A Few Factors to Consider when Negotiating a Contract as a Professional Athlete
Negotiating a contract as a professional athlete can be extremely difficult. It is a unique opportunity and that needs a tremendous amount of preparation. Here are a few issues to consider when preparing to negotiate a contract.
Contract length is an important factor to consider when negotiating a contract. This will determine how long the team an athlete is signing with will pay for the time spent playing for that team. Many rookie contracts have a standard contract length consistent with the league’s collective bargaining agreement. The length of the second contract can be negotiated. In many cases, especially in high contact sports like football and hockey where players are more likely to suffer career-ending injuries, contract length might be a priority in the negotiation. While longer contracts might bring more security to a career in terms of where an athlete might play, it is just as important to balance that factor with the financial terms of the contract.
Money Upfront / Signing Bonus:
While the total dollar value of the contract is important, the money received up front is another factor when negotiating a contract. The more money received up front is beneficial for a few reasons:
- There is less reliance on player performance
- Money received up front can be invested for potential long-term growth
- There is less risk of a work stoppage reducing income
Guaranteed money addresses how much a player will receive for the duration of the contract. For example, if a player signs a $2 million contract for 5 years and he guaranteed percentage is 50%, the minimum amount received will be $1 million. The next 50% will be paid out for fulfilling the contract bonuses such as activity and performance bonuses. It might be in an athlete’s best interest to have the most guaranteed money possible. Tax issues need to be addressed as well. More money up front or guaranteed might create a larger tax liability.
As always, it’s important to assemble a strong team of advisors to assist in the contract negotiating process. Once the contract is signed, it might be very difficult to make any changes.