Selling to buy. The new normal?

[Deleted member drgr12429]

Crikey! I opened this thread and i thought i was on another clubs forum!
The sense is off the charts in here. Very unlike MM.
It does make a change from gnashing of teeth and fists being shook at people saying "get orf my land".

 

[Darvo]

It's a huge benefit to a club like us now, so whilst I understand your point, we need it to remain.

How does it benefit a club like ours with aspirations of challenging the big boys?

 

[WeAreTheWolvesII]

How does it benefit a club like ours with aspirations of challenging the big boys?

Because we don't have those aspirations any more.

If there were no limits there are many more clubs down there, even the likes of Sheffield Wednesday, who would spend big and we'd drift.

It allows us to compete, or better in some cases, the likes of Everton, Aston Villa and now Newcastle who would immediately be challenging the top six if they could IMO.

 

[Stoichkov]

"Why aren’t we doing as many ‘bits’ as other clubs?"

"Why have Fosun turned the taps off?"

"Why do we have to sell to buy?"

"Our owners have no interest in our club anymore!"


Some things posted on there all the time, amongst many other criticisms of our lack of spending and overall strategy.

But why? What’s changed for Fosun?

I don’t think anything has changed with Fosun other than their plan. Like with any other business, an analysis of the market conditions will drive that plan.

Football is changing. The changes have already been introduced this month, with a 3 year run in period.

Part of the new UEFA FFP regulations limits spending on wages, transfers, and agent fees to 70% of club revenue.

Assessments will be performed on a timely basis and breaches will result in pre-defined financial penalties and sporting measures. The new regulations will come into force in June 2022 and will be phased in over a 3-year period.

All a bit wishy-washy at the moment, but it’s the 70% rule that’s the complete game-changer in my opinion. Here's why.

If the new rules were imposed this month in full, rather than with the 3-year phased implementation, us and 9 others currently in the Premier League would fail the test on wages alone. Spurs are currently the lowest on 57%, although I would imagine Conte is pushing for that to change!

We are just above the 70% on wages alone, with our wage bill 72% of our turnover.

Palace (93%), Southampton (90%), Everton (89%), Leicester (85%), Watford (80%) Newcastle (79%), Brighton (78%), Chelsea (77%), Burnley (75%), Villa (75%), Norwich (75%) and Arsenal (73%) all sat above us last season.

At the moment, these rules will only apply to clubs in European competitions, but anyone not in a relegation battle could potentially qualify for Europe if they have a good season, so clubs will need to pay close attention to them regardless, or risk being burned by 'pre-defined financial penalties and sporting measures' if they do qualify.

The Premier League rules have not been updated or published yet either, so whether they will be changed and how close they will look to the UEFA rules is unknown, but I would expect something will come out soon on this.


What does this mean for us?

Fast-forward 3 years from now when the rule is fully in place. We would fail any tests without spending another penny, as our wage bill is already 72% of our revenues. I would imagine with releasing the players we have since this was published, this would come down, so if a test was done tomorrow, we would probably be fine.

But assuming we push the wages to the maximum 70%, as most clubs will, any money for new transfers and new wages has to be generated by profits or player sales.

No real change for us!

Fosun can spend money if they want to, they have spent money in the past, so why the change in more recent strategy?

I think people are too quick to throw around accusations of lack of planning or lack of foresight from our owners, when if anything, they appear to be very shrewd operators, that look at how a market will change and develop before making strategic decisions.

If we get our house in order before everyone else, surely that puts us in a very strong position in the future?


What does it mean for others?

Villa are a good club to use as an example, as they are often held on a pedestal about how their owners throw money around like confetti. To me they are owners that are in it for vanity reasons and don’t really mind if their club makes a loss, as they will cover it as best they can. Nothing wrong with that currently, but obviously a different approach to Fosun and an approach that will need to be tweaked going forward.

UEFA’s break-even rule for sustainability (the one we were stung by) has also been changed (probably to accommodate PSG), so clubs can now lose €60m a season (approx. £51m). How clubs could use this to manipulate the 70% rule, I’m not sure (any suggestions welcome), as I don’t think any cash injection to cover losses, or any loans would positively impact revenues.

I suspect that even at a club where owners inject the maximum amount of capital allowed to cover losses, will still have to comply with the 70% rule.

So someone like Villa, who are currently at 75% wages to revenues, would need to shed 5% off their wage bill to comply.

Then any spending on new transfers and new wages has to be generated by profits or player sales. They don’t make a profit, as their owners inject capital to cover their losses, so player sales is their only avenue for raising funds.

Newly promoted clubs will have an advantage in the transfer market, as they will have a massively increased turnover and a relatively small wage bill, so more room for manoeuvre initially after promotion.

The big powerhouses of football, with turnovers 2 or 3 times that of most other clubs will have an advantage in terms of overall spending power, but I think that advantage will be narrowed by their excessive wage bills.

Take Man United as another example, the highest net spend in the last 10 years (£903m). Turnover of £500m+, with a wages to turnover ratio of 65%. They have 5% of their revenue to spend on fees and wages to take them to the 70% level. A grand total of £25m

If you assume transfer fee will be accounted for in a similar way to how they are now, by dividing the transfer fee over the term of the contract, they could spend £125m on players on 5 years contracts (5 x 25), assuming they free up some wages of players leaving or being out of contract.

But overall, their spending ability will probably be lower than it is currently. Could this be why Man City and Liverpool have both taken the decision to spend big on young strikers now before the new rules fully bite?


What’s the best strategy for now?

If I were running a football club, with these changes coming into force already and being phased in over the next 3 years, I would be looking to get my house in order as soon as possible.

Dos

• Running in profit to increase the amount you have to spend and natural increases in your wage bill.
• Operating a controlled, tiered wage structure.
• Concentrating most of your resources on your first XI and buying younger players with high potential on long-term, relatively low pay contracts as backup. This keeps the average age and overall wage bill down and also future proofs you going forward (as you need to spend less on replacements).
• Growing off-field revenues to improve revenues and profitability.

Do all these things remind you of a particular strategy?!

Don’ts

• Spending over the odds for any player in terms of fee and wages (United)
• Having a large squad of older, over-paid, average players, on long term contracts (Everton)
• Paying transfer fees for older star players on high wages with no re-sale value, as by the time their contracts have finished, you will not have any available resources to replace them, assuming you are maxed out at the 70% for wages (Villa)

To use Villa as a specific example again, if Coutinho sees out his 4 years at Villa, then leaves for free, they will have £8.5m in wages freed up, but no cash to replace him.

They either hope that a youngster can develop enough in those 4 years to replace his level of contribution, sign another older player on a free transfer on similar wages, or they go into the following season with a hole they are unable to fill.

That’s an extreme example, but one that illustrates how important succession planning for your first team is becoming, as it will become more difficult to go out and just buy players to fill a gap, without planning for it!


What does the future hold?

I think a lot of clubs will push this right to the wire. They will continue ploughing forward with their broken business models until the very last minute and then panic when the regulations take full hold (especially if they qualify for Europe unexpectedly!).

3 years from now, I can see a summer window like never before. Record amounts of players being released from their contracts and players being allowed to leave for well below their market value, just so clubs can shift players off their books to comply.

Longer term, I think this is a positive move, as it is effectively a soft cap on wages and transfer fees, which are getting out of control.

It also makes the hoarding of large, highly paid squads of players less likely, with bigger clubs unwilling to pay bigger wages to those that aren’t playing. That could be a good thing for clubs like us, as players that could be a star player for us, won’t be sitting on the benches of bigger clubs. Potentially a good thing for the progression of youngsters too.

So transfer fees reducing, wages reducing, an increase in available higher-quality players, more evenly distributed amongst clubs.

That’s hopefully what we will see, as I can't see any negatives in those things.

The next few years for us will be about treading water and maintaining our Premier League status.

We already have our house in order, and we are already doing the right things for the future. If we make sure our house is in better order than most, we are in the best possible position to capitalise when the panic sets in.

Short-term however, that might mean a competitive disadvantage as we adopt a stricter model to the rest of the market. But this should change to a competitive advantage longer term.

In my opinion, we are playing a waiting game. Waiting for football to financially implode on itself and being one of the few clubs in a position to pick up some of the pieces.

That’s certainly not a mouth-watering prospect for the next few years, but one that fills me with some confidence for the future beyond that.

The real risk is that the conditions to tread water become impossible, the currents become too strong, the competitive disadvantage becomes too wide and we sink.

But if you look at the long-term, I really don’t see that there’s a viable alternative.


This brings together a few discussion from a few different threads, but also worth checking out @cannockwolves thread on sustainability (Sustainability)

Fantastic post Wolfling. Why doesn't the Express & Star publish stuff like this instead of 3-day old weak rumours?

I only wish the knee-jerkers on here and Twitter would take some time to read this and have a think about why we're acting as we are.

In case they can't here's the crux of it all: "In my opinion, we are playing a waiting game. Waiting for football to financially implode on itself and being one of the few clubs in a position to pick up some of the pieces. That’s certainly not a mouth-watering prospect for the next few years, but one that fills me with some confidence for the future beyond that."

Well played sir

 

[YouGottaRaulWithIt]

Because we don't have those aspirations any more.

If there were no limits there are many more clubs down there, even the likes of Sheffield Wednesday, who would spend big and we'd drift.

It allows us to compete, or better in some cases, the likes of Everton, Aston Villa and now Newcastle who would immediately be challenging the top six if they could IMO.

It's a bit like an arms race. FFP rules stop the smaller countries getting nuclear weapons, so they cant threaten us, meanwhile USA and Russia are still able to destroy anyone they fancy.

I guess Wolves are the UK in this analogy, because the trident fleet is ageing and becoming less threatening year on year.

 

[WolfLing]

Because we don't have those aspirations any more.

If there were no limits there are many more clubs down there, even the likes of Sheffield Wednesday, who would spend big and we'd drift.

It allows us to compete, or better in some cases, the likes of Everton, Aston Villa and now Newcastle who would immediately be challenging the top six if they could IMO.

You’ve touched on a good point here. Villa maybe, Newcastle definitely would spend limitless money if they could. Everton have spent as much as they can within the rules (perhaps even outside of the rules!) and still come up short (albeit they spent it very badly).

Unless you can spend the same as those with the biggest turnovers, you won’t ever be able to compete by using the spending model! And no team can spend the same, as the rules don’t allow it now, and certainly won’t allow it in the near future.

The only team outside the Sky 6 to win the league in the last 27 years did that by doing things completely differently to everyone else in terms of recruitment and even style of play. A freak season that won’t be repeated any time soon, but it showed that by thinking differently, you can get results.

On that basis, I’m happy that we are trying to do things differently!

 

[WeAreTheWolvesII]

Fantastic post Wolfling. Why doesn't the Express & Star publish stuff like this instead of 3-day old weak rumours?

I only wish the knee-jerkers on here and Twitter would take some time to read this and have a think about why we're acting as we are.

In case they can't here's the crux of it all: "In my opinion, we are playing a waiting game. Waiting for football to financially implode on itself and being one of the few clubs in a position to pick up some of the pieces. That’s certainly not a mouth-watering prospect for the next few years, but one that fills me with some confidence for the future beyond that."

Well played sir

Because that's a highly debatable opinion.

People predicted football would implode many times before, especially after Covid, that was sure to be the end of it all. Hasn't happened though. Transfers and wages are still as ridiculous as ever.

 

[wwbug]

I feel it is simpler . Watch the Monty Python sketch Mr Creosote , "just one more wafer thin mint ................."
Fosun set a certain amount of money aside and they will not inject any more new funds.
This is because football has a habit of always sucking in more money .
Money is the easy answer, the panacea , the drug we are addicted to. The one that kills you.

 

[Stoichkov]

Because that's a highly debatable opinion.

People predicted football would implode many times before, especially after Covid, that was sure to be the end of it all. Hasn't happened though. Transfers and wages are still as ridiculous as ever.

Yeah he might be wrong

And so might you…..

 

[NewarkWolf]

View attachment 28383

This is the form table for the last 15 games of the season.

We need a giant window to turn ourselves around.

So Brentford don't need any additions then cos they're top 8 next season......

Taking a snapshot and basing the following season on that isn't a fair comparison

 

[CelebrityWolf]

Fosun are looking to sell.

 

[SoCal_Wolf]

Fosun are looking to sell.

About as evidence-based as me claiming that Jeff is taking a huge crap right now.

 

[Deleted member drgr12429]

Fosun are looking to sell.

You win, it's the wackiest post of the day!

 

[Mile End Wanderer]

Fosun are looking to sell.

Good hope they find a lucrative buyer

 

[Sussex Wolf]

Are you not giving far too much credit to these rules?

So if a club has a wage bill of 75% instead of 70% what's going to happen? I would imagine not a lot. So, whilst I get your theory I don't think it will be much of an issue and I don't think football will implode as you predict. They'll just change things if all the clubs want it changed and if not, clubs will pay the small fines or whatever that comes their way.

I know what you're saying is right technically but I don't think it will happen.

Also, I think you're giving Fosun a bit too much credit initially. We lost £1m a week in the promotion season. Is that sensible and responsible?

They spunked millions and millions on loads of rubbish initially and we were effectively one-year away from being another Sheffield Wednesday or Birmingham City in that FFP would have had a stranglehold on us. Thankfully, we won promotion so that bridge was never crossed. That was bold. That was a massive risk and thankfully it's one that paid off.

Let's not pretend otherwise, we were effectively the Man City of the Championship then.

Buying players that were out of our league, paying wages that we couldn't afford all on the gamble that we would go up.

So, I think a LOT has changed with Fosun's strategy. They're now not willing to put any money in and it goes totally against what they were about, it also goes against their insistence they look for value.

Good post with the details on the impact this could have but I think you're looking far too much into it, it's much simpler IMO - they've stopped putting money in for whatever reason and there is no long-term strategy or approach.

If I remember correctly, part of the new FFP regime referenced in the OP was to introduce new harsher, automatic sanctions to close loopholes and prevent clubs with rich owners effectively buying themselves out of trouble.

UEFA's new financial sustainability regulations to replace FFP: All you need to know

What are UEFAS new financial sustainability rules? What are the punishments for breaking the rules? When do the new rules start? Is everyone in favour of the new rules? Heres everything you need to know....

www.skysports.com

Ultimately, in the case of the UEFA rules, their ultimate sanction is to boot clubs out of their competitions, thereby depriving clubs of the financial benefits of competing in Europe. But they can also levy significant fines which would likewise eliminate most, or even all, of the benefits of qualifying.

 

[Sussex Wolf]

Very interesting OP and thread.

At the risk of going off at a slight tangent, I’d question the motive behind all of the FFP schemes.

If anything, it actually sustains unfair play.

I think it’s a means of perpetuating the closed shop of the elite clubs. I’m also surprised that it hasn’t been seriously challenged in the courts.

In what other business sectors are entrepreneurs denied the opportunity of investing in their businesses?

Of course it is. I think there have been admissions from some UEFA members that protecting the established elite from “unfair” competition from upstart clubs with rich owners, was an objective. Of course, such competition is not unfair in the slightest, while preventing it is. In many areas of business, this whole edifice would be ripped up by the competition authorities and the authors thrown in jail, because it’s classic cartel behaviour. The elite clubs work together to establish rules which create unfair barriers to entry (to their elite competitions). But it’s been historically treated as an association and the members get to choose the rules by which members are bound within it. Since it’s clearly evolved into a very large commercial business, it’s high time the authorities started to enforce the same anti monopolistic policies they do in other lines of business.

 

[top fox wolf]

Of course it is. I think there have been admissions from some UEFA members that protecting the established elite from “unfair” competition from upstart clubs with rich owners, was an objective. Of course, such competition is not unfair in the slightest, while preventing it is. In many areas of business, this whole edifice would be ripped up by the competition authorities and the authors thrown in jail, because it’s classic cartel behaviour. The elite clubs work together to establish rules which create unfair barriers to entry (to their elite competitions). But it’s been historically treated as an association and the members get to choose the rules by which members are bound within it. Since it’s clearly evolved into a very large commercial business, it’s high time the authorities started to enforce the same anti monopolistic policies they do in other lines of business.

I just what use to sign a football player.!!!!!! .

 

[KBWWFC]

So Brentford don't need any additions then cos they're top 8 next season......

Taking a snapshot and basing the following season on that isn't a fair comparison

Yet stranger things have happened...

You can't say we're 100% safe from relegation when for the back 40% of the season we were on relegation form.
The underlying metrics aren't much better - we don't create much, if anything. Our "purple" patch was reliant on us scoring more unlikely chances while creating nothing down the middle, and at the same time we're conceding more chances and indebted to Jose Sa having the season of his life and keeping us in most games.

As things stand, we have two senior midfielders at the club.
To deny we need a big transfer window to turn this around is burying your head in the sand.

Our "saleable" assets have decreased, whether that's through injuries or contracts running down, we're left with only one player to sell for any real money, and I think most people on here agree we need 4 or so signings.

We need to be exceptionally smart in this transfer window, if we're going to be "selling to buy", and we need the new players to hit the ground running.

Unfortunately I don't have faith in Fosun or Sellars getting this right, mainly because the situation we're in is due to a cumulation of multiple poor transfer windows.

I'd love to be proven wrong.

 

[Darvo]

Of course it is. I think there have been admissions from some UEFA members that protecting the established elite from “unfair” competition from upstart clubs with rich owners, was an objective. Of course, such competition is not unfair in the slightest, while preventing it is. In many areas of business, this whole edifice would be ripped up by the competition authorities and the authors thrown in jail, because it’s classic cartel behaviour. The elite clubs work together to establish rules which create unfair barriers to entry (to their elite competitions). But it’s been historically treated as an association and the members get to choose the rules by which members are bound within it. Since it’s clearly evolved into a very large commercial business, it’s high time the authorities started to enforce the same anti monopolistic policies they do in other lines of business.

Very eloquently put.

Less eloquently ... it stinks!

 

[wolveslegend]

we won't win a thing being self-sustaining, as we are we will eventually run out of quality players to sell and a crowd of 30k won't keep us financially stable. Going down the sell to buy route will eventually lead to relegation. If fosun are an investment group then shouldn't they invest to make us more successful ??? can spend what they like on the stadium but don't seem interested. All these posts making excuses . nonsense. Football is about now and winning things

 

[wwbug]

Very happy with these rules if they are enforced and adhered to by every club large or small.
It really shows up the need to improve revenue , is that what esports is doing ?
Overseas markets will be essential and sadly us locals wont be.
But our football has become a victim of its own success . Are we NIMBIES ?

 

[Sussex Wolf]

we won't win a thing being self-sustaining, as we are we will eventually run out of quality players to sell and a crowd of 30k won't keep us financially stable. Going down the sell to buy route will eventually lead to relegation. If fosun are an investment group then shouldn't they invest to make us more successful ??? can spend what they like on the stadium but don't seem interested. All these posts making excuses . nonsense. Football is about now and winning things

Disagree with pretty much everything there, and that’s even while being frustrated by our recent limited transfer activity.

Self sustaining is the only way for clubs to survive long term. Otherwise you’re just beholden to the whims and interests of one rich owner after another. Clubs in the PL can be self sustaining because the money available in the game is more than sufficient, but it’s not easy. Even clubs like Liverpool do the buy to sell thing, and you could hardly say they don’t win things.

Crowds of 30k are almost irrelevant to self sufficiency. The income from gate receipts is about 10% of a PL club’s total income. However, have a stadium and support with say 30-40k, and a large and high quality hospitality offering, and you can generate several tens of million more, which helps with FFP calculations. You’re right that Fosun are an investment company, but that means they will assess investments, such as stadium expansion, on a hard nosed financial basis. The reality is that after the pandemic, and now rising interest rates and a risk of sustained inflation and recession, the payback period is uncertain and may not compete with other investments they could make. Add to that a desire to sell at least some of the club, and the rational thing for them to do, is wait.

Doesn’t mean I like it, but despite that, I prefer it to my experience of bankruptcy and wallowing in the lower leagues for my entire adult life.

 

[old wittonian]

In the past Fosun have given us interest free loans. Why, therefore, did we have to borrow some £50 million at a reported 6% interest rate from a bank.
Why don't Fosun give us a bridging loan on contemplated outgoing/incoming transfers.
Doesn't make sense to me.

 

[wolveslegend]

Disagree with pretty much everything there, and that’s even while being frustrated by our recent limited transfer activity.

Self sustaining is the only way for clubs to survive long term. Otherwise you’re just beholden to the whims and interests of one rich owner after another. Clubs in the PL can be self sustaining because the money available in the game is more than sufficient, but it’s not easy. Even clubs like Liverpool do the buy to sell thing, and you could hardly say they don’t win things.

Crowds of 30k are almost irrelevant to self sufficiency. The income from gate receipts is about 10% of a PL club’s total income. However, have a stadium and support with say 30-40k, and a large and high quality hospitality offering, and you can generate several tens of million more, which helps with FFP calculations. You’re right that Fosun are an investment company, but that means they will assess investments, such as stadium expansion, on a hard nosed financial basis. The reality is that after the pandemic, and now rising interest rates and a risk of sustained inflation and recession, the payback period is uncertain and may not compete with other investments they could make. Add to that a desire to sell at least some of the club, and the rational thing for them to do, is wait.

Doesn’t mean I like it, but despite that, I prefer it to my experience of bankruptcy and wallowing in the lower leagues for my entire adult life.

How many of the teams who have won anything in the past decade are self sustaining and run well within ffp ? how many will be self sustaining in the next 10 yrs and not fall into massive debt ?
Wolves will struggle without the investment off fosun and that is how it will be , no outside investment will eventually see us lose prem status .

 

[waggys left foot]

China is totally obsessed with pursuing zero Covid so they have currently little interest in football as a soft power instrument -they have pulled out of hosting the Asian cup and there is no sign of a bid to host the World cup in the 2030s .Fosun will be guided by the Chinese state -hence they are going thru the motions with us.Fingers crossed they do enough to keep us in the Prem.

 

[Sussex Wolf]

How many of the teams who have won anything in the past decade are self sustaining and run well within ffp ? how many will be self sustaining in the next 10 yrs and not fall into massive debt ?
Wolves will struggle without the investment off fosun and that is how it will be , no outside investment will eventually see us lose prem status .

Many of the established PL teams are largely self sustaining these days. By that I mean that their owners are not injecting new money into the club. Spurs and Liverpool are funding their stadium through commercial loans, which the club will pay back via income generated by the facilities. In saying that, Spurs shareholders did just inject 150m into the club, but this was largely a reflection of the hit their new stadium took through the pandemic. Liverpool did something very similar for the same reason. What is common, is that both clubs recently took out large loans for their stadium improvements and then lost a lot (over 100m) during the pandemic when unable to use them properly. That aside, both clubs generally fund their squad additions through player sales.

Man Utd not only fund their own player investments, but the owners used the value of the club to borrow the money to buy it, so that’s an even more extreme example of self financing. Even the likes of Chelsea and Man City have been self financing since the introduction of FFP. Why do you think potential owners queue up to buy PL clubs these days? We’re largely past the era of vanity investment in squads to win trophies or to establish an owner as a pillar of U.K. society.

It’s the newly promoted clubs, and clubs outside the PL, who need regular owner cash injections just to operate their existing facilities and maintain a squad, because they haven’t yet achieved a sustainable level.

 

[VancouverWolf]

In some ways wth 5 subs next season, most clubs are now further behind the top 6 clubs.
Very disheartening.

 

[Sammy Chungs Tracksuit]

I have been going to Molineux for over half a century and I just dont buy into long term plans in football. Medium term plans of three or four seasons then yes but not long term plans. I've rarely seen any long term plan work out for sides in the top two divisions turn into reality because things get thrown off track by what happens on the pitch. I suppose maybe Brentford's long term plan has worked the best to get them where they currently are but staying there or improving further will be very difficult for them.
As for Wolves I think there is a very strong chance that we will be involved in a relegation battle this coming season and I'm not sure that we have enough steel or firepower in the current side to avoid coming out on the wrong side of that battle. Any long term plan that Fosun think they have would then be thrown into complete disarray. Things have already gone pear shaped to a degree. We are no longer the attractive project to join that we were two or three seasons ago. I genuinely dont think that either Fosun or a large portion of our fan base realise just how at risk we are next season.

 

[Nige100]

As an investment machine Wolves to FOSUN is exactly that now an investment. They speculated and accumulated to get us where we are and now self stability it will have to be.

We are never going to be a play thing for our owners to burn cash on. But to be fair they have also written off over £100m of debt accumulated to get us where we are now. A mid table PL club something a lot of us dreamed of for decades.

Sell to buy will always be the way now. What does irk somewhat sometimes is an investment company you know sales (Neves, Traore etc….) are coming so we ought to be able to buy on the back of that expected income so if we do lose out on a Paulinha (assuming we want him) to Fulham that seems poor.

 

[YouGottaRaulWithIt]

As an investment machine Wolves to FOSUN is exactly that now an investment. They speculated and accumulated to get us where we are and now self stability it will have to be.

We are never going to be a play thing for our owners to burn cash on. But to be fair they have also written off over £100m of debt accumulated to get us where we are now. A mid table PL club something a lot of us dreamed of for decades.

Sell to buy will always be the way now. What does irk somewhat sometimes is an investment company you know sales (Neves, Traore etc….) are coming so we ought to be able to buy on the back of that expected income so if we do lose out on a Paulinha (assuming we want him) to Fulham that seems poor.

I agree. The other incentive to stick with their investment is the potential of esports. If it does take off then Fosun could make more money from it than from football.
I am still not sure how that money will get into the books of WWFC. Its a separate entity. But as some have argued, it is an incentive perhaps to keep us in the Premier league.
Hopefully Fosun will find a way, by increasing the value of shirt sponsorship deals perhaps, to give us some more cash from their other businesses.
However, we can only tread water for do long. The team and the stadium will start to crumble away. I reckon if a decent offer comes in from the US they will sell and move on, taking esports with them.

 

[Boss Hogg]

It’s an excellent and interesting OP, but I just don’t believe that it would be applied to Big 6 clubs with their army of lawyers to find workarounds and other clubs will take a view that they would just pay the fine. Meanwhile we stand there with our hands in our pockets and face relegation as everyone comes past us.

When you have countries running clubs who is going to identify/monitor all of the funds finding their way into players and agents pockets, not all of it which will have passed through the club.

 

[Jefe]

The previous owner also placed an emphasis on running a tight ship - as we know, it culminated in disaster. Naive managerial decisions from non-Footballing men (sound familiar?), leading to two successive relegations and a toxic splinter faction of overpaid want-aways. I'm not saying the attempt to be self-sufficient always tempts Murphy's Law in this way, but just as with overindulgent spending, circumspection in a brutally competitive league is not without risk of its own.

All it takes is one bad season - a team that has become stale and strategically transparent, a reluctance to back the manager in key areas that the fans can see are a growing problem, the board getting a key managerial decision wrong (like Morgan sacking MM after January)- and you're sleepwalking into the thick stuff with nobody to rescue you. Fosun's Wolves are not at all immune to the same forces that did for Morgan.

 

[Deleted member 8455jwf]

we won't win a thing being self-sustaining, as we are we will eventually run out of quality players to sell and a crowd of 30k won't keep us financially stable. Going down the sell to buy route will eventually lead to relegation. If fosun are an investment group then shouldn't they invest to make us more successful ??? can spend what they like on the stadium but don't seem interested. All these posts making excuses . nonsense. Football is about now and winning things

Because those investments have been assessed and aren't deemed worthwhile.

 

[Deleted member 8455jwf]

As an investment machine Wolves to FOSUN is exactly that now an investment. They speculated and accumulated to get us where we are and now self stability it will have to be.

We are never going to be a play thing for our owners to burn cash on. But to be fair they have also written off over £100m of debt accumulated to get us where we are now. A mid table PL club something a lot of us dreamed of for decades.

Sell to buy will always be the way now. What does irk somewhat sometimes is an investment company you know sales (Neves, Traore etc….) are coming so we ought to be able to buy on the back of that expected income so if we do lose out on a Paulinha (assuming we want him) to Fulham that seems poor.

Not sure the Neves sale is coming though. Get the feeling he isn't first priority for many clubs but an option they like

 

[Hoganstolemywife]

"Why aren’t we doing as many ‘bits’ as other clubs?"

"Why have Fosun turned the taps off?"

"Why do we have to sell to buy?"

"Our owners have no interest in our club anymore!"


Some things posted on there all the time, amongst many other criticisms of our lack of spending and overall strategy.

But why? What’s changed for Fosun?

I don’t think anything has changed with Fosun other than their plan. Like with any other business, an analysis of the market conditions will drive that plan.

Football is changing. The changes have already been introduced this month, with a 3 year run in period.

Part of the new UEFA FFP regulations limits spending on wages, transfers, and agent fees to 70% of club revenue.

Assessments will be performed on a timely basis and breaches will result in pre-defined financial penalties and sporting measures. The new regulations will come into force in June 2022 and will be phased in over a 3-year period.

All a bit wishy-washy at the moment, but it’s the 70% rule that’s the complete game-changer in my opinion. Here's why.

If the new rules were imposed this month in full, rather than with the 3-year phased implementation, us and 9 others currently in the Premier League would fail the test on wages alone. Spurs are currently the lowest on 57%, although I would imagine Conte is pushing for that to change!

We are just above the 70% on wages alone, with our wage bill 72% of our turnover.

Palace (93%), Southampton (90%), Everton (89%), Leicester (85%), Watford (80%) Newcastle (79%), Brighton (78%), Chelsea (77%), Burnley (75%), Villa (75%), Norwich (75%) and Arsenal (73%) all sat above us last season.

At the moment, these rules will only apply to clubs in European competitions, but anyone not in a relegation battle could potentially qualify for Europe if they have a good season, so clubs will need to pay close attention to them regardless, or risk being burned by 'pre-defined financial penalties and sporting measures' if they do qualify.

The Premier League rules have not been updated or published yet either, so whether they will be changed and how close they will look to the UEFA rules is unknown, but I would expect something will come out soon on this.


What does this mean for us?

Fast-forward 3 years from now when the rule is fully in place. We would fail any tests without spending another penny, as our wage bill is already 72% of our revenues. I would imagine with releasing the players we have since this was published, this would come down, so if a test was done tomorrow, we would probably be fine.

But assuming we push the wages to the maximum 70%, as most clubs will, any money for new transfers and new wages has to be generated by profits or player sales.

No real change for us!

Fosun can spend money if they want to, they have spent money in the past, so why the change in more recent strategy?

I think people are too quick to throw around accusations of lack of planning or lack of foresight from our owners, when if anything, they appear to be very shrewd operators, that look at how a market will change and develop before making strategic decisions.

If we get our house in order before everyone else, surely that puts us in a very strong position in the future?


What does it mean for others?

Villa are a good club to use as an example, as they are often held on a pedestal about how their owners throw money around like confetti. To me they are owners that are in it for vanity reasons and don’t really mind if their club makes a loss, as they will cover it as best they can. Nothing wrong with that currently, but obviously a different approach to Fosun and an approach that will need to be tweaked going forward.

UEFA’s break-even rule for sustainability (the one we were stung by) has also been changed (probably to accommodate PSG), so clubs can now lose €60m a season (approx. £51m). How clubs could use this to manipulate the 70% rule, I’m not sure (any suggestions welcome), as I don’t think any cash injection to cover losses, or any loans would positively impact revenues.

I suspect that even at a club where owners inject the maximum amount of capital allowed to cover losses, will still have to comply with the 70% rule.

So someone like Villa, who are currently at 75% wages to revenues, would need to shed 5% off their wage bill to comply.

Then any spending on new transfers and new wages has to be generated by profits or player sales. They don’t make a profit, as their owners inject capital to cover their losses, so player sales is their only avenue for raising funds.

Newly promoted clubs will have an advantage in the transfer market, as they will have a massively increased turnover and a relatively small wage bill, so more room for manoeuvre initially after promotion.

The big powerhouses of football, with turnovers 2 or 3 times that of most other clubs will have an advantage in terms of overall spending power, but I think that advantage will be narrowed by their excessive wage bills.

Take Man United as another example, the highest net spend in the last 10 years (£903m). Turnover of £500m+, with a wages to turnover ratio of 65%. They have 5% of their revenue to spend on fees and wages to take them to the 70% level. A grand total of £25m

If you assume transfer fee will be accounted for in a similar way to how they are now, by dividing the transfer fee over the term of the contract, they could spend £125m on players on 5 years contracts (5 x 25), assuming they free up some wages of players leaving or being out of contract.

But overall, their spending ability will probably be lower than it is currently. Could this be why Man City and Liverpool have both taken the decision to spend big on young strikers now before the new rules fully bite?


What’s the best strategy for now?

If I were running a football club, with these changes coming into force already and being phased in over the next 3 years, I would be looking to get my house in order as soon as possible.

Dos

• Running in profit to increase the amount you have to spend and natural increases in your wage bill.
• Operating a controlled, tiered wage structure.
• Concentrating most of your resources on your first XI and buying younger players with high potential on long-term, relatively low pay contracts as backup. This keeps the average age and overall wage bill down and also future proofs you going forward (as you need to spend less on replacements).
• Growing off-field revenues to improve revenues and profitability.

Do all these things remind you of a particular strategy?!

Don’ts

• Spending over the odds for any player in terms of fee and wages (United)
• Having a large squad of older, over-paid, average players, on long term contracts (Everton)
• Paying transfer fees for older star players on high wages with no re-sale value, as by the time their contracts have finished, you will not have any available resources to replace them, assuming you are maxed out at the 70% for wages (Villa)

To use Villa as a specific example again, if Coutinho sees out his 4 years at Villa, then leaves for free, they will have £8.5m in wages freed up, but no cash to replace him.

They either hope that a youngster can develop enough in those 4 years to replace his level of contribution, sign another older player on a free transfer on similar wages, or they go into the following season with a hole they are unable to fill.

That’s an extreme example, but one that illustrates how important succession planning for your first team is becoming, as it will become more difficult to go out and just buy players to fill a gap, without planning for it!


What does the future hold?

I think a lot of clubs will push this right to the wire. They will continue ploughing forward with their broken business models until the very last minute and then panic when the regulations take full hold (especially if they qualify for Europe unexpectedly!).

3 years from now, I can see a summer window like never before. Record amounts of players being released from their contracts and players being allowed to leave for well below their market value, just so clubs can shift players off their books to comply.

Longer term, I think this is a positive move, as it is effectively a soft cap on wages and transfer fees, which are getting out of control.

It also makes the hoarding of large, highly paid squads of players less likely, with bigger clubs unwilling to pay bigger wages to those that aren’t playing. That could be a good thing for clubs like us, as players that could be a star player for us, won’t be sitting on the benches of bigger clubs. Potentially a good thing for the progression of youngsters too.

So transfer fees reducing, wages reducing, an increase in available higher-quality players, more evenly distributed amongst clubs.

That’s hopefully what we will see, as I can't see any negatives in those things.

The next few years for us will be about treading water and maintaining our Premier League status.

We already have our house in order, and we are already doing the right things for the future. If we make sure our house is in better order than most, we are in the best possible position to capitalise when the panic sets in.

Short-term however, that might mean a competitive disadvantage as we adopt a stricter model to the rest of the market. But this should change to a competitive advantage longer term.

In my opinion, we are playing a waiting game. Waiting for football to financially implode on itself and being one of the few clubs in a position to pick up some of the pieces.

That’s certainly not a mouth-watering prospect for the next few years, but one that fills me with some confidence for the future beyond that.

The real risk is that the conditions to tread water become impossible, the currents become too strong, the competitive disadvantage becomes too wide and we sink.

But if you look at the long-term, I really don’t see that there’s a viable alternative.


This brings together a few discussion from a few different threads, but also worth checking out @cannockwolves thread on sustainability (Sustainability)

Stumped upon this again this morning. An excellent, well-thought out post.

It goes to show, however, how quickly things change in Football! Without having played a game, the last week feels like one of the most pivotal in our recent history

 

[nomadwolf]

QED...We sold Steve Daley to get Andy Gray