Building The Next Generation

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Most business owners have a short-term focus: this year, maybe the next. Even startup founders tend to have a long-term vision, but are very focused on what can grow the business right now. Public companies (with a few rare exceptions, notably Amazon), tend to have even shorter quarterly windows. Even when companies pay for research, it is often biased in favour of driving immediate growth in their own business.

Sometimes, however, a business is willing to invest in the children.

Bauer Hockey, about whom I have written before both negatively and positively, decided to increase its own business in the very long term. It co-sponsored, along with Hockey Canada, a study as to how to increase youth hockey participation in Canada. Yes, Canada, the creator of the sport and the country with the highest participation worldwide, apparently has far too much room to grow. The key findings can be found here.

Bauer didn't pay McKinsey or some other consultancy or research firm to find ways to grow its profit margins or revenues next year or break into new markets. It simply asked a question, "how do I get more of my current kind of customer to exist?" Wisely, it focused on the next generation. They asked a simple question: how can we add 1MM new players to the game over the next 10 years?

In some ways, this is surprising. Kids hockey equipment has lower prices and, likely, much lower margins than adult equipment. To boot, well over 75% of kids gear is used. Every hockey league and rink in Canada runs an "equipment exchange" each fall. Everyone pays a nominal fee, brings their old equipment, dumps it in the center, and takes out used equipment that fits their kids. In other words, kids, except those playing in the more competitive leagues, generate very little revenue or profit for hockey equipment manufacturers.

Bauer is a very old company, founded in 1927. Although it went through a short period owned by Nike, the large sports apparel manufacturer, it went back to being private 5 years ago, after large Nike failed to achieve its targets. Old companies, especially in private hands and closely tied to their founding communities, tend to take the longer view.

Bauer is a $400MM revenue company. Adding 1MM players over 10 years - and like most growth, it will be weighted towards the end - will add perhaps $100/person in equipment revenues to the cumulative manufacturers' bottom line over maybe 100,000 people over the next two years, a total of maybe $10MM over two years. It is barely a 1% bump in revenue. Yet these players grow, and by the time they are adults, they are spending several hundreds of dollars each year on equipment. And they encourage their own children to play.

While clearly in Bauer's own self-interest, they have managed to focus on children, grow their long-term business and positively affect the community, all at the same time.

If you want long-term growth, focus on the next generation.