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.

http://www.twtd.co.uk/news/765.jpg>

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.

PimsOclock added 13:54 - Jul 5 Wow SteveH! Extremely analytical and lots of compelling arguments. Well done sir!
0

naa added 14:00 - Jul 5 A very intelligent blog. Wonder how many of the usual fools will still moan. Some of our fans need to start living in the real world.
0

alsagerblue added 14:09 - Jul 5 A very interesting blog with sobering prospects. I have for several years become resigned to us being an average Championship club.
0

rickw added 14:11 - Jul 5 Everything you've said looks correct, however if a club is motivated enough they will find ways around FFP - just look at Man City made all time record losses last season and still allowed into European competitions. Some other clubs don't seem to be sticking with this either, perhaps gambling on getting promotion this season - if thats the case it will either go very well or very badly for them......

0

naa added 14:20 - Jul 5 There is a two year window that essentially exempts everyone from FFP, in that they won't punish anyone in the first two years. I guess some clubs are going to 'go for it' in this period. I think we're right not to, personally.
0

ITFCOYB added 14:46 - Jul 5 Great blog and good to read some realistic comments on it, too. I had wondered if MarshallsMullet and i were the only realistic ones around here after being (brilliantly) cut down for a similar point of view (albeit hopelessly underdeveloped in comparison to the above) that i posted yesterday... Well don SteveH, i wonder if this could start a counter-culture of realism on TWTD... Nah, we'll still be reading the usual, i suspect, like hopeless addicts.

0

saffronblue added 16:04 - Jul 5 Wish the players agents would wake up to this, I think it is them that are killing our game always chasing the biggest dollar. I think deep down most of us accept that ITFC are now a mid table championship club and although we all dream of getting promotion realistically with our resources this seems unlikely and if we could play attractive footie and win more than we lose most of us will be happy. That said I hear Van Persie is looking for a new club, go on Marcus, you know it makes sense.

0

Andy32Cracknell added 16:09 - Jul 5 I think that this is a brilliant blog. I fully understand what you are saying, even though many dont. However, there is one way the club can get around the FFP and that is through the club sponsorship. Mr Evans sponsors our loved club, and he could do a yearly contract and pump as much money as he wants into the club through this. JUST AN IDEA.
0

irishtim added 16:45 - Jul 5 Outstanding blog. Well researched . Only prob is we all get a bit carried away at times.Hoping that we might get back to the glory days. Reckon u should be a journalist mate. Again well done.
0

StortfordBlue added 17:25 - Jul 5 Absolutely fantastic blog. Thanks for taking the time and effort to post it.
0

Daleyitfc added 17:58 - Jul 5 Excellent, if depressingly realistic, blog. I suspect that the FFP model will fail reasonably quickly, leading to a total revamp of football in England, and clubs like ours will then find themselves playing in regional leagues come 2020.
0

buryblue77 added 19:01 - Jul 5 Very good blog! FFP is the biggest load of nonsense we've seen enter the game. It is elitist and wholly unfair on smaller clubs. I agree that clubs should have severe penalties for not following a sound financial model but to restrict clubs in this way is wrong, it will discourage wealthy benefactors from buying clubs and surely we will see a levelling out of clubs merely based on their size and the amount of fans they can accomodate.

0

rosseden added 19:18 - Jul 5 Brilliant blog - we should ask Phil for a separate section of the site for the realistic fans, where we can post about realistic targets and what we might be able to do as a club to move forward.... i found a few sensible people when i wrote a similar blog a few months back..... Interestingly, i dont know SteveH, and as far as i know neither of us work for ITFC so dont have insider info, but there are quite a few very similar numbers in the two blogs..... http://www.twtd.co.uk/news.php?storyid=20645

0

DutchTownFan added 19:42 - Jul 5 Fantastic blog! Bet PJ, Clegg and Evans are glad you managed to put the facts forward to us in such a clear way.
0

linhdi added 22:26 - Jul 5 Excellent blog. In most professional leagues there is a strong correlation between a club's wagebill and its league position. Your trendline suggests that Town are performing exactly to expectations relative to attendance, which in turn is a reasonable proxy for income and hence for wagebill. So, to be realistic, a top-10 finish would represent a reasonable achievement. That feels right, looking at the greater financial strength of many other clubs in this league next season.

0

WarkonWater added 09:58 - Jul 6 What I find in interesting is that in 2005/06 when we finished 15th in the league our average home attendance was 24,252. In the last season when we also finished 15th our average gate was 18,266. This is an alarming decline of 24.7%. I know attendaces in the Football League have fallen in recent seasons but they have not been as dramatic as ours. This club has been in serious decline since the Marcus Evans takeover. We will not be able to compete until this is reversed.

0

rosseden added 10:59 - Jul 6 Warkonwater, do you mean until we grow attendances, or until Evans leaves?
0

itfc1981 added 11:27 - Jul 6 Clegg not selling players before there value falls, is why is looked down on. In real terms he is losing the club money. What you say is true on the whole, but it has to be said Clegg and co bad management as lead to the employment of poor managers who have in turn brought badly. Therefore we have dropped down the league and have lower attendences than we should do. FFA locks clubs into its model at the point of its introduction, ie while we have hit a 50 year low. For this we blame the board.

0

owdboy1 added 11:44 - Jul 6 Congratulations on a very well researched and lucid blog. The great problem for ITFC is to get back those supporters who got totally disillusioned during the Keane era and stopped attending. There are probably 5000 to 10000 floating supporters who would return if the current team is successful. It has always been a factor at Portman Road that success breeds crowds (see other successful times). The great problem for the current management is how to do a Reading / Norwich and achieve success without spending money. (Answers on a postcard to Mr P Jewell!!)

0

TR11BLU added 12:32 - Jul 6 Excellent, well researched blog, thanks Steve. To owdboy1, nail on the head with the need to attract those supporters back but as shown in the blog stats, PJ is also doing his bit to disillusion the masses. IMO two bad management choices.
0

murraybrunning added 14:30 - Jul 6 This is a really well written coherent blog and I agree with most of the points. However having a rich owner like ME FFP does not mean he cannot put his hands in his pocket. He is our shirt sponsor- He can plough as much money as he likes into shirt sponsorship thus increasing turnover and the amount that can be spent. There are also similar avenues that could be explores with stand/stadium naming rights. Not saying this is a road we should/would go down but it is one way a rich owner can side-step FFP if he really wished. Congratulations on the blog though mate- we need more intelligent people like yourself who live in the real world!

0

ipswichjon added 14:38 - Jul 6 Very good blog, perhaps more than anything this highlights the need to get the supporters through the turnstiles. There are two things that would really be beneficial to Town I think (1) An emphasis on attractive attacking football, this is much improved under Jewel but a shift to the Joe Royle all out attack might atract in a few more (2) and I think this is the key for Ipswich, INVEST IN YOUTH! We all want to see home grown products in the team, we all are (apart from a tiny number of morons) prepared to give them time and allow for errors if the work rate is there and their wages are considerably lower than established FLC or premiership reserve players! I'm hoping that this is Cleggs plan as they've brought Klug back.

0

rickw added 16:32 - Jul 6 Someone mentioned we had a lot more fans in 2005/06 despite being 15th. That was a team mainly comprised of youth team players, who were playing good attacking football and we had a decent home record (abysmal away though). Fans were watching then because of those reasons and we thought we were watching the beginning of a promising team..... Since then football has been dull (mainly under Keane) and we've shown very little signs of the clubs progressing. I felt the 2nd half of last season when we went to the 4-2-3-1 formation was a lot more entertaining and we all know a good centre back and keeper would drastically help us defensively. If we can get those players in and continue playing the football we were I am sure fans will come back!

0

TangoAlphaNovember added 16:44 - Jul 6 Well done thoughtful blog. Has given me better insight into how club finances work but also made me feel pretty gloomy too. If the players understand how this works surely they will want to go to the clubs with a larger fan base and stand a better chance of gaining promotion/earning more money. Same goes for managers also.Must feel like swimming against the tide for someone like PJ who is expected to haul the club up the ladder to the promised land of the Premier League.

0

HARRY10 added 20:52 - Jul 6 Unfortunately the ticket income figures are wildly out as can be seen from the accounts released in Nov 2010 - "Gate receipts were down from £6.702m to £6.362m, despite an increase in ticket sales due to Town’s extended Carling Cup run, coupled with a lucrative FA Cup fourth round tie at Chelsea, during the 2008-09 campaign." I cannot see there being any significant changes since then Ticket income is about £a third of our total income, we will need an awful big rise in attendances to make a big difference in what we have to spend, sadly most fans are still in cloud cuckoo land regardimg us spending millions on such and such a player. We will have to wait until we see what is left come the end of August then pad it out with a couple of loanees in Sept.

0

Blogs 295 bloggers