Author Topic: Cleeve article  (Read 380 times)

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Cleeve article
« on: April 30, 2022, 10:08:06 AM »
It is very likely at the National League’s AGM in June that salary caps will be the main talking point.
Various options were put to clubs, including a hard cap (a fixed maximum amount clubs can spend on players' wages), soft caps and even a concept based on the USA baseball system that Woking FC owner John Katz threw into the mix.
All have their plus and minus points, but currently you are allowed to spend what you like on player wages, although this is highly likely to change. One of the main protagonists against any sort of cap is the PFA, who are essentially a trade union for players and retain charitable status. Clearly, any caps mean less money for players and hence less money for their members, so they are diametrically opposed to caps being installed.
The National League has a pretty good record of looking after its clubs; I cannot remember a club going bust recently under their watch. We already must submit returns on a quarterly basis; PAYE and VAT payments are monitored monthly, allowing the league to step in quickly at the first signs of trouble ahead.
The word on the street is that a soft cap of 70pc of turnover is likely to be the chosen route that we must follow. The devil is always in the detail and my worry is that the walk to financial security could be littered with booby traps whilst en As an example, our attendances fluctuate significantly with the team’s performance and as our gate receipts (unlike the Premier League) make up a huge percentage of our income, having to budget for our gates in advance will never be an easy job.  After guessing gates, I would then need to estimate the average ticket price, which would mean estimating the mix of the crowd in terms of away fans and home fans. Away fans usually have a higher average ticket price as a higher percentage of adults travel to matches away from home.
With higher travelling numbers you have higher stewarding costs, something that is often overlooked, so the net gain is never as high as some fans think it should be. To put this into context, after deducting VAT and using our category A pricing and without deducting stewarding costs we probably average a blended rate of at most £14 a head in the away end and no more than £11 a head in the home end.
For a category B game these figures drop considerably. If the visitors sell the tickets to their fans, they are allowed to deduct 5pc for doing so – bigger clubs can easily pay box office staff their annual salaries by just insisting (as is their right) that they sell all away tickets to their fans themselves.
If King’s Lynn Town drop into the National League North (NLN) many fans will want a price decrease and they will probably want a price lower than our current category B prices, even though, like every business, we have had significant cost increases to absorb this year.
If we were to do that, my guess is that our blended price, especially with fewer away fans in the NLN and after deducting VAT would be no more than £10. So, if we estimated 800 fans per game, multiplied it by 23 and took 70pc of the total over a 44-week season we could have a total wage budget of just £4,181 a week - far less than what we spent to get promoted out of the Southern Central League.  
A wage budget that small would guarantee relegation. I accept there are sponsorship deals and a little league income, but one would still need to pay managers, coaches, training costs, travel, electricity and so on. The remaining 30pc I doubt would cover the travel and hotel bills.
The new model championed by the fan led football review is unlikely to allow directors' loans. Often, club directors have companies in a group structure which allows profits gained in one company to be offset against losses in another. If these loans (which in our case are non-interest bearing and have no fixed date for repayment) must be injected into clubs as equity, then tax would need to be paid on the money being loaned across as you cannot get a tax deduction when you invest in a business and take an equity stake.  
From the fan led review side of the fence this, they say, protects clubs as directors cannot pull their money out and bankrupt the club in the process; but this misses the point as there is usually no money pot to pull out from in the first place. I would, though, be quite happy with restrictions on debt from commercial organisations being used to repay directors' loans.
What would happen if you over-estimate the attendances and find your three best players injured in the first few weeks of the season and results then go against you and crowds fall? Players are on fixed contracts so what would directors be expected to do if you find yourself exceeding the soft cap? From an administrational perspective there would need to be real time reporting, which would make life even more expensive for smaller clubs.
My solution would be to allow a sensible level of directors' loans per year, maybe up to £200,000 and only after this threshold is breached would there be a need to convert debt to equity. 
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