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SCMP: Calculating the turnover

3 May 2013

Second part of a three part interview

The second part of our interview on the subject of Salary Cost Management Protocol.

What other areas of turnover can we safely include in our forecasts? The obvious ones are season ticket sales, league match gate receipts and friendly game receipts. We normally get a good indication from our first batch of renewals of our season tickets as to what level we will be at. We build it up from there. We'll then assume that the same number of people will take out a direct debit as we had last year, and the remainder will pay up front. League gate receipts are based on the average crowd for the season just gone, and we know we are taking a significant drop in that this time round. We will be down to somewhere around the 4,200 mark once the Colchester game is taken into account. To calculate our net gate receipts we simply deduct the number of season ticket holders from the average attendance figure, and multiply it by the average entry price per head. Cup and friendly games are usually a round amount which is added to that figure. On the player side of it, we always use the ‘AN Other’ name to fill any gaps we have from those players who have been released or for contracts which have expired. We assume we are going to fill the gaps before the season kicks off and we forecast accordingly. Other relevant turnover includes things like the central payments we get from the Football League, which incorporates TV and radio broadcasting, but we don’t forecast for standalone TV appearances in any way. For some reason we very rarely find ourselves on the lists for televised matches, which can be very frustrating. There are other clubs who seem to get chosen almost week after week.

How important are attendances in relation to the final figures we achieve? Gate receipts are a big one for us because, as we say, the forecast going forward has to be evidence-based. In terms of attendances, that means that you have to predict like-for-like - with the odd spike if a so-called big team has dropped out of the Championship. We didn’t foresee an average drop of 1,000 over the course of this season at all and it meant that once we got to December we had to actively cut things back, simply because we weren’t getting the income levels we thought we would achieve. It was interesting for us to talk to people at the Football League just a few weeks ago because they commented on the fact that we'd got ourselves into a bit of trouble this season. The alarm bells had been ringing with them as we started to get closer and closer to our 65% level. The simple reason for that was that our forecast on gates was too high at the start of the season. We had budgeted against an average crowd of 5,200 from the season before and the 1,000 drop meant we lost a big chunk of our expected income.

Does the commercial side of the business come under the SCMP bubble? Yes, but again it is all evidence-based. What you do have to do with this type of revenue is forecast against your income from these streams after you have paid for the service in question. In other words you use the net figures. For example, if we pay for a meal in the restaurant at £15, and sell it at £17.50, it’s only the £2.50 (multiplied by however many meals you sell to your supporters) which goes forward into the forecast. That's the same for programmes, shop and lottery. Commercial income also includes Football League interactive revenue (earnings from the official website), kit royalties, associate director fees, ground boards, advertising space, donations, stand sponsorship, shirt sponsorship and player sponsorship. We also include car parking because that does bring a fairly big chunk into the club over the course of the season.

Is this part of the income stream what we used to call the football fortune? Yes, all other areas of income such as these were held under the football fortune banner. The solidarity money we get off the Premier League is included in that, along with the parachute payments for those clubs relegated out of the top flight. The net transfer income is included, but only for the cash you receive that year. For example, the payments for Richard Keogh were spread over three years and that would be reflected in the forecast for each of those three years. It starts to get complicated when you submit your P&L (profit and loss) figures for the year because the whole amount of the Richard Keogh fee would be included for the year in which he was transferred.  Everything else in your SCMP forecast should be the same as your P&L account, apart from that one figure. The Football League reviews all of these documents and, if something isn't right, they'll come back to you for an explanation. All transfer income comes through the Football League anyway, so they are pretty much on top of that side of things. 
 
There appears to be a loophole whereby you can boost your forecast and add to your turnover figures with a donation or a gift of an injection of money? This is the only grey area in the whole system - equity cash injections and accumulated profit. The equity cash injections are where the director's loan turns from a soft loan (flexible terms of repayment) into a donation (no repayment required at all). Basically, if you get a genuine donation then you can include it as part of your income. If it has to be repaid in any way then it has to be omitted. PFA contributions for medical insurance count as a donation, as do some of the fantastic things some of our own sponsors do. These often go under the radar at the request of the sponsor concerned, but it is something we greatly appreciate. Just to clarify, equity would be when somebody said they wanted to put £1 million into the club and they absolutely did not want it back. A loan would be if they said they would give you the same amount of cash but that they wanted it paid back in full, or in part, within an agreed repayment timescale. 

Click HERE for part three of this article.

Click HERE for part one of this article.

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