Can we learn from over the Pond?
The pandemic can’t be used as an excuse for footballs finances, it merely expedited a problem that has been apparent for years. The simple fact of the matter is that club turnover doesn’t reflect expenditure on player salaries, with various solutions discussed, in some cases tried, yet still falling way short.
The problem isn’t limited to the lower league clubs, but the riches of the Premier League, in particular, mask the issue. Outside of the top leagues, the problem is exacerbated due to the vast differentials in broadcasting revenues, and the fallout that a lack of exposure brings.
The EFL has regulations in place related to a club’s net spend, Covid brought along a proposal to impose a salary cap. However, with the only real light at the end of the tunnel being promotion to a higher league, clubs will overspend against income to go in search of this. Some may say this is short-sighted, but in reality, an owner losing money in League 2 may as well lose a little more in an effort to break even, rather than continue to fund a sinking ship.
The Professional Footballers Association opposed the salary cap proposal - unfair on its members. Perhaps, but without change clubs will reduce salaries, focus more on younger players who cost less and have re-sale potential, and the average age of players going out of the game because no contract is forthcoming will reduce dramatically.
The limitations on net spend give a huge advantage to clubs who have bigger fan bases and therefore - pre-Covid - more match day income, it’s cited as unfair to the rest, the level playing field not being level at all.
So if net spend has its drawbacks and hasn’t been seen to work, and if salary caps are opposed by the players union and those clubs who have the ambition to be promoted, what can be done?
In simple terms, a club reducing salary levels in favour of substantial success related bonuses can prosper.
It is very easy to model out what success looks like, historic statistics indicating how many points are needed, and thus how many wins, how many goals need to be scored and/or clean sheets recorded to achieve promotion for instance. Structuring each players contract with a guaranteed salary level coupled with a substantial bonus for playing their part in the season in terms of meeting individual performance parameters, alongside a stipulated number of appearances can be both beneficial to the club in reducing its expenditure and for the player who, if they perform and play their part they are rewarded in excess of what a traditional contract would pay.
Immediately the question arises of ‘Yes, but how do we meet those bonuses if the success is achieved?’. The answer to that question is insurance. Niche sporting insurance enables a club to insure its potential loss should a targeted performance be stipulated and achieved. In addition, there are insurance vehicles that lend themselves very well to these type of policies whereby the club can control the risk yet still benefit from underwriting profits if the success isn't achieved. This factor alone would enable clubs to become not only more sustainable but be in a better position the following season to challenge for its targets.