According to a new report from accountancy and business advisory firm BDO, nine in ten clubs in the English Premier League (EPL) are expecting to report profits after player trading.
The BDO report – which surveyed the Finance Directors (FDs) of almost 50 clubs throughout England and Scotland – has become an annual staple and this year’s research suggests the sport is in rude financial health.
It is also a snapshot on how that financial health has translated into a change from the sense of a club being of its community towards being one of investment. The vast majority of Football League clubs and Scottish Premier League clubs have been subject to a formal or informal approach in the last 12 months.
Far Eastern interest has been overtaken by US interest and institutional investors now make up the largest proportion of interested investor parties.
There are still huge financial disparities between top flight and lower league clubs but one thing they would all agree on is that success doesn’t happen overnight nor does it purely rely on the performance of eleven men on the pitch.
Running a football club is, in many ways, no different to running any other business. It needs a highly skilled management team, a quality talent pipeline and a healthy and sustainable balance sheet.
“Despite living with uncertainty, football clubs are confident of a future worth investing in,” said Ian Clayden, a Partner at BDO.
“Management teams are looking at commercially-savvy ways to diversify and find new revenue streams. They are targeting strategic alliances with overseas clubs and franchises, and entering into other commercial ventures such as hotels, restaurants, leisure centres and other complementary activities.”
“They are also investing in technology and facilities to improve the experience and augment engagement with loyal customers.”
“Outside of promotion or avoiding relegation, building a loyal fan base is the number one priority for most clubs. This concept of ‘customer first’ will not be unfamiliar to most consumer-facing businesses.”
The clubs are using technology and smart marketing to make themselves as relevant in the lives of younger fans as they were in the days of their parents and grandparents. The game has changed immensely since then but the basic principle of making the outcome of a game really matter still hold true.
“For UK businesses, there’s a huge amount of uncertainty, not least in the lead up to Brexit,” continued Clayden.
“But those that plan ahead, remain innovative and responsive to changing customer demands will come out on top. If businesses are looking for an exit or a funding boost, there is still a healthy appetite for M&A activity with investors – many from overseas – looking to tap into the UK market.”
Most business leaders will relate to one of the clubs’ biggest expenditures – people. Four-fifths are spending more than half of their turnover on player wages. Championship clubs are spending even more, with over half allocating more than 75 percent of their earnings on wages.
To help mitigate this high cost base, clubs are making a significant investment into youth academies to help develop rather than buy-in talent.
Nearly two-thirds of clubs from the second to the fourth tier of the game in England have increased academy budgets year on year.
With an inflated transfer market, player transfers have become a key revenue source for the lower leagues. Many are realising the benefits of investing in talent that can be brought through to first teams or sold on for significant profits.
“Attracting and retaining good quality people is one of the biggest challenges facing businesses,” said Clayden.
“Some companies, I’m sure, will relate to the frustration that those in the lower leagues are feeling with larger clubs cherry-picking the best talent and attracting people with big-ticket salaries that they simply can’t compete with.”
“Investment in your talent pipeline rarely yields overnight success but a focus on personal development, upskilling and developing quality apprenticeship or graduate schemes, will see businesses benefit in the long term. In most organisations, people are its most valuable differentiator.”
One other key finding from the report relates to community investment and participation.
“It’s clear that the importance of being part of the local community is core to the culture and strategy of football clubs,” said Andrew Groat of BDO.
“Our survey this year records a 50 percent increase in the number of respondents who are active in football and community care projects; three-quarters of clubs are community focussed.”
“Sadly, it would appear to be a continuing trend that this aspect of the industry does not receive the media attention it deserves.”
We at Sport for Business are doing our part to reverse that trend with our Sport for Social Good Report and Conference taking place in Dublin next month where will be highlighting some of the work that does take place in this area.
If you are a member of Sport for Business and would like a full copy of the report, simply contact us today and we will get one to you.