Monday 31 January 2011

Football should be a business

You often hear the complaint that Football is all about Money these days, and its just business. Shame its not really. Because if it were, then your team would be more successful.

Often Football is about emotion, and no better day to discuss it than deadline day, when emotion, panic and generally craziness takes over.

There is a way. follow simple business rules, and don't let your heart take over. If any business has an asset that receives an offer worth more than its value then every business will take the money and reinvest.

Imagine that you have a business that has 25 products. You can easily analyse the sales, profit and total contribution from each product, You can factor in growth rates for each product and its easy to create a 'next 3 years' value attributed to each product. Some of the products you created from scratch and some you bought in as small products and grew them.

Imagine that total sales are £100m, and profits are £20m.

Now product Torres contributed £10m in profits last year, but after a serious product problem towards the end of the year sales have been very slow and profits actually zero. Prospects for the next two years are not good, because no one can work out what is wrong with the product. So, our company analysis values this product at its next 3 years earnings. Which our best guess is zero, or close to it.

Then a competitor comes in a offers £50m. what does the company do?

1. Wonder if they have missed something on the valuation, and is it earning more than they think? No they did not.

2. Ask, can we get the £10m a year back? Maybe but no guarantees.

3. Ask what would we do with the £50m? Can we invest in some products that will have a better future?

You bet its option 3.

So, Liverpool, SELL TORRES!

And every club should invest a talented, unemotional and cold hearted analyst, who should be the decider on transfers. Not the manager who starts every new job with 'give me 3 years' , and for whom every new signing ' needs time', which roughly translated means , keep me in my well paid Job a bit longer please.

Manage you players like cold assets and you know when to sell.

One team that does it well is Arsenal. Honestly who has left Arsenal and done well? Ashly Cole is the only one I can think of in British Football, and you could add Van Bronckhurst who never seemed to get a fair crack at Arsenal but made it at Barcelona.

But, Wenger has let many players go at the height of their ability it seemed, only for time to show that they were past it, or not actually that good. Henry (£16m) , Petit (£25m) , Overmars (£25m), Anelka (£23m), Vieira (£13.7m), all superb and critical players that he let go, seemingly at the height of their powers, but offered at beyond their value, so sold. And, when he says he is not buying because players are over valued, he is applying the valuation sensibly and making sure he does not buy a dud.


About the author: A lover of Football, and an expert on Cricket Balls, especially Readers Cricket Balls and Kookaburra Cricket Balls, this article is written by Connected.

1 comment:

  1. If Wenger is so great, what about Jeffers? Agree on Torres.

    ReplyDelete