Crystal Palace Long Term Financial Stability Part 3

LONG TERM FINANCIAL STABILITY

Wage Structure

Establishing a wage structure is essential for every club, particularly those aiming to progress from mid-table status to contenders. My approach to wage structuring is straightforward yet effective, mirroring the simplicity often found in Football Manager.

Let’s consider a scenario where your wage budget is 1.5 million, a standard allocation for a mid-table EPL club. We’ll aim for a squad size of 20 players, divided into three groups: Pillars, First XI, and Squad. The breakdown would be 4 Key, 7 First XI, and 9 Squad players. To determine the wage distribution, we divide the total wage budget by the number of groups, resulting in 500,000 for each group. Each player’s contract within their respective group must fit within this allocated amount. This method ensures a balanced wage structure that optimizes the utilization of resources while maintaining financial stability and squad cohesion.

Key- 125,000

First XI – 71,000

Squad – 55,000

For me personally, this is an absolute requirement to follow. The best thing you can do in my opinion, is to keep your squad level lower, so you can give more money to your best players or attract the best players you can. 

Youth players and Elite Talent are not included in the wage structure. While this “throws out” the wage, I’ve found a lot of teams are way too bloated and by trimming the players down, helps balance this issue. For instance, in my Crystal Palace team, not a single player’s wage was above 85,000 for the first 3 seasons. I was running my wage at round the 1.2m mark, with a budget of close to 2m. This balanced the books for me and I was able to pay debt quicker, which put me on the path to financial freedom sooner, rather than later. I understand that one of the “club vision” requirements might be stay within the wage budget, but I’ve been over many times before even with this and not once have I had any negative impacts. As long as you run a profit every 24 months, you should be fine.

 

Recruitment Policy

The transfer window is an exciting period filled with scouting and preparation to address squad needs. Our recruitment policy, while simple, is effective in ensuring squad cohesion and performance improvement.

Firstly, we identify any gaps in the squad using our squad management spreadsheet, which allows us to evaluate player performance and alignment with our club’s DNA. This could involve addressing depth issues or replacing underperforming starters.

Our first course of action is to assess our Academy and Elite Talent Program to see if any players are close to fulfilling the identified needs. If no suitable candidates are found internally, we proceed to the transfer market. For short-term solutions, we consider options like free agents, loan deals, or experienced players in their 30s. On the other hand, for medium-term solutions, we explore buying young talents with the intention of developing them and selling them for profit later. Alternatively, we may opt for slightly older players to fulfil specific roles temporarily, allowing us to avoid renewing their contracts when they expire. As a proponent of strategic deals and maximizing value, I prefer the approach of acquiring players to play specific roles and eventually selling them for profit.

Our recruitment efforts must be done during the previous season. Following on from how our scouting system works, we should have a few players in each shortlist for our positions. This is our process

• Identify positions that require improvement
• Investigate whether it requires a short-, medium- or long-term solution and assess the shortlist
• Do a simple analysis with DNA, performance, price and wages of all candidates

Gives us a quick snapshot into our options. I generally look at wages compared to fee. Fee’s you can stretch out and structure however you want. Wages, you cannot. It’s important to note what role each player is being used in at their current club. It’s another tool to use to make an informed decision. Use your best judgement and all the information at hand before recruiting. The most important part about recruitment is getting the big ones right, saving the risk for much lower outlays.

The “Moneyball” approach has experienced a rapid ascent in FM over recent years. In my view, Moneyball presents a superb strategy for acquiring players to meet short or medium-term positional needs. However, in pursuit of the highest calibre talent for your team, I believe prioritizing the philosophy of marginal gains is essential, provided our circumstances allow for it. This concept, famously championed by Sir David Brailsford and echoed in the bestseller “Atomic Habits,” suggests that incremental improvements, even as small as 1%, can yield remarkable long-term returns.

Consider this: while spending 15 million on a midfielder rated 70/100 may offer better value for money compared to investing 30 million in an 80/100-rated player, the 14% increase in rating promises significant returns on investment. Furthermore, this principle extends beyond player acquisitions to included coaching, recruitment, facilities, analytics, and medical staff. The cumulative effect of pursuing marginal gains across these areas can be transformative.

Another aspect to consider is how we assess the value of an 80/100-rated player. If last season saw a 5th-place finish, followed by a 3rd-place finish after acquiring the higher-rated player, it’s challenging to attribute the improvement solely to player quality. External factors and team dynamics play substantial roles in performance outcomes, making it difficult to quantify the direct impact of player acquisitions solely through performance metrics. Perhaps in a future post, we can centre our focus on marginal gains. 

In conclusion, while Moneyball remains an invaluable tool for our short and medium-term recruitment strategies, I advocate for a broader approach that prioritizes maximizing output across all aspects of the club, irrespective of immediate value considerations. While I acknowledge the potential profitability of recruiting and developing players for resale, my strategy leans towards investing in all areas of the club to enhance performance and achieve sustained success. However, I do have an alternative solution for player acquisition aimed at generating profits…

The Harry Redknapp Initiative

One of my favourite things to do and “easiest” ways to make money is by wheeling and dealing baby! This is separate to our Academy and Elite Talent Program as we have absolutely no intention of developing them for our team or our group. This is purely buying players to make money. The transfer list is full of bargains, you must find the ones who you think are underpriced and you can move quickly.

Let’s look here.

We take the purchase price, their wages paid, agent fees and signing on bonuses into account for our total outlay. When we sell, we deduct any costs related to the sale (sometimes it’s easier to use an agent to sell), which will then give us our profit. I’ve found that it’s quite easy to make your wage bill a year doing this. I think anything around 50% ROI is a win. Few tips.

1. Buy them, loan them out to a club that will pay their wage and hopefully a fee if possible. This increases the ROI significantly. Try also including a mandatory fee that’s 100% ROI or the very least 50%. Optional fee always make it at least 100%.

2. Move them on as quick as possible. Just like a used car yard, time and space is money. I try not to hold too much inventory (human rights violation?) at a time.

3. Stay away from GKs. They are hard to sell and you don’t make too much money on them. Not worth the time.

4. As your transfer budget grows, you can take on more risk. I usually stick to around the 250k-3m mark. Bigger the outlay, the more you must make, so bigger the risk. However, if you have a budget of over 100m+, take those 15m transfer listed high reputation players on from Man Utd who has played 7 games in 3 years. For example, year 3 I bought Ryan Gravenberch for a total outlay of around 16m and immediately loaned him out to Atletico Madrid for 100k a month, 100% wages and with an option to buy for 48m. They used it at the end of the season. I made roughly 262% ROI, one of my biggest for almost no effort other than looking at the transfer list.

Transfer Policy

Our approach to transfer policies is uncompromising and driven by a clear valuation strategy. Each player in our squad is assigned a value based on the cost to replace them with a similar player, plus an additional 25% premium. This valuation represents the minimum price at which we are willing to consider selling a player.

Our stance is firm: players are not for sale unless their value is met. We prioritize retaining our key assets and ensure that any potential transfer offers reflect their true market worth. If a player expresses discontent or seeks to force a transfer, it signifies a misalignment with our squad’s culture and values. In such cases, we are prepared to negotiate based on market value, but only if it aligns with our overall squad management strategy.

Our commitment to maintaining a squad of high-calibre personalities and talent ensures that such situations are rare. Our players understand and respect the club’s valuation policy, usually agreeing to any fee we say needs to be met.

Increase Commercial Exposure and Revenue

Affiliate networks play a crucial role in expanding our club’s presence and influence in various markets. LAFC, for instance, provides opportunities to tap into their well-regarded youth academy. By establishing affiliations with clubs like LAFC, we not only gain access to promising talent but also enhance our brand visibility in the United States.

Signing players from the USA and integrating them into our squad or loaning them out helps us further solidify our presence in the American market. These players contribute not only on the field but also attract attention from fans, leading to increased shirt sales and overall engagement with our club.

In addition to player acquisitions, organising pre-season tours in regions like the United States allows us to connect directly with fans, build relationships with different cities and expand our fan base. It’s a comprehensive approach that leverages affiliate partnerships, player acquisitions, and community engagement to strengthen our club’s global footprint.

Club Vision

Now that our structure and programs are in place, it’s imperative to formulate our club vision. This vision will be structured around three pillars, with KPI’s  monitored annually to ensure continual growth and improvement.

Emphasizing the importance of relying on KPIs rather than results as a measure of success is crucial. Variability is inherent in football, and it’s a force that inevitably affects outcomes. How many times have you been FM’d? Success in football, like with anything, is not always linear; there are often fluctuations in performance, even when efforts are strong.

Club Identity

Our club identity consists of a youth first approach, coupled with a distinct tactical style and player profile. We need to find some benchmarks that can measure our success.

Youth Policy

• Youth teams to compete for Division Titles and go deep into knockout stages of each tournament
• As stated in our outline, 25% of PL, 50% of FA Cup and 75% of CC minutes must be played by CTP.
• Top CTP in the England national team.
• Top 5 CTP in the top 5 European leagues

Player Profile

• All positive personality 
• Have the highest rated team in all our DNA attributes
• Have the most domestic players

Tactical Philosophy

• Top 5 in possession
• Top 5 in progressive passes
• Top 5 in xG

Sporting Success

Two of the three best managers in the league right now and a few things jump out at me

• Year 3 there’s a spike in xG, but not xGA.
• Years 4-5 see a smaller spike in xG and a greater dip in xGA, which brings success. 
• “Peak” years are variable. 
• Higher performance and output on an individual year basis doesn’t mean you’ll win trophies

Our evaluation must stem from our own standards. There’s no point in comparing our performance as a midtable team to that of a club like Spurs. Our starting points are fundamentally different, and expecting substantial short-term increases in output is unrealistic. Additionally, we need to acknowledge our output peak, which occurs when our performance falls within the boundaries of our highest and lowest outputs. Coaches like Klopp and Arteta demonstrate steady improvements until they reach their output peaks and maintain consistency within those parameters. This approach also offers a straightforward method for identifying weaknesses in gameplay. If there’s a significant deviation from the norm, it warrants analysis, much like Klopp likely conducted when Liverpool conceded 47.3 xGA in the 20/21 season and 56.77 xGA in the following season. It’s important to recognize that stellar performance doesn’t always guarantee favorable results, and vice versa. For instance, in the 19/20 season, despite Manchester City having over 100 expected goals and conceding only around 20 expected goals, they  suffered nine losses, allowing Liverpool to clinch the title despite potentially inferior metrics. Not every season will surpass the last; setbacks are inevitable. However, the trajectory over a 4-5 year period should generally trend upwards.

Sporting Success

• Growth in xG, xGA, xP, possession, progressive passes, reduced turnovers
• Competing for European slots
• Grow Reputation

Financial Sustainability

Unlike sporting success, financial sustainability is very much a yes/no equation. Our key metrics will be the standard across business. We aren’t going to include expenses, as Wage/Transfer budgets are our biggest expense, it’s extremely unlikely we need to monitor anything other than that KPI.

• Total Revenue
  • Commercial
  • Matchday
  • Competition
  • Broadcast
• Debt
• Balance
• Wage budget
• Cash runaway

Here’s an image of our Club Vision 

That’s it! Thanks to all who have followed along. I’ll be looking to do a few different pieces every couple of weeks!

As always, you can find me here at @TacticalFool on twitter. Any questions, fire away.

Till next time