6 Business Lessons From Dissecting Lebron James’ Entrepreneurial Journey
By: Adam Aya
Tags: Money, Basketball, Entrepreneurship, Finance, Economy

How King James went from an all star NBA player to an all start entrepreneur

Photo by Project 290 on Unsplash

Professional athletes, like lottery winners, are notoriously bad with money. From Mike Tyson, Dennis Rodman to Vince Young, examples of once highly paid athletes who went broke are numerous. After retiring, very few athletes turn into businessmen. A small minority of those become successful. Lebron James stand out here by not being one of the greatest players that has ever played in the NBA at the same time he displays high business acumen. From rejecting a $28 million check from Reebok when he was at high school, seeking partnerships with brands he works with over endorsements, buying stakes in businesses to creating his own media company, King James can teach us a great deal about entrepreneurship and business growth. In this article, we look at great length at the notable business decisions Lebron has made over his career and how he turned himself into a savvy businessman.

#1. Focus on long-term goals rather than short-term gains

Lebron James grew up in poverty in the inner city of Akron, Ohio. As a high school student, Lebron was one of the most highly anticipated NBA prospects in history. Celebrity sports stars and even Nike co-founder Phil Knight came to watch his games while at high school. It was not uncommon for his hometown high school team to have games moved from their small gymnasium to larger arenas, given all ticket games were consitently selling out. Shoe executives were desperate for James to wear their brand’s logos. He was approached by Adidas who offered him a $60 million contract, Nike with an $87 million contract and Reebok was willing to offer him a whopping $115 million. These were very high figures for a young basketball player — As a comparison, Kobe Bryant was coming off a winning three successive NBA championships and only received a $40 million four year deal from Nike that same year.

Reebok wanted to add Lebron James to his list of athletes that included Shaquille O’Neil, Allen Iverson and Venus Williams. Nike back then was the leading shoe brand in the NBA thanks to a partnership with Michael Jordan. Lebron took the decision to sign with Nike who offered him significantly less, missing out on an extra $28 million. The long-term vision of King James paid off. In 2015, he signed a lifetime deal with Nike for an estimated value of $1 billion. This was the first contract of its kind the company’s history. Meanwhile, Reebok did stop sponsoring NBA players in 2019. Lebron had later called this the best business decision he has ever made.

He said: ‘I was going to be making a deal for life, you don’t think about the first check, you think about all of them.’ This was the initial sign of the business mindset that would shape Lebron into the man he is today.

#2. Favour partnerships over endorsements

When Lebron joined the league, he continued to sign marketing deals with more companies such as Coca-Cola and Mc Donalds. By the end of 2003, he was the fourth highest endorsed athlete in the world. Only Tiger Woods, Michael Schumacher and David Beckham were being paid more. At the end of his second season in the league, Lebron took his biggest business risk, leaving his agent to go his own way, creating a marketing agency with three of his hometown friends. He decided to take control of his own business decisions allowing him to shape the narrative portrayed to the public. The NBA’s elite businesses thought at the time that this was a terrible idea.

Lebron got close to Paul Wachter, the man who advised Arnold Schwarzenegger and helped him become one of the most recognisable men on the planet. The most notable piece of advice Lebron received from Paul was that he should seek partnerships rather than endorsements. Yes, endorsements can bring a high one-off payment but partnerships could be significantly more rewarding over the long-term as the athlete can get a portion of the company’s profits. Lebron decided that if a company was not willing to accept a partnership, he wouldn’t simply work with them.

#3. Buy stakes in companies — The Dr Dre Beats deal

In 2006, Lebron James was introduced to Jimmy Lovine and Dr. Dre, co-founders of Beats by Dre. The pair wanted to partner with James in order to boost the company’s sales. Again here, instead of securing a sponsorship deal with Beats where Lebron would be paid a fixed amount for wearing the headphones in public, he secured a partnership with the company that included an ownership stake in the company.

Lebron James had the brilliant idea to supply every member of the USA basketball team with a pair of Beats headphones during the 21-hour flight from the States to Beijing when the team headed to the 2008 Olympics games. When the team faced cameras upon arriving in China, all team members were wearing Beats headphones. This event created a massive buzz and catapulted the company’s sales. Beats eventually was purchased by Apple in 2014 for $3 billion valuation. This transaction netted a $30 million profit for Lebron James. This is another example proving that owning equity is more financially rewarding in the long run than an endorsement pay-check.

#4. Buy and build — The Investment in Blaze Pizza chain

Lebron James has been featured in McDonalds commercials for many years. When his contract with the fast food chain expired in 2017, he declined a lucrative $15 million and decided instead to double down on his investment in the pizza chain Blaze. Similar to his investment in Beats, Lebron was interested in an ownership stake. In addition, James was given ownership of two franchise locations. He now owns 21 franchises according to Forbes.

Blaze Pizza became the fastest growing fast food chain in the US. It has plans tp build 100–150 restaurants and expand internationally. Lerbon’s investment is worth at least $40 million according to ESPN.

#5. Owning a sports team — Acquiring a 2% stake in Liverpool FC

Lebron James has always openly spoken about his desire to own an NBA team. Having said this, NBA rules prohibit active players from owning a stake in a team. He then turned his focus to Europe where soccer is the most popular sport. James managed to acquire a 2% stake in Liverpool FC, an English Premier League soccer club. Since this acquisition, the club won the UEFA Champions League tournament and has been valued in 2019 at close to $2 billion. This means James’ stake is valued at more than $30 million.

#6. Vertical integration, cutting out the middle men — Starting a media agency for athletes

When Lebron James moved from Miami Heat to Cleveland Cavaliers in 2014, he has written a letter to the readers of Sports Illustrated to explain the reasons for his move.

In that article he stated: ‘I’m doing this essay because I want an opportunity to explain myself uninterrupted’.

Little did he know that this was the motive for starting a media agency where athletes can express themselves and share their thoughts freely without being ‘interrupted’. With his business partner Maverick Carter, they started the agency in 2014 and called it Uninterrupted. The agency started recording video testimonials with high profile athletes in the NFL, UFC and NBA in 2014. In February 2015, the agency received $16 million in funding from Warner Bros to develop its activities with more athletes. Uninterrupted now works with dozens of athletes on both sides of the Atlantic.

Thanks to the deal with Warner Bros, Lebron James has secured the main role of Space Jam 2, a sequel to the 1997 movie that featured Michael Jordan. The movie is expected to be released in 2021 and is expected to be a big hit.