| [Blog] FFP + Low Attendance = Mid-Table Written by SteveH on Wednesday, 4th Jul 2012 22:14 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. Please report offensive, libellous or inappropriate posts by using the links provided.
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