At a time when a rumor is making the rounds that a prominent member of the media was unofficially giving cornerback Richard Sherman free advice on his negotiations with the 49ers (Sherman may have gotten his money’s worth), I’m prepared to give all players free advice on this topic. (And they’ll definitely get their money’s worth.)
Here’s the advice: Hire a good agent.
Players who think they can save a few bucks on the commission by simply hiring a contract lawyer to spend 30 minutes reading the final document simply don’t understand what the job entails. The job entails maximizing the player’s take-home pay, taking into account non-monetary factors like where the player will be living, who he’ll be playing for, and his chances of individual and team success on that roster. Because those factors are unique to every player, the following observations apply only to the goal of putting the most money in a player’s pocket. Because Sherman’s deal is the most recent player-negotiated contract, these observations are tied directly to his situation.
1. The $2 million per-game roster bonuses.
Over the past decade or so, per-game roster bonuses have become an important part of the NFL player compensation landscape. It’s a pay-as-you-go term, giving players money based on their ability to suit up and play in a given game.
In most cases, the per-game roster bonuses total less than $1 million. Aaron Rodgers, for example, has per-game roster bonuses totaling $600,000 per year. Last year, his broken collarbone resulted in more than $330,000 in lost income.
Sherman’s contract carries a whopping $2 million in per-game roster bonuses. Few players have ever had that much ($125,000 per game) tied to being on the game-day roster. It’s believed that the 49ers sold Sherman on such a significant amount by pointing out that Colin Kaepernick had the same amount of per-game roster bonuses.
That’s accurate. But current 49ers quarterback Jimmy Garoppolo, the highest paid player in NFL history, has only $800,000 in annual per-game roster bonuses.
Assuming that a good agent could have at least cut that amount in half, with the balance becoming base salary, Sherman would have been assured of earning another $1 million not tied to the number of games he actually plays.
2. The negotiations with other teams.
It’s undeniable that this deal came together quickly, with Sherman visiting the 49ers facility a day after being cut by the Seahawks and not leaving. If Sherman had a good agent, that agent could have been working the phones with any and all other interested teams in an effort to find out whether they’d offer as much or more than what the 49ers offered. Even if Sherman had still signed with the 49ers, a good agent could have squeezed better terms out of the 49ers if the agent had been able to persuade them that other teams were seriously pursuing Sherman, with competitive terms.
3. State income taxes.
Let’s assume the Lions (who were very interested in Sherman) would have given Sherman the same deal the 49ers did, with a base package of $7 million for 2018, $2 million in per-game roster bonuses, $1 million in playing-time incentives, and a $3 million incentive tied to making it to the Pro Bowl (which actually could be the All-Pro team). Michigan has a tax rate of 4.25 percent. If Sherman had unlocked all incentives, he would have paid $552,500 in Michigan taxes. In California, where the tax rate for the highest earners is 13.3 percent, he’ll pay $1.729 million.
That’s a difference of $1.117 million. A good agent would have pointed that out to Sherman. It’s unknown whether anyone did. It’s unlikely that the 49ers did.
4. The upside of making it to the Pro Bowl.
If Sherman makes it to the Pro Bowl, a total of $16 million in salary for 2019 and 2020 becomes guaranteed. That’s fine, but a good agent likely would have requested a voiding of the final two years of the deal based on making it to the Pro Bowl, allowing Sherman to parlay a Pro Bowl season into much more on the open market than a total of $16 million guaranteed over two seasons.
5. The 49ers’ reputation.
49ers executive Paraag Marathe has a well-earned reputation as being a shrewd negotiator. Every good agent knows this. Most players may not. Whether or not Sherman knew this isn’t known. Regardless, the final numbers on the deal are currently expected to show that Marathe negotiated a team-friendly deal.
6. The bottom line.
Players are tempted to negotiate their own deals because of one thing and one thing only: They don’t like writing checks to their agents. If, like state and federal income taxes, the fees were deducted from the players’ game checks, the players may be less salty about paying their agents. (Anyone who pays quarterly taxes out of money already earned understands this dynamic all too well.)
But it’s not about the check the player writes. It’s about the check the player gets. Sherman has a practical guarantee for 2018 of $7 million. Under the maximum fee of three percent, he would have paid $210,000. Thus, a good agent would have had to negotiate a base deal worth $7.21 million for 2018 to pay for the agent’s services.
A good agent may have been able to get Sherman a base package of much more than $7.21 million. Along with the ability to get back to the market next year. Along with a more favorable state income tax situation.
Sherman made his choice, and no one expects him to admit that he may have made a rash decision at an emotional time without the best advice possible. Other players, who may be under the misimpression based on the erroneous initial report that Sherman is getting a firm $13 million per year, need to realize that the commission they separately pay is worth every penny — assuming the money is being paid to a good agent.
Here’s the part where some of you will bang out comments suggesting that I’m making these points in order to help out agents. Before you do, you’re absolutely right. I am.
I’m also trying to help players. Good agents make money for themselves and more money for players. In turn, this takes more money out of the coffers of billionaires who would love nothing more than to see this still-isolated quirk become a trend, and for that trend to then become the norm.