Sports Clubs: Financial Sustainability Issues
By Athena Constantinou, Managing Director, APC Sports, Nicosia, Cyprus
The financial sustainability of sports clubs is highly dependent upon the business model adopted and followed by the clubs’ management.
Most sports clubs face structural financial hurdles stemming from the use of inappropriate business models and usually seek to alleviate their financial difficulties through the injection of investor funds.
The injection of investor funds, however, does not ensure long-term financial sustainability, unless the financial injection is utilised in ways that deliver sustainable results both on and off the field of play in the long-term.
A successful strategy for sports clubs entails a shift in the end-goal.
For the most part, the stakeholders of sports clubs see success on the field of play as the main goal of the clubs instead of the clubs being financially robust. Most sports clubs are not run as businesses seeking to maximise value and economic returns. As a result, sports clubs do not devise and implement strategies which will yield them a clear competitive advantage and thus help them maximise economic returns and value.
Sports clubs can become well managed and financially sustainable, by having realistic forecasts and sensible budgeting. Sensible business and financial decision making, full utilisation of their earnings potential, and maximisation of value through deals and synergies within the sports industry is also required.
Sports clubs need the ability to grow and trade players and division promotions, and to capture media rights revenue, enhancing and expanding their hospitality offerings, as well as brand leveraging through merchandising and sponsorships. From capacity to cash flow, sports clubs can achieve lasting strategic, operational and financial changes for the benefit of all their stakeholders.
Club acquisitions can create havoc in the post-acquisition days, if not handled properly. To achieve a smooth transition into a new modus-operandi and emerge stronger and more profitable post-acquisition, sports club managers and stakeholders need to:
- Prepare and follow a post-acquisition business plan for the club’s way forward.
- Prepare and implement revenue enhancement and cost reduction strategies.
- Evaluate club assets, on and off the field of play, identifying under-utilised assets and identifying their optimal utilisation.
- Thoroughly review and analyse existing infrastructure in terms of its strengths and weaknesses, along with proposed enhancements/changes.
- Undertake debt and capital restructuring and their optimisation.
- Make decisive changes and oversee the implementation of them.
- Engage in brand-building, boosting engagement of both the local communities and the club’s international fan-base.
- Grow and develop sports academies.
As regards business and financial services, sports clubs need to address:
- Financial reorganisation and operational restructuring to improve performance, including reviewing the club’s present business and financial strategies and position and preparation of a restructuring plan (operational and financial) with the purpose of turning the club around and giving it a more predictable chance of turning investment into profit. This also requires monitoring the implementation of the restructuring plan.
- Revenue enhancement and cost control, which includes budget preparation and management.
- Undertaking feasibility studies for athletic facilities projects. Analysis of the prospective revenue streams, such as naming rights, match-day income, events revenues, and the like) and assessment of their viability.
- Valuation of sports clubs, sports facilities and sports venues, including an evaluation of the clubs’ value, sponsorship agreements, TV revenue, future income from tickets and merchandising, and the clubs’ assets, such as venues, buildings, players, and so on.
- Preparation of business plans and feasibility studies for establishing and developing sports clubs’ own sports academies.
This is a quite an agenda to accomplish, which will require the services of professional advisors to be able to achieve it effectively.
The Author may be contacted by e-mail at ‘
