Making money after the big sports contract ends

Pro athletes are in denial. Melissa Jordan, a client relationship manager at the boutique wealth management firm Geier Financial Group, sees it all the time: “They don’t ever want to think they’ll get hurt or that this’ll end,” she says. “But the fact is, it will.”

Jordan and her colleagues have to constantly remind their athlete clients — the firm has 19 active, 40 retired — that their current station in life is temporary, and that they need to plan for retirement now, not later. The most popular, and riskiest venture for retired pros it to open a restaurant. Other common – and commonly doomed — ventures are: car washes, bowling alleys, domain names, and clothing lines.

“We’ve seen a lot of guys that want to start something very similar to Under Armour,” Jordan says. “We advise them against it.” Her colleague, business development manager Erich Imphong, adds that they often have to “talk them down” when old friends call up looking for money for potential investments. “We say, ‘No, don’t put half a million dollars into a bowling alley. Don’t put all of your 2008 salary into this,’” he recalls. “The bigger issue is really that a lot of them just don’t know what they want to do after retirement.”

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Mark Teixeira has already been preparing for his second life. “We all know that we have to do something after sports, and we have plans, but many of us don’t want to think about it too much yet,” he told Fortune. “I’ve turned down a lot of ideas because they didn’t feel right, mostly real estate opportunities like buying condos or small houses.” One fleshed-out proposal Teixeira turned down was for a mouthguard company that a friend was starting; Geier advised him not to invest.

In March 2012, Teixeira partnered with Kenny Dichter, former CEO of Marquis Jet, to form Wheels Up, a strategy and innovation firm that plans to connect athletes with performers. He’s also an investor in Juice Press, a juice chain that has nine stores in New York City and is rapidly opening more. “I’ve lost money on investments, of course,” he says. “You have to lose. But I’m bullish on my prospects to do good things and make money after I retire.”

Mostly, Teixeira has tried to set up opportunities that align closely with his biggest interests, which he says are opening up a health and wellness space, and “marrying social media and baseball.” Since 2008, he has worked with an urban redevelopment group in Atlanta – he played college baseball there — that helps build communities through youth baseball. “Hopefully,” he says, “some day people will look at a part of Atlanta and say ‘Wow, Mark Teixera helped revitalize this area.’”

MLB legend Cal Ripken has achieved exactly that success since his 2001 retirement. His company, Ripken Baseball, owns two minor league teams (the Aberdeen IronBirds and the Charlotte Stone Crabs), owns and operates youth baseball academies in Aberdeen, MD, and Myrtle Beach, SC, and includes a design business that consults with cities building baseball fields. Ripken also has published three baseball-themed young adult novels and still does appearances and speaking engagements (sources say he can fetch as much as $80,000). That’s a huge range of endeavors.

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“I remember in the first couple years I got into the big leagues, a lot of Orioles were at the end of their careers—Kenny Singleton, Al Bumbry, and Jim Palmer,” Ripken told Fortune. “I asked them all, ‘What are you doing next?’ When you get to around 30 years old, you start to think you don’t know how much longer you’re going to play.”

Ripken knew that he wanted to be “in the kids business,” as he describes it, and he wanted to open a baseball field for kids in his hometown of Aberdeen, MD. At the same time there was an effort to get a minor league team there, so although Ripken originally had no interest in the minor league business, he helped get the stadium built. The company that eventually became Ripken Baseball was created more as a firm to handle his own off-field endorsements and licensing deals. But, he says, “It was also for keeping track of all the strategic partnerships you form with all the people you meet when you play. That was important.”

On top of all that Ripken Baseball does, Ripken is still an endorser. He has deals with One A Day men’s vitamins, Under Armour and Transitions Optical. He says he endorses products he actually uses, but also seeks out business-to-business value. Ripken Baseball’s five-year deal with Under Amour, signed in 2009, is one such example: UA outfits the Aberdeen IronBirds as well as the youth teams that play in the Cal Ripken World Series. Ripken and Under Armour CEO Kevin Plank are both Marylanders, as well as athletes turned businessmen. But Ripken says he’s been picky about his sponsorship deals since day one as a player. “In my second year, Jockey underwear wanted to pull me in,” he recalls. “I passed up on that because I couldn’t stand the thought of my mom seeing me pose in my underwear. I ended up with a $500 milk commercial instead.”

MORE: 2012 sports endorsement stars(and 2013 prospects)

Pitching ace Randy Johnson, meanwhile, has so far refrained from big business moves and spent much of his post-retirement time on USO tours to visit American troops abroad. In 2010, he flew to Kuwait and Iraq. The next year he went to Okinawa, and recently he met troops in Qatar and Afghanistan.

Though Johnson hasn’t started or invested in any companies, in 2012 he linked up with Ulysse Nardin, the Swiss luxury watchmaker, to put out a watch modeled after his own tastes—called The Big Unit, it retails for $15,500. Only 100 were made. “I don’t have as much interest in doing a lot of business, so this is the biggest thing I’ve taken on,” he said during a visit to the Fortune offices. “Which is not to say it’s the only thing I’ve been offered.” Johnson started getting interested in watches while he was still playing; he would “talk shop” with the managers of watch stores. Before he had any affiliation with Ulysse Nardin, he had bought five or six of their watches. And he now owns more than 50 watches in total.

“I don’t need to endorse any company,” Johnson says. “I’m doing this because it’s a good fit, and I’m learning a lot about watches.” He also stresses the trust he has in Patrik Hoffmann, the company’s CEO.

Teixeira, too, places a big emphasis on trust. He advises friends in the MLB that before they partner with anyone, they ought to make sure that person is vetted by people they already trust. And track records are important. “If [Starbucks CEO] Howard Schultz comes to you with an idea for a new company, you say, ‘Where can I sign?’ But if Jimmy from down the street who has never started a business in his life comes to you and says ‘hand me $5 million,’ you say, ‘Well, let’s talk about this a little more,’” Teixeira says. “The guys in sports that have lost money, they’re the guys that gave money to Jimmy.”

Even when players don’t give money to their own Jimmy, they can still get themselves into trouble. Lenny Dykstra, famously, managed to lose upwards of $58 million. Former NFL player Rocket Ismail lost $300,000 trying to create the Rock ‘N’ Roll Café. As Ripken acknowledges, “Restaurants are a favorite lure. I think all sports guys are targeted. And we’re all tempted. The ending is that business is art. You have to have your full attention on it.”

Agents may try to rein in a client’s spending, but it can be difficult. “When a big name gets into money trouble after retirement, people want to blame the agent, like, ‘How could his agent let that happen,’ but at the end of the day, I can’t tell [a top MLB pitcher] how to spend his money,” a successful baseball agent said by phone. “He’s not 15, and I’m not his dad. You just have to hope they’re responsible; you can’t save them from mistakes.”

For Ripken, the key is in constantly coming up with good business ideas—no matter when they hit. “In business, ideas come to you at the weirdest times,” he says. “I wake up in the middle of the night and want to make a note. And that’s always good. I don’t think I ever did that in baseball. I didn’t wake up in the middle of the night thinking, ‘Okay, look for the 2-0 changeup from Teddy Higuera.’”

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