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The Gold Coin Principle

Updated: Mar 14, 2023

When Fulham beat Brentford in the Championship play-off final in early August it secured the London-based club a possible £135 million over the next three seasons, mostly from broadcasting revenue. If Fulham were to avoid relegation from the Premier League in the current season that figure could rise to £265 million over the next five seasons. The burning question remains; what are football clubs doing with this so-called "golden ticket" to the Premier League?

Firstly, it is important to recognise the magnitude of promotion to the Premier League. Over the last 5 seasons promotion to the Premier League has increased promoted clubs' annual revenue by 322% on average. The revenue earned provides clubs with the platform to develop the club on and off the pitch, which bizarrely is not the case for most promoted clubs.

What is referred to as the £100 million "golden ticket" to the Premier League is seen as exactly that whereas we believe it should be treated like gold coins. A golden ticket is a once-off shot at the big time whereas gold coins are an investment which potentially grows in value to the holder, both are gold but don't be fooled. An investment in a football club from a windfall of cash that comes with promotion is completely different from spending that cash.

Over the last 5 seasons promotion to the Premier League has increased promoted clubs' annual wage bills by 74% on average. This might not seem a lot but bearing in mind that it is a 74% increase from Championship wages, which averages 118% of total revenue. Included in these statistics is a football club that believes in the gold coin principle, Burnley Football Club. Relegated from the Premier League in the 2014/15 season and promoted again in the following season, Burnley have invested their gold Premier League coins rather than spending their golden ticket.

When Burnley were relegated from their brief, 1 year stay in the Premier League during the 2014/15 season their Board of Directors took the odd but brilliant decision to approve the an investment of £13 million in their academy. Burnley were facing life in the Championship but were due to receive £26 million in parachute payments from the Premier League. Usually relegated clubs use parachute payments to help them adjust their squad, on Premier League wages, to Championship level but Burnley had planned smartly the summer before.

Upon their first promotion in 2013/14 Burnley's revenue increased by 302% while their wage bill only increased by 37% (of which a large part was due to promotion bonusses). Burnley also had a net spend of only £12 million upon promotion so when relegated later that year, they didn't have a much different squad, in terms of personnel and wages, than they had in the Championship. Therefore, when Burnley were relegated to the Championship they could keep the same squad, with £5 million worth of signings, and that left them with a £21 million parachute surplus.

The decision taken to invest £13 million of this surplus in the Barnfield Training Center was a long-term, value-adding one that very few football club owners take. Seeing a return on investment on a football academy can take up to ten to fifteen years but it is one that gives a club the edge in the most important aspect of football business, the transfer market. With transfer fees for football players inflating at an alarming rate being able to produce homegrown, academy talents puts football clubs on the right side of transfer business.

Dwight McNeil is an anomaly when it comes to players who have made it from the Burnley academy to the first team but 5 years after joining the academy McNeil is valued at £45 million by CIES Football Observatory. If Burnley were to sell McNeil at that valuation they would pay off their initial investment in the academy, by more than three times. As Burnley enter their fifth consecutive year in the Premier League, they have more than a badge on their shirts to show for it, they have a world-class, Category 1 youth academy and a homegrown £45 million midfielder.

It is not always as clear cut and smooth sailing as is the case with Burnley and Dwight McNeil but if football clubs can make the mind shift in terms of how they invest their revenues, regardless of the amounts involved, then they could be sitting with more gold coins than any promotion could bring about. Football is not as simple as this but with the right strategy and planning clubs can give themselves a better chance of collecting gold coins rather than wishing for a golden ticket.

At 4NFC we strive to assist football clubs with the planning and investing of all revenues to help build a sustainable, gold coin-laden future. Get in touch and we'll be happy to discuss academies, financial planning, revenue generation and many more gold coin strategies.

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