Football clubs – is boom and bust the future?
The finances which are floating around in modern football at the moment are quite staggering, with multi-million pound takeovers of clubs such as Manchester City and Paris St Germain proving that the lure of the game still endures as the ideal plaything of the super-rich.
The financial rewards are difficult to resist if you can start mixing it with the ‘big boys’ in the Champions League, but outside of this category there are plenty of clubs who have been caught out and overspent in order to reach their goal, often with disastrous consequences.
So, what are some of the worst cases of ‘over-reaching’ in the football world? What can SMEs learn from the mistakes which numerous clubs have made?
Portsmouth FC is perhaps the most effective modern-day example of a football club that scaled the heights before succumbing to the inevitable financial lows.
Having landed the FA Cup for only the second time in their history in 2008, everything seemed to be progressing very nicely as the club established a platform amongst the biggest clubs around in the Premier League.
Financial downfall
However, spending money on a number of players during this period ultimately led to major financial problems once things turned sour on the pitch and the club was relegated.
A number of players were earning exorbitant salaries on contracts as long as 4 or 5 years in some cases, something which proved unsustainable in the second tier of English football.
Mired in £135m worth of debt during February 2010, the football club was placed into company administration and this episode only served to mark the beginning of a turbulent financial period.
Glasgow Rangers are another club to have fallen fowl of a ‘boom and bust’ mentality, having been banished to the fourth tier of Scottish football last year after some alarming irregularities in their tax affairs were revealed.
SMEs can certainly learn a lesson from these examples, principally that it is crucial to get all tax affairs in line and that focused and structured spending is vital…..even during the good times.
Business restructuring specialists
A number of businesses may find themselves in a financially distressed situation in 2013 as numerous economic indicators suggest the remainder of the year could present obstacles for SMEs across the UK.
Seeking advice from a company insolvency specialist could make a crucial difference in terms of how your company deals with the situation and can provide practical solutions to the financial problems being experienced