TSV 1860 Munchen: Creating financial stability
I'll try not to ramble too much in this section, and make it as coherent as I can - but financially stability is a big thing I like for my clubs, which is pretty much how I am as a person! I'm going to try and run 1860 on the tightest budget I can and try and turn them into a financial superpower.
For those who aren't aware, here is a good bit I read on Wikipedia about how the Bundesliga runs financially:
In the 2009–10 season, the Bundesliga's turnover was €1.7bn, broken down into match-day revenue (€424m), sponsorship receipts (€573m) and broadcast income (€594m). That year it was the only European football league where clubs collectively made a profit. Bundesliga clubs paid less than 50% of revenue in players wages, the lowest percentage out of the European leagues. The Bundesliga has the lowest ticket prices and the highest average attendance out of Europe's five major leagues.
Bundesliga clubs tend to form close associations with local firms, several of which have since grown to big global companies; in a comparison of the leading Bundesliga and Premiership clubs, Bayern Munich received 55% of its revenue from company sponsorship deals, while Manchester United got 37%.
Bundesliga clubs are required to be majority-owned by German club members (known as the 50+1 rule (de) to discourage control by a single entity) and operate under tight restrictions on the use of debt for acquisitions (a team only receives an operating license if it has solid financials), as a result 11 of the 18 clubs were in the black after the 2008–09 season. By contrast the lax approach of the other major European leagues has resulted in several high profile teams coming under ownership of tycoons and Middle Eastern billionaires, and a larger number of clubs have high levels of debt.
After 2000 the German Football Association and the Bundesliga mandated that all clubs run a youth academy, with the aim of bolstering the stream of local talent for the club and national team. As of 2010 the Bundesliga and second Bundesliga spend €75m a year on these youth academies, that train five thousand players aged 12–18, increasing the under-23-year-olds in the Bundesliga from 6% in 2000 to 15% in 2010. This allows more money to be spent on the players that are bought, and there is a greater chance to buy better instead of average players.
In the first ten years of the second millennium, the Bundesliga is regarded as competitive, as five different teams have won the league title. This contrasts with Spain's La Liga which is dominated by the "Big Two" (Barcelona and Real Madrid), and the English Premier League which has seen the "Big Four" (Manchester United, Chelsea, Liverpool, and Arsenal) finish in the top four for a number of years. This theory has been called into question because of Bayern Munich's dominance in the 2012–13 to 2015–16 seasons as the Bavarian side is able to spend big to purchase the league's best players and the Premier League's four different winners in four seasons. Financial regulations
For a number of years, the clubs in the Bundesliga have been subject to regulations not unlike the UEFA Financial Fair Play Regulations agreed upon in September 2009.
At the end of each season, clubs in the Bundesliga must apply to the German Football Federation (DFB) for a licence to participate again the following year; only when the DFB, who have access to all transfer documents and accounts, are satisfied that there is no threat of insolvency do they give approval. The DFB have a system of fines and points deductions for clubs who flout rules and those who go into the red can only buy a player after selling one for at least the same amount. In addition, no individual is allowed to own more than 49 percent of any Bundesliga club, the only exceptions being VfL Wolfsburg, Bayer Leverkusen and current Regionalliga Nordost member FC Carl Zeiss Jena should they ever be promoted to the Bundesliga as they were each originally founded as factory teams.
Despite the good economic governance, there have still been some instances of clubs getting into difficulties. In 2004, Borussia Dortmund reported a debt of €118.8 million (£83 million). Having won the Champions League in 1997 and a number of Bundesliga titles, Dortmund had gambled to maintain their success with an expensive group of largely foreign players but failed, narrowly escaping liquidation in 2006. In subsequent years, the club went through extensive restructuring to return to financial health, largely with young home-grown players. In 2004 Hertha BSC reported debts of £24.7 million and were able to continue in the Bundesliga only after proving they had long term credit with their bank.
The leading German club FC Bayern Munich made a net profit of just €2.5 million in 2008–09 season (group accounts, while Schalke 04 made a net loss of €30.4 million in 2009 financial year. Borussia Dortmund GmbH & Co. KGaA, made a net loss of just €2.9 million in 2008–09 season. Attendances
Based on its per-game average, the Bundesliga is the best-attended association football league in the world; out of all sports, its average of 45,116 fans per game during the 2011–12 season was the second highest of any professional sports league worldwide, behind only the National Football League of the United States. Bundesliga club Borussia Dortmund has the highest average attendance of any football club in the world.
Out of Europe's five major football leagues (Premier League, Serie A, La Liga, and Ligue 1), the Bundesliga has the second lowest ticket prices and the highest average attendance. Many club stadia have large terraced areas for standing fans (by comparison, stadia in the English Premier League are all-seaters due to the Taylor Report). Teams limit the number of season tickets to ensure everyone has a chance to see the games live, and the away club has the right to 10% of the available capacity. Match tickets often double as free rail passes which encourages supporters to travel and celebrate in a relaxed atmosphere. According to Bundesliga chief executive Christian Seifert, tickets are inexpensive (especially for standing room) as "It is not in the clubs' culture so much [to raise prices]. They are very fan orientated".Uli Hoeneß, former president of Bayern Munich, was quoted as saying "We do not think the fans are like cows to be milked. Football has got to be for everybody."
So where does that leave us?
As you can see, we are comfortably in the black - but this does include the £20m for the sale of Brandt and the prize money at the end of last season, £28m. I have spent just £2m on transfers - so we are losing money. As I'm at the midpoint of the season, I will take last seasons financial data to help me evaluate where I want to be.
We made a steady profit last term - but subtract that prize money and we are in real trouble. We have to assume that these figures are somewhat fixed and my on-field performance is the variable here. What if I finish 12th season and only make 15 million - well then we've only made £3m profit and then my budgets are slashed for next year.
My one way of doing this is to base my finances around this:
Wage budget < Gate receipts.
Last year we did that, and quite comfortably - but that was as a newly promoted team. I want to push on and make this a big team, but being wary of budgets. So I need to work out my real wage budget. To do that, I need to find out how much each ticket sells for (£20) and my average attendance (35k), how much each season ticket is (£291) and how many (just over 10k) and work out my overall budget. I will then divide that by 52 to get a weekly budget. Based on current figures, here we are:
Not a lot to worry about now - I spend about £160k of that per week. But it's good to be aware that if I wanted to squeeze every last penny out of my budget - I'd be spending more than I would be bringing in through my gate receipts. I can just plug in new numbers for next season or when my budget needs to change. This way - I can use the sponsorship and prize money for new signings and to improve my facilities.