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Why Poaching Lance Franklin is A Classic Example of What NOT to Do in Business!.

Article by WealthSafe.

Date Published: 28 Oct 2013

I may eat my words. And will be happy to.

But I believe poaching Lance Franklin for $10 million over 9 years is a poor business decision by the Sydney Swans.

Here’s why …

When Ross Lyon was poached as a coach by the Fremantle Dockers football club, I said at the time it was a brilliant business decision.

The reason? Mark Harvey had not delivered the goods. Ross Lyon is one of the top coaches in the league. His club St Kilda had been procrastinating on renewing his contract. A brief window of opportunity opened. The Board of Fremantle swooped and hired him in a shock move, that devastated Mark Harvey and angered many of the Fremantle fans.

I said they would get over it when Fremantle reached a grand final or won a premiership within 2 years. They reached the Grand Final this year.

Now Fremantle is the talk of the town. Sure they lost the Grand Final. But they will be back.

Why was this a smart decision?

A coach is a key in leading a team. There is only one coach. Fremantle had real problems with a coach. And in 17 years they had never come close to winning a premiership.

By contrast, I believe the Buddy Franklin decision is a poor one.

Why? Many reasons, but here are some.

Perhaps I am being unfair. At least Sydney are investing in a proven star. Gold Coast did it with Gary Ablett and it has been a spectacular success.

But mostly, these decisions don’t work.

What is the lesson on this?

Smart investors and business people are always looking to buy at an undervalue. And won’t put all their eggs in one basket when it can jeopardize their other interests, eg. putting all focus into one project and neglecting other legitimate projects which increase their risk.

Let’s hope I am wrong … But at least some valuable lessons here about investing and about managing risk as a business owner and investor. Any business reliant on one contract is vulnerable to failure. Likewise, Sydney has made itself a lot more vulnerable all of a sudden.

The lesson? Don’t put all your eggs in one basket where it is going to jeopardise your other baskets, and make you more vulnerable and dependent.

I’d love to hear your comments on this post.

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