Crawford said.

Crawford also has been careful not to cut off communication with anybody in the racing world. At his level of the sport, drivers pay to race, usually between $40,000 and $60,000 per event. Earlier this year, one of his drivers bounced a check after a race. Instead of calling a lawyer, Crawford called the driver to try to work through the problem. He still thinks they can find an amicable solution.

"The long-term value is that that word will get around," Kuratko said. "It goes all the way back to the first point about his people and his team. Drivers are going to talk to other drivers and say, 'He is truly committed to me.' That's an outstanding attribute of a great leader."

And one that would serve any small-business owner well.
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