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UPDATE PART TWO: More from the club's chief executive

Football operations, football budget, wage cap and Friday night football discussed

14 December 2017

Part two of our end-of-year round-up from chief executive Nigel Clibbens includes a closer look at the positive impact of a successful cup run and an explanation of the often complicated and intricate subject of the ‘Football Budget’.

Football

The club currently employs 34 people working directly in first team football activities. We have 27 players, comprising 24 club contracted players (including four first year professionals) and three loan players. We have seven employees on the football staff (manager, coaches and support staff). Football staff payroll costs are at 75% of the club total spend (excluding interest and depreciation - and when player wages are included). On top of this are other football operational costs, such as travel, medical costs, etc. 

We are entering a busy time for fixtures in both league and cup, with seven games in the next 22 days, and this period will be critical in shaping the rest of the season.

After a very solid and fully deserved draw at League One Gillingham, in the second round of the FA Cup, we hope to use home advantage to progress when we face them next Tuesday night. Admission prices are cheaper than for league games, at £15 for adults and £5 for kids on the night. Click HERE for full match ticket details.

It’s also worth buying in advance to get an extra saving. We hope the reduced price will attract a good crowd which will help cheer on the team to face Championship side Sheffield Wednesday at home in the third round [this fixture is likely to be played on Saturday 6 January, kick off 3pm, should we be successful in making it through].

Cup football provides important extra income which significantly changes what we can then spend on players, other football activities and the rest of the club. For example, from the 2016/17 season we earned £127,000 from the three cup competitions, with a quarter of that coming from the Checkatrade Trophy. 

From the 2015/16 season, with the Liverpool, Everton and QPR games, we earned £736,000. So far for the 2017/18 season we have earned £80,000, before the Gillingham FA Cup replay.

In League Two we are currently sitting lower in the table than where we were at the same point last season, but we remain optimistic that we can mount a challenge through the second half of the campaign.  

We have some important games coming up against teams both towards the top and bottom of the division, but with just three defeats in the last 14 league games, and only one game lost in the last nine, we are certainly hard to beat. However, it’s telling that we’ve drawn five of those nine games despite leading in every one of them. Converting leads into wins going forward is an area where we can gain points and gain ground.

The rest of December and the festive season promises to be exciting, especially with the visits of Coventry and Accrington, which is always feisty, coming back-to-back. We hope you can be there to support us and be our twelfth man.

Football Budget

Much is said about the club’s football budget and it’s always a keen talking point, so it’s worth being clear on where we are.

Our approach remains to grow and direct as much cash and investment into our football activities as we can and then, together with that cash, we must get the maximum from it by being effective in using what we have. Effectiveness comes from focusing on first class player coaching, match tactics, player recruitment, team and player preparation, and development.  

The amount we have already committed on players costs and other football activities for this season is more than at this point last year. The budget, as we speak, is bigger. This increase has come despite the large fall in cup money and transfer cash so far when compared with 2016/17 and the year before. The detail of that has been provided in the first part of our review. Click HERE to read part one.

As is normal for all clubs, the way in which this budget changes for the second half of the year is hugely dependent on extra cup income (and sometimes player sales in January).

There can be a lot of debate about comparative spending between different clubs. In reality, our most reliable data on football budgets comes from the EFL but, even then, it is calculated on a very specific and anonymous basis so, unless clubs then decide to tell each other what they are doing, they only know their own spending and their ranking within the division, and not which other teams are spending what.

Each season in June / July every League Two club must confirm its ‘Relevant Turnover’ – in other words its forecast income for the year and its ‘Player Related Expenditure’ – these are its committed contractual spending on players (basic salaries, expenses and agent fees) and estimated future spending on players (bonuses) for the season. 

The EFL checks the submissions. Each club can spend 55% of its ‘Relevant Turnover’ on ‘Player Related Expenditure’- this is called Salary Cost Management Protocol [SCMP] – let’s call it ‘wage cap’ for simplicity. In 2018/19 it reduces to 50% (we, as a club, voted to support that reduction as we believe clubs need to take steps to improve their viability and curtail spending on players and the best way to achieve this is to do it together, as a division).

‘Relevant Turnover’ and ‘Player Related Expenditure’ are very specifically and narrowly defined by the EFL rule book as to what counts towards it, and what doesn’t. For example, it excludes all football operating costs, such as manager, coaching, medical, sports science, travel, and cost of players aged 20 and under. It also means young players are effectively ‘free’ and don’t eat into the wage cap. For example, last year Macaulay Gillesphey didn’t count in our wage cap, and this year Shamal George, along with our four development players, sit outside our ‘wage cap’ calculations.   

Clubs can, therefore, with strategic recruitment and development of young players in mind, increase their spending power and squad size by using young players who will then fall outside the wage cap. On top of this, because of the EFL Financial Futures scheme [click HERE for more information], clubs can get extra income grants to help with funding younger players. This underlines the potential role young players can play in being smart with budgets and football squads.

We submit our wage cap data twice a year, with a pre-season return in June in advance of the summer transfer window. We submit again in December, prior to the January transfer window. Following each of these submissions the EFL completes a benchmarking exercise for the league and tells each club their position in the 24-club league ranking. We receive the benchmarking data twice a year, in October and February, following the closure of the transfer windows.

This is an independent, reliable and consistent source of benchmarking information for the first half of the season, when clubs start their campaigns.

As explained above, because of the potentially huge impact of cup income after the August window each season (and to a lesser extent with player sales during the January transfer window) spending and rankings then change over the course of the season. That is why the process is repeated following the closure of the January transfer window.

Clearly, because not all of the costs of football activities are included in the EFL data (young players and manager, coach, travel, etc), comparing the actual amounts each club spends on football remains difficult, if not impossible.

As I said, budgets are not the whole story and are never a guarantee of success, plus the information is mostly difficult to untangle.

Up to a point, on-the-field success is influenced by how much you spend on all football activities, particularly with regard to spending on player costs. The simple theory being that better players cost more and that, in turn, makes you win more. Naive statistics might point to a strong relationship between the two, but that doesn’t mean one necessarily causes the other.

Money is not sufficient on its own and, as we all know, having the most resources has never been a guarantee of success either. Certainly I’d say that not having as much money as a rival doesn’t stop you doing better than them, or from having more success than them.

Of course, they make for good media headlines and conversations, but that’s about it. What’s important is what happens on the pitch, not who has spent what. In my view it’s more important to make sure you get value for money and then get the maximum from it.

That said, it’s helpful if the information from the club is there for fans to see, so that they can debate it from an informed point of view, rather than speculate about it. 

So, here it is ...

In the most up-to-date EFL benchmark data, up to 31 August 2017, we were at 99% of our wage cap. We could spend no more on players, except young players, unless we got new or improved funds which were outside of our forecast, such as income from cup runs, commercial activities, ticket sales or non-returnable cash donations, or from our club costs going down. 

Rest assured we maximise the income and minimise the costs in the wage cap return in order to maximise our spending capacity! At the same the EFL makes sure clubs don’t overestimate income or underestimate costs. Given we are at the maximum, when things change we get the cap changed so that it allows us to trade.

Our ‘Player Related Expenditure’, based on the EFL rules, put us very close together with two other clubs (within the average cost of one player), in joint seventh position in League Two, and there was then a big gap of nearly £200k down to the next club, in tenth position. Since then, following improvements in our actual trading [as I said, outside of our forecast] we gained more headroom, which was immediately spent on taking Steven Rigg and Clint Hill on short-term deals.

As in previous years, cup success, starting with Gillingham, improves our wage cap and gives us scope to do more with players during the window. The same applies to income from attendances and from our commercial and retail activities.

At the same point last year we were at 99.4% of our cap, and we were again very close to two other clubs in joint sixth position. There was then a gap of £150k to the ninth-placed club.

In the second, February end-of-season return for 2016/17, we remained in the same position in a group which was ranked from sixth to ninth in the division, and by this time we were £250k ahead of the tenth placed club. 

For me, the key points to take from this are these – our player budget is currently more than it was at the same stage last year and we are at the maximum, as we were last season.

Our place in the EFL pecking order is about the same [joint sixth or seventh]. As ever, cup income makes a big difference to what clubs – and particularly clubs like us, who are at their limit already – can spend in the second half of the year.

And, finally, I would reiterate that all of the above plays some part, to a point, but there is more to winning than the amount you spend! Spending is the easiest thing to do in football.

The Transfer Window and BAME

The club does not support EFL proposals to mirror the Premier League with an early closing of the summer 2018 transfer window. From our point of view, the case for change in the EFL is not a strong one. The proposal will not fully fix the problem of losing players after the season has started and it is more likely to lead to player wage inflation at clubs.

In addition, there is no certainty that the EFL will not be faced with backtracking if the Premier League reverts to the current system in the future – which will not be ideal. EFL clubs still have a final vote on the matter in February, but there is sufficient support at the moment for it to be adopted.

We supported the EFL proposals to extend the BAME initiative to increase diversity in coaching. We were previously members of the pilot group and have been in favour of such a scheme from the outset. We gave our backing and offered to take part in the trial process because we feel we need to play our part in opening up the game more widely, and that needs positive action. Click HERE to read the BAME press release.

Friday Night Football

Chairman Andrew Jenkins asked recently for views on Friday night football. It’s safe to say that the message coming back is that there was no appetite for league football being moved, so that won’t happen. However, as a one off, perhaps for FA Cup ties, some fans were open to a Friday night kick off, depending on the fixture.

In the next instalments I will be focusing on our Academy, our community activities, and I will talk more about the business areas of the club.


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