An interesting blog on TWTD regarding Financial Fair Play rules

With the Financial Fair Play (FFP) rules taking effect, it is time that supporters understood the finances of their beloved club and start to be realistic with their expectations. While FFP should stop clubs going bust it will not level the playing field.


The turnover of Ipswich Town is around £17 million per year. This may sound like a large sum of money, but once you start looking at the numbers you quickly realise that this is not enough to compete at Championship level.

The majority of this money comes from us, the fans, at the turnstile, although there are other income streams; Premier League payments, TV rights, use of the stadium, replica kits etc.

Average attendances have been slowly falling over the last few seasons, last season it was 18,266. This is down from 19,914 in 2010/11 and 20,840 in 2009/10. Last season’s reduction will probably reduce turnover to around £16 million. With some simple mathematics that works out as 12,000 season tickets plus 6,000 matchday tickets for the 23 home games which is approximately £12 million, leaving around £4 million from other sources.

The Financial Fair Play rules will force clubs to live within their means. The initial proposal was for Championship clubs to restrict their spending on wages to 60% of the turnover (Salary Cost Management Protocol or SCMP). League Two clubs will eventually be limited to 55% of revenue and League One clubs 60%. For the purposes of this blog I will assume that only 70% of income is available for wages, (slightly higher than the original SCMP proposal, but realistic to reach a break-even point).

This effectively means only £11.2 million of the £16 million can be spent on wages. This is still a huge amount, so seeing it as a weekly amount of £215,000 maybe a little easier to understand. To put this number into some perspective, allegedly, Jimmy Bullard was earning £45,000 per week at Hull whose attendances are about the same as ours; this would represent around 20% of their entire wage bill. Fortunately for Hull their parachute payments should have covered this.

So where does all the money go? We only think about the 11 men on the field, but there are five on the bench, and a further 11 players in the squad (2011/12). In addition to this you also have the manager, his assistant, coaches, physios, scouts, groundsmen, admin staff (and a CEO) and the list goes on and on.

To simplify the calculations I will round this to 32 people, the 27 players, one manager plus four others (to cover the staff on normal rates of pay!). So, £215,000 between 32 people is £6,718 average per person per week.

But wait. Your ‘star’ players want more than that, so let us assume that four players want £18,000 per week (a figure that was mentioned in relation to several players last season). That leaves £143,000 between the remaining 28.

Then you have half a dozen rising stars and ex-Premier League players whose agents will demand £12,000 a week and are likely to leave the club if their demands are not met. That only leaves £71,000 between the other '22', or in money terms, £3,227 per week. This is still a good salary for a young player.

So we have spent all our income on wages and then the player that we paid £3 million for, walks away on a free transfer (he is entitled to do so – the £3 million was paid for the contract, not the player). The question has to be asked. Where we will find another £3 million to replace him? What about signing-on fees and agents' fees? We must take into account that the players that you buy may have less value when it is time to sell (let’s face it; we only want to sell the players that are no longer good enough).

To keep the club competitive we need to buy players. Ideally the manager would need £5 or £6 million per season to buy in new talent and expect to receive £2 or £3 million from sales. In other words we need £3 million per season set aside for purchases. If you do the same calculations but start at £9.2 million the '22' could only be paid £622 per week which is only £32,000 a year. Suddenly, the finances don’t look so good.

Yes, this is a very simplistic way of looking at the finances of the club and its assets, but it hopefully gives an insight on how tight money really is. Our wealthy benefactor has previously pumped money in, but under the FFP rules he cannot bankroll the club the way he has done previously (although he would be allowed to invest a further £3 million per year to buy new players).

So what is the answer? You have to pay lower wages to free up capital. Reduce overheads and cut waste. We no longer have a reserve team; very few academy players have been offered professional contracts.

We will lose out on players because we cannot afford the demands of their agents or cannot compete with clubs with a larger fanbase. Teams like Derby, Leeds, Leicester, Cardiff, Forest and Sheffield Wednesday can afford to offer wages that are 25% higher than ours (based on their attendances) and still comply with FFP rules.

When one of our targets signs for these clubs we like to blame Paul Jewell, Simon Clegg or Marcus Evans for not being able to close the deal. Ask yourself this question. What would you do if someone offered you 25% more cash to do exactly the same job?

Ipswich does not get the largest attendances in the Championship; in fact we are mid-table on attendances as well as performances. Doncaster’s attendance was half that of Ipswich and they ended up being relegated. It is difficult to see how the majority of League One teams, with similar attendances to Doncaster, will achieve success in the Championship as their budgets will be far too low to attract Championship level players.

Equally it is difficult to see how established Championship clubs can compete with the relegated Premier League clubs and the ‘bigger’ clubs as their wage budgets will be much higher than our own. Believe it, or not, there is a correlation between attendances and final finishing position.

If you take the average attendances for each club and order them by the clubs final position in the Championship you will see a rather random looking pattern. Add a linear trend line and you will see that the top clubs averaged around 23,750 supporters per week and the bottom clubs just over 12,000. The trend line is almost identical for the previous two seasons.

It is clear that we need to attract more supporters. We need about 25% more. The 18,000 fans need to increase to 22,000+. Ipswich remains the only club in Suffolk that is in the Football League. We need to ship them in from Sudbury, bus them in from Bury and ferry them in from Felixstowe.

Organise transport, maybe even subsidise trains and buses. Free park and ride with match tickets. Discourage cars near the stadium. Encourage people to turn up earlier (and spend the money they would have spent parking the car!). Make the match day experience better and easier.

FFP will stop clubs going bust but it will not level the playing field because of the disparity in attendances. A low attendance will equal a lower wage bill and therefore a lower standard. Also parachute payments could apply to up to a third of teams in the league, this will give an advantage to well-managed clubs falling from the Premiership.

I suspect we will see big budget clubs at one end of the table, with the smaller clubs fighting to stay in the Championship. Every season sees a team that punches above its weight. Last season it was Reading. Next season I hope it will be Ipswich. We need to be realistic, our performances, our attendances, our players are mathematically just above mid-table.

Finally, there are a number of points that are continuously being made on the news pages that, in my opinion, are made by people that do not fully understand the finances of the club and the effect they have on the club.

• “We need to buy a decent goalkeeper, a couple of defenders and a striker” – based on the figures above how would you do this? • “The owner should use the money he made selling Wickham to buy some decent players” – Yes, Ipswich made a very good profit on one player, but several players walking away at the end of their contracts and players that have not worked out have wiped out any profit made. • “We should not have sold Jordan Rhodes” – probably true, but in business you have to make difficult decisions and most times the decision to sell or release has been correct. How many players have we sold and have never heard anything about since? • “The owner needs to put his hand in his pocket” – Sorry, he is no longer allowed to invest heavily… and by the way, he has invested large sums of money already. • “Bad management” – A football club that was over £40 million in debt and losing money is now basically at break-even point and ready for FFP. How is that bad management? • “Ticket prices are too high” – I agree, but a £5 reduction would mean £2 million less income per year. It would take an additional 3,500 supporters just to recoup that loss. • “Clegg Out” – Chief executives are rarely popular. Simon Clegg is much maligned on this forum because he does not have football in his blood, but he has achieved reductions and is steering the club towards a secure financial future. Many of his decisions have been unpopular, some may have seemed unwise and some perceived as crazy! But in business, these decisions have to be made for survival.

SteveH from TWTD

Thoughts?

 

good article warky, very good

(ok - just realised you didn't write it! but still, good article!)

 

Will reading this affect how people on this forum think about Ipswich and how things are going at the moment, I doubt it..............but it should.

FFP will change football in England forever, larger clubs with larger fanbases will be at the top and the rest will be scrapping it out behind. Lower budgets combined with the new academy system will kill any hopes of a smaller club being able to overachieve and the dream held by many supporters that their club might one day be successful will be eradicated. As always, the rich get richer and the poor are left to suffer. I can even see it getting to the point where two teams local to each other will consider merging to increase their fanbase and to stay competitive.

Marcus Evans has invested a large sum of money in our club but I can't help feeling that the opportunity we had when he came in with his cash has been wasted. Now we have our hands tied because of FFP and it doesn't matter how much he has anymore because he can't spend it.

 

I agree San Diego but what's to stop Marcus Evans from sponsoring the shirts for £5 Million per year! There are ways around these rules, you could drive a coach and horses through them and I am sure that clever accountants will be doing so in the future!

 

Everyone thinks the premiership is the best thing but in reality it is the death bell for many smaller clubs. Since it's invention we have seen transfer fees and wages spiral out of control and clubs have been allowed to accumulate unsustainable amounts of debt. This was never going to last and now finally changes are being made. Trouble is, these changes will not affect the top clubs and spell the end for many smaller teams. Tha FA is now at the mercy of the premier league, as shown in the past when they have threatened to stop parachute payments if they don't fall in line with new rules made by the prem.

In the future you could see the likes of Colchester absorbing say Southend or Chelmsford to increase catchment areas and eventually, when that doesn't amount to much, Ipswich absorbing the lot. Whilst the merging of two rival teams is unthinkable you can see the sense in it. What if the two Sheffield clubs were to combine? It would put many current supporters noses out of joint but the new team would undoubtedly be stronger and younger supporters would know no different. It is also possible that we end up with a two tier premier league where promotion/relegation only happens between the two. It actually feels like that is the way the prem is looking to do things without coming out and suggesting it.

 

You could argue that trying to sustain four professional leagues is ridiculous and that we will eventually end up with just two. Whilst an unpopular thought with todays fans, will football follow the current business trend of smaller businesses being bought out and re-branded by a larger one?

 

You make valid points SD, the big clubs are getting richer off the backs of the rest. Long gone are the days when a club of our size could compete at the top of English football. We may well have to adapt to survive in the future and tbh Colchester being merged with us in the future is not out of the question. There are many Town fans living in Colchester who go to the WHCS when we are playing away!

 

It could also be the case that small clubs will fold altogether and their supporters will start to follow the next closest team to them. It's a sad state of affairs but is there a case for having so many professional teams in a small country like ours? Two leagues of stronger, larger teams may be the way forwards.

How many fans around the country are really enjoying their football at the moment, or are there more who are simply worried about the state and survival of their team?

 

Im not sure where i stand on these issues.

It does boil down to a debate between standard of English football and status of the club that you support. Im not against cutting the number of professional league but the one thing i would hate to see is promotion/relegation in the English football pyramid to be cut in anyway.

Been a while since i read the eppp rules but something that would make it more appealing to me is a mandatory % of first team matches that youth players snagged from clubs in lower leagues have to play when they sign a full professional contract, if not either a heavy fine must be issued or a mandatory loan/sale to a club who can guarantee that.

 

In relation to owner sponsorship they did say when it was originally announced that it would have to be in line with other sponsors, ie if Crystal Palace, Middlesborough, Derby and Burnleys non-connected sponsorship deals were worth approx £1m a year, ME couldnt go and sponsor us £5m but would have to be in line with other clubs so possibly he could chuck an additional £500 on top but not go stupid. Whether they will carry this through or not who knows!
The article in general, although well written is something a number of us have been saying for ages. When Clegg is accused of not chucking enough moneyat a player to enable us to get his signature (and therefore ****ing up) and we have said something along the lines of having to adapt with the financial fair play rules it has been met with ridicule. Admittedly it is also we cant hide behind forever. We are no longer a big team but there are plenty of smaller ones out there which we can compete financially against.
The future of football at this level is likely to change and in general terms I think it will be for the better but it will mean bargain hunting and missing out on targets although annoying may happen more oftern.
The potential stupid thing will be as alot of income comes through ticket sales it is going to dip/ rise depending on how we are doing. A decent start to a season could see 5000 casual fans turn up that will soon disappear when things start going down hill. This possibly means that the club can only base a seasons income on season ticket sales and readjust the budget at christmas based on how many casual/ non season ticket holders turn up.

 

the worst thing that could ever happen to football in this or any other country would be making it a 'closed shop' with no promotion or relegation. this must NEVER EVER HAPPEN

 

supers, it shouldnt be a closed shop but the debt level of clubs and wage level of average players seems out of control. Most football clubs if run as any other business would have been shut down long ago. It should mean medium to long term that wages fall to sustainable levels and clubs have to be a lot more savvy when it comes to signings. A lot more scouting, a bit more sense, a bigger squad opportunity for youth team players and more clubs pulling out of deals/ changing targets rather than chasing and paying over the odds for the number 1 target.

 

completely agree. there are a few clubs who seem to be running their ships better now, but its far from ideal. when you hear some of the wages really average players are earning it is barmy. i've long been of the opinion that football in this country needs to collapse on itself before it can regroup and get back to reality. unfortunately that's far from the ideal solution but i still think it will happen one day.

 

I haven't read the whole article, it's far too long, but the figures quoted are way off the mark. Players on the periphery like Wight will be on hundreds, not thousands. Players like Carson, Smith and ALB won't be on more than £2k and you're left with no more than 10 players who will be on more than £5k a week and nearly all of them on less than £10k.

Rather than guess at figures and pretend to do some sums it would be better to say 'I don't have a clue what the finances are like so I'm not going to write an article to explain them'

Absolute nonsense from top to bottom.

 

You are always going to have the 'haves' and 'have nots' in this world, nothing will change that but there need to be some restriction on clubs like Man City just buying every player just so the opposition can't have them. What i would like to see is a system that is a strict you can only have 30 players on your books at any one time over the age of 18, and within that for instance there is certain catagories that certain players wages would come in i.e out of that 30 no more than 5 players wages can be upto 6% of the total turnover, 15 players can be upto 3% of the turnover and the final 10 players can upto 2.5% of the turnover. I know this doesn't account for staff members and such like and it needs tweaking as this is only a flash of thought, but something like this would hopefully make football a more even playing field and distrubute the players better rather than Man City having players outside their squad that would walk into any other team.

I'm probably going to get shot down for this, but it is just a flash of thought!

 

I think it is a good article and the general point being made is a good one but there are a few things with regards to ITFC I disagree with and that's the Rhodes transfer (I know it's digging up a very repetitive argument) but as Lancs says players of our own probably aren't on the biggest of wages and I also disagree on the ticket price issue. I've said before season ticket prices are fairly good value for money at the club but matchday prices are ludicrous and not sustainable if we want to increase numbers, it's very short sighted!!

As for this article anyone remember Mark Venus predicting that this would happen about 10 years ago? I remember he had an article in a programme saying football was going to get a shock in a few years time!!

 

For me the interesting point was regarding the relationship between fan base and success at championship level. Very interesting. This is why it is critical that regional clubs such as Norwich and Ipswich attract and retain a decent support base. Other than their impressive (and oft-cited) history there is little to choose in terms of town size between the likes of Ipswich and Colchester (and to be fair Norwich is little bigger). No club has a divine right to league status and it is only the vastly superior fan base of both Norwich and Ipswich that keeps us above the "smaller" clubs with upward looking aspirations rather than just a perennial need to survive.

The prognosis for Ipswich does not look too great with a diminishing series of attendances but should the team perform then I am sure the punters will as well. The trouble is you need to have a shift in the trend as until the team improves the fans will probably continue to trickle away and until the fan numbers increase the team will probably not improve. Tough to square that circle but not impossible. Hope that this does not happen to us and that we've seen the end of our dark days although I am not so arrogant to assume that the current situation will always be the case.

 

perhaps if you read it properly you'll realise its a thoroughly interesting read. you also don't need to be a genius to work out your clubs wages are too high across the board when you see how much of your income is being devoted to the wage bill each year

 

I agree with much of this. I think the diminishing attendences are down to a number of reasons:

1. 11 years in the Championship
2. The past few years we've been pretty dire and the entertainment has been very poor, particularly under Keane!!
3. The current economic climate
4. The price of matchday tickets
5. Ipswich itself mainly with regard to students,IMO(what i can gather from what I hear) I find that alot of youngsters who perhaps were season ticket supporters in the past now have actually moved away from the area to go to Uni etc and therefore do not go as often as they used to and then because Ipswich is not exactly prosperous they do not move back to the area and go where the jobs are. Add to this that you do not get that many newcomers who come to settle in the area, we do not have a great number of students and those which do and are new to the area rarely stay beyond their degree to settle here. This is in contrast to Norwich who have a large student population with many of whom actually stay and settle in Norwich.

 

It really is a catch 22 situation. The team has to do well consistently to attract larger crowds, if the team fails the crowds reduce meaning that there won't be extra money to spend on decent players. The fair play rules are all well intentioned but will do nothing but compound the downard spiral. Club's with small turnovers will never be in a position to buy better players if it breaches their % of turnover so from what i can see this will be the final nail in the coffin. The bigger clubs that have a big turnover will do very nicely while everyone else will be caught in this financial straight jacket. Perhaps it will be fairer if the relegated premier league clubs didn't get so much in parachute payments and for a reduced period.