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Getting a balance
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The Bigger Picture: Administration

By: Rob Sedgwick
Date: 29/07/2009

PROBABLY one of the most amazing facts of the last few years is that no league football club has gone out of business. Many have come close to disappearing altogether, but none have done so since Maidstone in 1992.

Judging by the number of clubs who have gone into administration, which by now must be well into double figures, it would seem that a large number of football clubs are still living way beyond their means. Sometimes this is due to a wealthy benefactor propping up the club, but in the main it is simply that there is not enough money coming in to pay the bills.

Why is this? Sometimes there are exceptional circumstances such as the collapse of ITV Digital, which affected many teams at the time, not least ourselves, and the ramifications of that time are still being felt at Blundell Park.

Other times it may be due to relegation reducing the income of a club. That leads us nicely to the next point, which is that a club's ambitions to do well can lead to poor financial decisions being made which could adversely affect the club in the future if those expectations are not realised.

There are only so many promotion places to go round, and cups to win, or come close to winning. Yet many clubs who proudly announce Five Year Plans to go places which often seem absurd to the outsider, are clearly budgeting to at least achieve some of these aspirations. They clearly cannot all succeed. It is an impossibility with only a finite amount of success available within our competitions.

The possibility of failure has to be entertained and allowed for in clubs' budgets. Relegation can happen to any club, anyone can have a bad season and go down (yes, even the Big Four!). So all players contracts should have the possibility of relegation written into them and a commensurate wage reduction.

Then we come to the issue of players' wages. Clubs obviously have total control over what they pay their players. Yet many clubs have placed themselves in jeopardy by paying their staff more than is prudent. The league have introduced rules to cap the total wages that a club is allowed to pay. But this doesn't mean each club has to pay this amount, just like it is not obligatory to reach your overdraft limit.

An allowance has to be made for the team not doing well and gates falling as a consequence. The pressure to do well and the unrealistic expectation of success though must still be leading to clubs overspending judging by the fact that so many teams are still going into administration every season.

We as fans can play our part by lowering our expectations of what our side should be doing. Would you rather that your club gambled on success and risked their future at the same time? Or would you rather settle for a more conservative, prudent approach which perhaps lowers the chance of success in the short term but ensures the club is viable in the longer term? Just because other teams in the division your team is in are overspending it doesn't mean it is a practice your club should blindly follow.

When clubs do go into administration other firms in the local community often suffer. The money owed by the club, usually in the millions, is largely written off and the creditors have to take it on the chin. Firms must be reluctant to give any sort of credit to football teams, and rightly so as many firms must have suffered or even gone under as a result of unpaid debts, but it does mean that sensible clubs may suffer as a result of their sport's reputation.

In summary all clubs and many fans are suffering because some clubs are behaving irresponsibly. I would like to see the following actions (taken unilaterally if necessary) taken by all clubs:

  • Operating well within their present budgets, making reasonable, worst case allowances for falling gates.
  • Ensuring the possibility of relegation has been factored into players' contracts, no matter how unlikely it seems.
  • Fans to have realistic aspirations for their clubs and not to demand expenditure which the club could not afford.
  • A tightening of the current wage cap within the Football League to make it less likely for clubs to get in trouble. Whatever is in place now is not working.
  • A more punitive points deduction punishment than is now in place for clubs entering administration, either more points and/or additional years.
  • An extension of some form of the wage cap for the Premiership clubs, many of whom are finding themselves in difficulty despite their huge incomes.

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