Minority Report 2019-20 - Talking Finance (2)

Summarising 24 clubs accounts which as you rightly say are not easily comparable because they are summaries with some items masked.

The most obvious conclusion is that many clubs are massively indebted but are carrying on regardless and finding ever more "creative" ways of maintaining cash streams. For any business, when cash stalls, debt becomes unmanageable, at whatever level unless someone is willing to take over the club, with those debts and expunge them or maintain new credit lines.

The problem with football, making a profit is nigh on impossible.

So if a club wishes not to indebt itself (a noble and sensible standpoint), it has two ways of competing. Finding revenue streams that accelerate its income capabilities. Or wait til everything collapses and potentially find a higher echelon than they would have under the old structure.

Our problem, well our 3 problems.... 1, our commercial revenues don't appear to have had the step change some perceived would happen on re-entering the championship. 2, our sales proceeds continue to be nominal in contrast to our more indebted peers, 3, the purchases we've made have been significant in number, while less significant in quality and value, at this time. This may be resolved in time, and as a result, residual value at the point of crystallised sale may be unaffected. But short term stated goals (survival) may be jeopardised by the strategy adopted for player acquisition.

Can we compete in the Championship if we ensure we remain breakeven at worst? Maybe. Can we compete regularly if we have an aggressive sale and purchase cycle that repeats every 18 months to 2 years? No, I don't believe we can.

 

Just missing academic citations for the masters
Despite the self imposed financial ham-stringing by the owners to keep us solvent on the balance sheet for which you’ve gone into great detail, the overwhelming fact is they massively cocked up the summer transfers, letting pinnock go for what was in effect ‘ championship brass tacks’ compared with most at this level reinforces that argument I believe, especially when we didn’t need to sell
Just look at the state of the defence week on week, it tells it’s own story. Not saying pinnock would’ve plugged all the holes but I reckon he could’ve marshalled it better than the train wreck it’s been overall so far. to try and blood what is in effect a new back line in this league is pure folly.
I can’t recall Sheffield united flogging the backbone of their side when they were promoted back to the championship and they haven’t exactly broke the bank to get back to the premiership unless I’m wildly off the mark?
Professional football is surely about being as successful as possible? Albeit in our case, tempered with budgetary constraints.
Bottom line being we were in a position not to sell either pinnock or Moore but let them go for well under what they should’ve commanded at this level.
We’ll never know of course if they would’ve made a difference but personally I feel the defence would’ve been in better order and we’d have had a hold up outlet for a plan B in Moore.
Now it’s cross your fingers time due to poor judgement by these owners in the summer.

 

Not being funny RR but you have way too much time on your hands! Stupid amounts of money being bandied about.

 

This is brilliant, you should get the highlights published by a national newspaper, seriously.

 

Football fans in general always know the answer to a problem, because it is always the same, "spend more money". And yet if you ask them to spend more, they are reluctant to do so. For example, if we doubled our admission prices it would, at least in theory bring in an extra £3.6m. It is much easier to pay Ethan Pinnock or Keiffer Moore an increase in pay if you have that much more cash. However, the reaction would be that many fans would rather not go, than pay extra. The law of diminishing returns. When asked why the team is not better, those self same fans will tell you that the board should have kept those players, and should have found the money to do so from their own pockets. Now Patick Cryne did that on occasion, and by the time he sold out, he had built up a debt of more than £6m and had invested another £1.5m in donations. And yet many will remember Patrick Cryne only because of the players he sold in January 2016. Our current owners have no loyalty to Barnsley FC. Why would they? They are here in order to try to make a profit on their investment. Best of luck with that by the way. They are not going to throw money at the club unless they see a logic to it. A logic that I do not see, if I am honest. Even then, they would have to have incredibly deep pockets to do so, and then FFP comes into play to ruin their chances.

My motives for producing this information were to get it out there. To show the fans the mountain that we have to climb. To try to illustrate how difficult it will be to deliver what they want. Having read all of that information, the fans have a choice. They can of course ignore it and continue to pedal the same old lines of thinking. Or they can genuinely sit down and think about the information, and having thought about it, they can try to arrive at an alternative strategy. A strategy which they can fund from existing resources, because if additional resources are required, they must have a new source of funding.

The questions that this information should prompt are difficult questions. They are not easy to answer. It is a lot easier to just continue to insist on a better plan, and forget about the hard questions. But someone has to answer them.

 

I'm retired so I guess the answer is yes, I have too much time on my hands.

 

Good read that Red Rain.Unfortunately people only want to believe in things that suit their agendas.
I've listened to the board the Ceo, the financial director and the coach but unless it suits they all tell lies.

 

Never said that. They were both in contract, no more money need be found. As can be seen from your figures, remaining in the Championship is worth more than we received from their sale. And that's before we factor in the purchase of replacements and signing on fees for those players. Doesn't mean we would have remained in the Championship, but neither would we have required the owners to dip into their own pockets had they not been sold.

The options aren't just:
1 Buy only young players with a resale value and sell at the first opportunity regardless of affect on the team
2 Overspend

There are others

 

Jay, I did not have you in mind when I wrote all that stuff. It has been written and compiled over a number of months because the subject interests me.

Partly the reason for all the work is to try to illustrate why the modus operandi is what it is. We are not a rich club, partly because economic factors affecting South Yorkshire, partly because the population of the town is not large, and the people have lots of alternative teams they can support, and partly because we do not have a rich benefactor /owner who is willing to subsidise the club and its fans. Personally, I have known all of that for a good many years, and it has never put me off supporting the club, because they are my team, and I identify with the team. Nevertheless, I am realistic. I known that to be better than we are means that we have beaten the odds, and we do have a better club than does Doncaster/Rotherham/Chesterfield and a lot more that face similar adverse circumstances. I just feel that sometimes, my fellow supporters need reminding of the odds that we face, and the challenges that we need to overcome to be a better club, to be more successful on the field.

You make the point that there are other ways, but you do not say what those other ways are. Quite frankly, I am not sure there are other ways, because I cannot think of any myself. If I could, I would tell everyone what they are, exactly, and in detail. If you can think of a better way, well the numbers that I have produced will allow you to check out your theory, and I will be only too happy to assist you with your calculations and ideas. But you have done what I thought others would do. You have said, there must be a better way, but you have not offered any thoughts on what that better way might be. Again, frankly we are miles behind most of the league in terms of funding, and I'm afraid that funding is 90% of the issue in the Championship, and that is why much of the emphasis of my piece was concerned with FFP and the cheating that is going on to frustrate the attempts of the EFL to create a more level playing field. Because if clubs are better funded than us, and the still have to cheat in order to compete effectively, then what chance do we have if we are not willing to do any of that stuff. And do not get me wrong here, because I do not think that we should be doing any of that stuff.

Above all, I think the figures that I have produced represent an interesting topic of conversation, and I have produced them at this time because we have an international break coming up, and time to talk about these things. Of course, it may only be me that is interested, in which case, I shall be talking to myself, but please do not take my remarks personally, because they are not intended as a personal attack on any individual.

 

Pretty sure I did offer a different way. Don't sell Pinnock and Moore, don't pay them any more, just don't sell them. That's different to what we did, so it's a different way. Would that have resulted in our owners having to reach into their back pocket considering we'd already sold Lindsay and received an extra £6 million due to promotion and wouldn't have to buy replacements?

 

But isn’t “not selling Pinnock and Moore” just a gamble to stay in the Championship? Exactly what RR is saying. We wouldn’t have the money from the sale of them and then if we still got relegated we’d have a bigger hole in the finances. Where would that money come from?

 

Great analysis RR, easy to follow and understand the challenges of staying in the Championship without risking financial ruin when you layout the compounding influence an increase in spending in just one season would have on the following seasons.

Many thanks !!

 

We didnt have to sell all three..

 

Clubs like Wednesday and derby still find ways round cheating the system. Mr Chansiri for example owns a lot of the sponsors that sponsor the club such as a made up taxi firm which is more revenue to cheat the efl

I’m not saying we follow suit but there’s only so many times you can go to the well and keep hoping we can re sell our potential assets

To compete in this league you need regular cash injections and like you say, the owners aren’t willing to do that due to varying factors

It’ll be a massive miracle if we stay up this season with this current team and without investment

 

As I touched on earlier, the questions are how do we generate more revenue and how do we then spend that in a sensible way that allow us to not just progress over time, but, and this I feel is what isn't being considered, compete.

Firstly, our owners have several businesses, across different countries and presumably, with potential markets that could be tapped into for possible overseas followers, particularly as there is now an online portal that can easily get the club in front of anyone in the world, and, generate money from them.

The one perception I felt must be part of this journey was our pushing into overseas markets and trying to cater for Chinese, American... and probably mostly, Indian audiences, given, aside from the Times Square "ad" we've not been made aware of any efforts to attract any overseas audiences, or any resource that's been allocated to it, or, any increase in volumes of online subscriptions.

I also thought a potential strategy was to enhance corporate sponsorship using their existing business, affiliated businesses, or businesses in the target markets we may have been aiming to attract in the point mentioned before.

Done successfully, that could generate significant amounts. Instead we went with a tiny unheard of company (that some have said.... may not be the most moral) that I suspect is paying one of the lower levels of sponsorship in the championship.

We could have increased season ticket prices more. Our season tickets are very very cheap, and the club could look at other ways of encouraging more people to use the thousands of empty seats which may well up the pot a little too.

But fundamentally, if we are going to have such a known strategy of sell everything, we have to say no. A lot. Til people go away and don't bother us again, or they return with a proper bid or pay over the odds. That only comes from saying no and putting big price tags on players heads.

My perception is if someone came in for Woodrow, we'd be happy with £3-5m... because its more than we paid. if it was say Brentford or Bristol City... I suspect they'd be wanting something in the realms of £10-15m.

Every time we sell for less than value, we crystallise an invisible loss. The more we do that, the more we waste opportunity of parity. And worse, it means we don't move our strategy of recruitment forward.

We also have choice of who we recruit and how many. Its a self imposed choice that we have signed so many 22-20 year olds with so little game time. We could have signed 8 players for the same transfer fees and wages, but that would have allowed us to get slightly better quality that were more match ready.

So yes, I concur so many clubs are cheating and frankly, must be living on borrowed time, and yes I concur on the face of it we face an uphill task to compete. But... we're also impinging on our potential success by making decisions that may take longer to come to fruition and ignoring the here and now.

If we go down, the value of our players will drop. It sets back the development, it impacts on gates and possibly commercial activities and we start all over again.

These owners could have done more with sponsorship, commerciality, utilising existing businesses, pushing overseas revenues for streaming content and utilising what revenue we do have better than what they have done so far.

 

Our owners are multi-national business people. Now I am not multi-national, and neither am I an entrepreneur, but I would expect that given their success, they would have a better insight into the sponsorship possibilities for Barnsley FC than you or I. They will be even more aware than you and I what the costs are of failure this season. For a start our TV revenue will fall by £6m, and I would think that they are fully exercised by that possibility. It may be time to break out the emergency funding in January for all I know. But we really need to get away from the them and us mentality. We need to credit them for having some intelligence. We both want the self-same thing, albeit for differing reasons.

As to the possibility of multi-million pound foreign deals, well I am highly skeptical that turnover can be boosted that way. India has no great interest in football, and what company wants its name to be associated with failure, be it and Indian company, an American company or a British company. I do not have a business, but if I had a business that I wanted to link to a big name, a name that I thought could improve my brand as a result of that association, one of the last names that I would think of would be a side that was already condemned to struggle in a higher league this season. The money that Barnsley FC would have needed to spend to give a potential sponsor hope that he was associating his business with success would be far more than the sponsorship fee that could be raised. This process really is not easy, and you should assume that we have intelligent business persons in control of the club, albeit business persons who want to see a return for any investment.

There is no doubt that your response does go into more detail than most, and I am grateful for that. However, what it amounts to is still, I don't know but our owners should be doing better. Sorry to paraphrase it thus, but that is exactly how I feel.

 

Some very good points there but can you imagine the uproar if the board significantly increased season ticket prices.
I also agree with Red Rain when he says the "us and them" mentality isn't helping.

 

If there is no scope to generate further revenues from overseas audiences, frankly, I see no reason at all for this group to have acquired us. Undervaluing sales, as in the Cryne era, is no way to progress.

We assume they want to make money "over the long term"... but that was said at Nice, and the period of ownership was very very short. My perception now as time has passed is that we were a distressed opportunity. Bought for little, left to carry on as it was, try and get the ground back into club ownership and probably flip for as much profit as they could manage.

A question for you, for all your words and analysis... what is your personal conclusion? That its just futile and what will be will be?

 

You obviously do not believe the rumours that we offered Pinnock the best contract that we have ever offered. You obviously think that Pinnock would be outstanding for Barnsley, even though he is not a starter for Brentford. It is clear that we need players with more experience of the Championship, but Pinnock does not have that. In other words, there is no guarantee that Pinnock would have made any difference, and we would have been out by £3m if he had failed in the Championship. I do not know the future, and neither do you. However, the picture you paint is of a future that much better under your plan than it is now, and frankly, there is no evidence for that.

You say that we have an extra £6m, but every team in the Championship has that £6m. In fact, every team in the Championship has that £6m and a lot more. My analysis went out of its way to point out the huge disparity between our turnover, and the turnover of almost every other team in the Championship. The comparison that you should be making is not with what we had last season. Our turnover last season was enough for us to win promotion. The comparison this season is with the turnover of every other team in the Championship, because we need to finish in front of 3 of those teams in order to stay up. It does not matter that our turnover is £6m more if every team in our league has still more. In fact it is worse than that. Because of SCMP, the team that finished last season will have been far inferior in individual quality to any team in the Championship. So we have to catch up whilst spending a maximum of the same amount of money, and in many cases less.

This is not supposed to be an argument. This is supposed to be an exchange of genuine information, an education process if you like. Please try to regard it in that manner rather than the usual knock about.

 

The most successful strategies tend to be incremental and ones that overlap so there isn't over reliance on one area. They could certainly have increased ST prices a little off the back of a lot of feel good from a record season for points.

I certainly don't feel I have an us and them mentality (though everyone has a perception).... my background is accountancy and strategic consultancy, particular in the turnaround community, so I feel very comfortable extrapolating business and investment reasoning and possible growth strategies for either enhanced profit, providing credit lines or flipping.

So from a personal standpoint, i'm just talking aloud of why have they bought us, what are their strategies for personal gain and for the club during whatever period they own us.