Video Spurs’ financial health and long term prospect

[Park Lane Mark Twain]

Zero profit is the standard life cycle so why would football be any different?

Assuming "being a premier league club" means your product is in development / introduction phase then it would be expected / good business practice to have zero profit.

In addition to this, profits are taxed so if you make profit you may be better off investing those in infrastructure etc. rather than recording it as profit.

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Well firstly football isn't like a mobile phone, its lifecycle is different as it's based on a different, evolutionary growth.

Secondly the rise of inflation with transfer fees and player sales is astrinomical compared to the rise of normal money inflation in every day life. When that happens bubbles will burst, it's a matter of when not if.

Thirdly we are looking at figures that are skewed with regards to THFC. The TV money revenues spiked profits across the board in the PL, as has our over achievement in Europe. We have the 6th highest revenue yet have finished 2nd, 3rd, 4th etc. If we were to use this vastly variable figure as a consistent expenditure, we run big risks. Unlike any other league, apart from Serie A really, the top 3-4 teams usually pick themselves. In the Premier League, the need for top 4 compared to the risk of not getting top 4 is major to our club compared to the likes of Chelsea & Man U due to their owners investment or brand strength.

TheFightingCock has got a podcast it uploaded yesterday or the day before I think where they have Paul Robinson as a special guest. It's well worth a listen if you have 25 minutes spare as it talks with Robbo about his time at Leeds. He said that the most pivotal moment there wasn't not winning the Champions League back when they made the semi finals but missin out on qualifying for that tournament next time around. Peter Ridsdale had spent within their means with the expectation that X money will continue to come in. When it didn't the wheels came off & that's why whilst I'm very ambitious for my club, our club I think it's acting so sensibly at the moment when inflation is so volatile, teams are risking a lot instead of investing smartly into the infrastructure of their business and I think it's the right call as the money bubble will burst and when it does, we will be in a position to prosper ten fold.

We can already see wobbles because of reckless spending with the likes of Alexis Sanchez, Paul Pogba, Ozil & Gareth Bale causing more long term harm than good. Jack Rodwell was the first example yet the current ones aren't playing at nearly clubs, they are playing for the biggest clubs in the world. Andre Grey cost the same based on inflation rates as Diego Maradona did, teams will struggle to keep up so I like that we saw this year as an opportunity to safeguard whilst others spiked the market. To me it made sense whilst we overachieved to do so.

 

[LuckyMe]

winning would be gobsmacking - and financially very good with not only extra prize money but no doubt sponsorship deals have a 'success in CL' clause which yields even more more…..and maybe enables a naming rights sponsorship deal for stadium etc.

But even runners up would take us up a notch.

And a 5th CL run in 5 seasons next season (with player reinforcements this TW) would help cement clear water between ourselves and Woolwich.

And even start to make a gap between ourselves and ManU in terms of current footballing standing (although sadly their huge commercial income will allow them to ride the storm even though it might take them 2 or 3 seasons to revive their squad) - and amazingly we are already equal with ManU 5 year coefficient which determines CL seeding, and another good run next season could take us well clear of them which will help us when they are back in CL.

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Kick in, given that you mention seedings, a win in Madrid will automatically put us in pot 1 next season.

The quality gap is much smaller going from pot 2 to pot 1, than from pot 3 to pot 2, especially with the bizarre pot 1 allocation, but it's still worth taking into account. It should, barring a horror draw, mean a (further) increased likelyhood of making the knockout rounds, and also the chance of winning the group and securing an easier last 16 tie.

 

[Spursidol]

Kick in, given that you mention seedings, a win in Madrid will automatically put us in pot 1 next season.

The quality gap is much smaller going from pot 2 to pot 1, than from pot 3 to pot 2, especially with the bizarre pot 1 allocation, but it's still worth taking into account. It should, barring a horror draw, mean a (further) increased likelyhood of making the knockout rounds, and also the chance of winning the group and securing an easier last 16 tie.

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Regardless of the result this year, a decent run in CL next season will very probably move us above several other clubs which are currently above us, so we end as being something like 10th - 15th in the co-efficient table (currently we are 17th), and that will be enough to guarantee us Pot 2 the following year (regardless of other results), and a couple more seasons of similar would cement our place in the co-efficient table.

Would be good to put clear water between ourselves and ManU too as imo, they will struggle to get CL for a couple of years, so the more room we create the better as with their income they will be back in CL in say 3 or 4 years time, unless of course they totally screw up and sponsors do not renew !

 

[Spursidol]

Zero profit is the standard life cycle so why would football be any different?

Assuming "being a premier league club" means your product is in development / introduction phase then it would be expected / good business practice to have zero profit.

In addition to this, profits are taxed so if you make profit you may be better off investing those in infrastructure etc. rather than recording it as profit.

Click to shrink...

Zero profit as a business aim is very high risk.

Take on one high wage player or one or two players who are constantly injured and suddenly you are making losses - and no easy source of money to bale you out.

Aim to make a profit, and one or two mistakes in player acquisition are not a problem - you have enough spare money to get rid of the and buy more.

So aiming to make a profit is a significant risk reducer - and that's true for any business .

 

[Blanchflower]

Zero profit as a business aim is very high risk.

Take on one high wage player or one or two players who are constantly injured and suddenly you are making losses - and no easy source of money to bale you out.

Aim to make a profit, and one or two mistakes in player acquisition are not a problem - you have enough spare money to get rid of the and buy more.

So aiming to make a profit is a significant risk reducer - and that's true for any business .

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Intentional?...

 

[r-u-s-x]

Zero profit as a business aim is very high risk.

Take on one high wage player or one or two players who are constantly injured and suddenly you are making losses - and no easy source of money to bale you out.

Aim to make a profit, and one or two mistakes in player acquisition are not a problem - you have enough spare money to get rid of the and buy more.

So aiming to make a profit is a significant risk reducer - and that's true for any business .

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Risk and reward - Its not an aim its a process of quicker growth - you can invest in the short term in the hope/ expectation of higher revenue in the future (see Uber / WeWorks etc). Zero profit on its own is not a great indicator of health of a club - I will stand by this.

There are ways to mitigate against risk (relegation clauses etc.), if I am a club coming up from the Championship I would not be looking to make any profits for the first few years, I would be spending the cash to try and establish as a PL club -the rewards are huge. It didn't work for Fulham /QPR but has for Wolves / Leicester).

There are other strategies out there (Burnley) but Zero profit for a period is valid.

 

[r-u-s-x]

Regarding the tax thing - if at the end of the Financial year I have £50M and I want to carry that over I would pay 20% tax so £40M - (I think this is how it works not an accountant or business owner).

Alternatively I could spend the full £50M on a new training ground / hospitality etc. for growth in the future.

Second is zero profit but I wouldn't say its significantly more risky or non-desirable.

 

[Spursidol]

Risk and reward - Its not an aim its a process of quicker growth - you can invest in the short term in the hope/ expectation of higher revenue in the future (see Uber / WeWorks etc). Zero profit on its own is not a great indicator of health of a club - I will stand by this.

There are ways to mitigate against risk (relegation clauses etc.), if I am a club coming up from the Championship I would not be looking to make any profits for the first few years, I would be spending the cash to try and establish as a PL club -the rewards are huge. It didn't work for Fulham /QPR but has for Wolves / Leicester).

There are other strategies out there (Burnley) but Zero profit for a period is valid.

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Probably 50% of players bought do not live up to expectation. So buying a complete dud or someone who is far from expectation just is not that unusual.

So if you plan to break even and do that - guess what you may need to pay to get rid of the player or may just get in only a fraction of what you spent on them. And that means replacing that player is a problem as you don't have the funds you had when you first bought them.

And if you buy Alexis Sanchez on £350k pa on a 5 year deal, then if you don't like him after a year (as ManU have the problem now) the most likely outcome is they need to subsidise his wages for say £200k per week (£10m) for 4 years - so that £40m out of the window.

And if you have aimed to have zero profits, then you are £40m down to start with

No prudent businessman would aim for a zero profit.

Problem only becomes when the market becomes overheated in terms of values - first well known example being the Dutch bulb crisis when prices of bulbs rose to £1,000 or so (in the 1700's)…...and then suddenly there were no buyers and anyone holding bulbs lost a lot of money.

That's why you make profits, so you can ride market downturns, even severe ones

 

[Airfixx]

"Not my money"

 

[r-u-s-x]

Probably 50% of players bought do not live up to expectation. So buying a complete dud or someone who is far from expectation just is not that unusual.

So if you plan to break even and do that - guess what you may need to pay to get rid of the player or may just get in only a fraction of what you spent on them. And that means replacing that player is a problem as you don't have the funds you had when you first bought them.

And if you buy Alexis Sanchez on £350k pa on a 5 year deal, then if you don't like him after a year (as ManU have the problem now) the most likely outcome is they need to subsidise his wages for say £200k per week (£10m) for 4 years - so that £40m out of the window.

And if you have aimed to have zero profits, then you are £40m down to start with

No prudent businessman would aim for a zero profit.

Problem only becomes when the market becomes overheated in terms of values - first well known example being the Dutch bulb crisis when prices of bulbs rose to £1,000 or so (in the 1700's)…...and then suddenly there were no buyers and anyone holding bulbs lost a lot of money.

That's why you make profits, so you can ride market downturns, even severe ones

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You can for a period but it comes with risk attached but for long term growth / health Leicester's & Wolves approach was sound as long as they now increase revenues and move into profit making.

Lots of business (with prudent owners) have a strategy during growth of no profit in the short term and clubs are no different.

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Growth of a market does not mean its a bubble - FFP is largely stopping excessive spending in the PL. That's not to say these clubs are healthy, without looking at the contracts etc in detail to see how they deal with relegation I have no idea. If they are still making losses once they are an established PL team this is also a concern.

 

[Park Lane Mark Twain]

Some perspective when looking at our financial results compared to the other clubs in the country. Please look at this and tell me that you can't see where things are heading for 3/4s of English football league sides and why our prudence at a time where factually we were right to believe e squad could and would still maintain top 4 wasn't in hindsight more correct than mismanagement:



The growing gap between the Premier League and lower-league clubs has been starkly illustrated by figures that show nearly three quarters of English Football League sides are losing money.

Premier League teams had record revenues of £8.4 billion and 12 of the 20 top-flight clubs made a net profit in 2017-18. By contrast, 52 of the 72 clubs in the Sky Bet Championship, League One and League Two ended the season in the red.

Taking into account all profits and losses, the 20 Premier League clubs made a surplus of £304 million while the 72 EFL teams had a collective net deficit of £388 million.