Scientific Experiment V1#1 R.Lerner/ Board Approval Ratings

[irreverentad]

Over the last few years, as I have grown more and more disillusioned with Premier League football I changed the way I looked at the Villa.

I used to be desperate for us to finish as high up in the League as possible, or to get 5th or 6th (having already accepted that we will not win the League or get Champs League).

I discovered that football, for me, is all about memories. I don't remember (without looking) what position we finished in the last 5 or 6 years. But I do remember great moment from games eg Yorke v Sheff U, Saunders v Ipswich, Young v Everton, Agbonlahor v West Ham.

This is all that matters to me. As long as Villa stay up I am happy.

Yes to win things would be great but I just like the 'special moments' from great games. I am still fiercely proud to be a Villa fan and wish them to win every match but to qualify for the Europa League does not excite me.

I am thankful for Randy for what he is doing and what he has done. He has helped us buy players such as Young, Bent & N'zogbia (hopefully) who will give me those special moments I will always remember.

As a result I am beginning to love football again!

[PB]

It appears as if our wage bill may have been £384,000 per week over budget for a couple of years.

What should a good, responsible club owner do in that situation?

Could that not also have been written as:

It appears our revenue was £600,000 per week under budget for a couple of years.

What should a good, responsible club owner do in that situation?

I'm not sure what you;re getting at, other than to say that the club revenue should have been increased to allow for the increased wage bill of an additional £600,000 per week that you appear to be suggesting.

Other than by acquiring Champions League football, with its attendant riches, how do you propose such a feat be achieved?

Given that you cant compete in the Champions League without your wage bill being within budget especially?

[snowychap]

I'm not sure what you;re getting at...

Perhaps you ought to have read further through the thread then, PB : this was a subsequent post.

Without repeating the entire post, my initial point of that next post was:

i like that way of looking at it, as in a sense it is our revenue restricting our wage bill, rather than just our wage bill being too high.

Indeed. As your thread the other day suggested, it is a combination of the two (as I assume that the figure PB used to illustrate the wage bill issue was working back based on a sensible wage:revenue ratio).

[ChrisNichollsToe]

IrishCockney...........great post and spot on.

[HackneyVillain]

Over the last few years, as I have grown more and more disillusioned with Premier League football I changed the way I looked at the Villa.

I used to be desperate for us to finish as high up in the League as possible, or to get 5th or 6th (having already accepted that we will not win the League or get Champs League).

I discovered that football, for me, is all about memories. I don't remember (without looking) what position we finished in the last 5 or 6 years. But I do remember great moment from games eg Yorke v Sheff U, Saunders v Ipswich, Young v Everton, Agbonlahor v West Ham.

This is all that matters to me. As long as Villa stay up I am happy.

Yes to win things would be great but I just like the 'special moments' from great games. I am still fiercely proud to be a Villa fan and wish them to win every match but to qualify for the Europa League does not excite me.

I am thankful for Randy for what he is doing and what he has done. He has helped us buy players such as Young, Bent & N'zogbia (hopefully) who will give me those special moments I will always remember.

As a result I am beginning to love football again!

Pretty much sums up my feelings too, although I'd happily take participating in Europe again.

[birdistheword]

I like cheese

[Dodgyknees]

And a vast majority of that argument I think is totally spot on. I think Randy also naively only expected to spend so much on players and then to basically stop spending , without realising that to stand still in this league requires spending money on players. English football and the way of transfers being slightly different to American game.

Randy even said that it was always known that the spending in year 4 would decrease. Naive.

Exactly my thoughts.

[IrishCockney]

Don't get me wrong, I too WANT Randy to succeed, badly!

But like any hands off businessman, he hires and trusts people to make the right decisions. The men at the top, O'Neill, Faulkner and to a much lesser extent Houllier, all failed to achieve the goals set.

In O'Neills case its fairly black/white - judged on results, Faulkner however is the elusive one. IF he hired Houllier, IF he allowed O'Neill to ride over him and IF he didn't have a handle on the spending then in my opinion - goodnight Josephine!

I also WANT McLeish to succeed, I just hope he's given some slack by us, the fans and a fair wad to make some semblence of progress this season, otherwise the gates and therefore the revenue will continue in the wrong direction, and Mr Lerners tenure will never recover.

[Amsterdam_Neil_D]

And a vast majority of that argument I think is totally spot on. I think Randy also naively only expected to spend so much on players and then to basically stop spending , without realising that to stand still in this league requires spending money on players. English football and the way of transfers being slightly different to American game.

Randy even said that it was always known that the spending in year 4 would decrease. Naive.

Exactly my thoughts.

He is a very successful business man and I just can't believe he would invest so much money into a business and not have a long term business plan in place which would take into account everything such as transfers and wages. The Man City emergence is a cop out IMO, even without them the fact remains that whatever you think you will need to compete money wise in 3 or 4 years you can be times that by 4,5 or 6.

[PB]

I'm not sure what you;re getting at...

Perhaps you ought to have read further through the thread then, PB : this was a subsequent post.

Without repeating the entire post, my initial point of that next post was:

i like that way of looking at it, as in a sense it is our revenue restricting our wage bill, rather than just our wage bill being too high.

Indeed. As your thread the other day suggested, it is a combination of the two (as I assume that the figure PB used to illustrate the wage bill issue was working back based on a sensible wage:revenue ratio).

Yeah, the figures I quoted came from the BBC website , an article published in March.

This article stated that the last available figures showed our wage bill as 88% of turnover, as opposed to the 67% it would need to be under UEFA FP regulations that come into effect in 2013.

On our current turnover, that equates to £20m per year, or nearly £400,000 per week higher than the UEFA FP regulations allow, thus barring us from entering European competition from 2013 unless the figure is brought under control. Even if you disregard the UEFA FP regs, I think its pretty clear that the wages/revenue ratio should be at the sort of 2/3rds level anyway so that the club will still be here in 100 years time.

As I also said earlier in the thread there is little point in us trying to blame anyone for that figure being currently so high, as without knowing the exact nature of the roles taken by Lerner and O'Neill during the latter's tenure as manager we cant know who was making what decisions.

On the one hand, you might say that Lerner gave it a real go and properly backed his manager at the time with a budget fitting a top 4 club (a club with a turnover £30m higher than ours) in the hope that by qualifying for the Champions League the revenue from prize money and more probably sponsorship would increase by the right sort of level. Some people might argue that given such a budget, it was reasonable to expect a manager of Martin O'Neill's reputation to achieve Champions League football. Having failed, for whatever reason, to achieve that target, and with the subsequent emergence of Manchester City, who we are unable to compete with on financial terms, the same people might then say that Lerner's duty of care to the long term future of the club is to accept that the attempt to buy our way in failed, that we had a small window of opportunity and didnt take it, and that we now need to put ourselves as a club into a position where the books are properly balanced.

In that sense, given that a player towards the top of our wage scale earns about £50,000 per week, to lose £380,000 per week is a nett loss of something like 7 reasonably top earners from the wage bill. We still have some way to go to achieve that, as I would speculate that we remain something like £150-175,000 per week too heavy wages wise despite recent sales.

Others might argue that Lerner should have had a tighter rein, that he shouldnt have allowed O'Neill to run up such a huge bill and place the club potentially in such jeopardy, and maybe there is something in that too.

So basically, I'm not sure how you propose we can reach this 67% wage limit by increasing turnover by £30m per year (over 30%) in the space of 2 years, given that we cant compete financially with three of the top four, and have significantly lower revenues than at least another three clubs also. Where is this £30m going to come from to support the wage bill as it was?

[snowychap]

Yeah, the figures I quoted came from the BBC website , an article published in March.

This article stated that the last available figures showed our wage bill as 88% of turnover, as opposed to the 67% it would need to be under UEFA FP regulations that come into effect in 2013.

Having looked at that article and having had a a brief scan of a few about the FFP regs, I haven't seen anything which specifically states about wage:revenue ratios.

The FFP regs, from what I have read, relate to allowed losses over periods, showing that clubs are 'moving in the right direction', money put in to the club, &c.

It would be interesting if they have proscribed a maximum ratio (as if there is then I've missed it) or is this just being conflated with the generally held maximum sensible ratio that is put forward?

On our current turnover, that equates to £20m per year, or nearly £400,000 per week ...

And that is what I said: that the 'wage budget' that you speak of is a figure that has been worked back from the actual revenue figure.

So basically, I'm not sure how you propose we can reach this 67% wage limit by increasing turnover by £30m per year (over 30%) in the space of 2 years, given that we cant compete financially with three of the top four, and have significantly lower revenues than at least another three clubs also. Where is this £30m going to come from to support the wage bill as it was?

I don't propose that and I haven't proposed that.

You came at the question looking at previous financial years and claiming that the wages were '£x above budget'.

Unless you have seen some budget documents relating to these years or some management accounting reports indicating such a delta against an actual budget then I think you are making a mistake to come at it purely from a cost perspective.

The problem I had, therefore, with what you posted was that the wages could not been seen in isolation and that it was a part of the picture.

If one is to budget for a future financial period, one doesn't set the budget for a particular cost as a percentage of the actual revenue in the future period. If one is looking to have a particular ratio of, say, 66% of revenue then the budgeted wage figure would be 66% of the budgeted revenue figure and not the actual.

How to deal with a wage/revenue issue now and in future periods is different to analysing what happened in prior years.

The easiest thing is to look at it from a cost perspective but to concentrate on that only (which I don't imagine they are doing) would carry risks.

[BG_Villa_Fan]

In that sense, given that a player towards the top of our wage scale earns about £50,000 per week, to lose £380,000 per week is a nett loss of something like 7 reasonably top earners from the wage bill. We still have some way to go to achieve that, as I would speculate that we remain something like £150-175,000 per week too heavy wages wise despite recent sales.

Assuming the players wages represnt the lion's share of the total wages the club pays and that the numbers from the 'Wages & Revenue (sustainability )' thread are correct ( ish ), which I believe they are, then the total sum as things currently stand calculates to a number between 40 mil and 50 mil per year. That's not nearly 88% of the turnover, unless the Villa pays really big money to ordinary employees, i.e. non playing staff.

[PB]

In that sense, given that a player towards the top of our wage scale earns about £50,000 per week, to lose £380,000 per week is a nett loss of something like 7 reasonably top earners from the wage bill. We still have some way to go to achieve that, as I would speculate that we remain something like £150-175,000 per week too heavy wages wise despite recent sales.

Assuming the players wages represnt the lion's share of the total wages the club pays and that the numbers from the 'Wages & Revenue (sustainability )' thread are correct ( ish ), which I believe they are, then the total sum as things currently stand calculates to a number between 40 mil and 50 mil per year. That's not nearly 88% of the turnover, unless the Villa pays really big money to ordinary employees, i.e. non playing staff.

Well, I havent read that thread, I was merely basing my assumptions on what was on the article I linked to. As it is the BBC, one might assume it had some credibility. The 88% figure has been bandied about for quite a while too, since MON left anyway, so I dont think the Beeb just pulled it out of thin air, although i suppose you;d need to ask the journalist in question where he got his figures from. All I can do is the quote the BBC as my source and leave people to make their minds up about which source they prefer

[BG_Villa_Fan]

In that sense, given that a player towards the top of our wage scale earns about £50,000 per week, to lose £380,000 per week is a nett loss of something like 7 reasonably top earners from the wage bill. We still have some way to go to achieve that, as I would speculate that we remain something like £150-175,000 per week too heavy wages wise despite recent sales.

Assuming the players wages represnt the lion's share of the total wages the club pays and that the numbers from the 'Wages & Revenue (sustainability )' thread are correct ( ish ), which I believe they are, then the total sum as things currently stand calculates to a number between 40 mil and 50 mil per year. That's not nearly 88% of the turnover, unless the Villa pays really big money to ordinary employees, i.e. non playing staff.

Well, I havent read that thread, I was merely basing my assumptions on what was on the article I linked to. As it is the BBC, one might assume it had some credibility. The 88% figure has been bandied about for quite a while too, since MON left anyway, so I dont think the Beeb just pulled it out of thin air, although i suppose you;d need to ask the journalist in question where he got his figures from. All I can do is the quote the BBC as my source and leave people to make their minds up about which source they prefer

I don't doubt the source, it's just that we don't know what exactly is included in that 'wages' number - is it only the players wages, what other staff's wages it includes, whether it includes payoffs, etc.

And most importantly - what percentage of that number the players wages are.

[PB]

Unless you have seen some budget documents relating to these years or some management accounting reports indicating such a delta against an actual budget then I think you are making a mistake to come at it purely from a cost perspective.

Well, I dont, but I assume, as I just said, that the BBC journalist knew more or less what he was talking about. Should have an issue with what he wrote, then you might be better off querying him, rather than me, who is just quoting his figures as the BBC is traditionally a reliable (although not perfect) source of information. They are certainly not given to wild speculation or making rash assumptions as a general rule, although perhaps this particular journalist is? Maybe he is part of a wider conspiracy?

If one is to budget for a future financial period, one doesn't set the budget for a particular cost as a percentage of the actual revenue in the future period. If one is looking to have a particular ratio of, say, 66% of revenue then the budgeted wage figure would be 66% of the budgeted revenue figure and not the actual.

Under normal circumstances, how would you plan a future budget? Say for the year 2013-2014? One might factor in some growth, or decline in revenue, based around various assumptions and trends and around predicted performance, competitor activity etc. In this specific case it would be rash to budget for an income that was 30% higher than the current figure, I'm not sure any accountant would get away with such a prediction. i think one might predict an income figure for 2013-2014 that was more or less what we have currently. So our future budget, assuming we have a reasonable business plan and not some wild eyed fantasy, is perhaps likely to be quite similar to our current budget, and if, as I have been (I believe) reliably informed, the wage cap is at 67% for UEFA competition , it seems likely that further trimming is required (assuming the BBC fella has his numbers right).

[snowychap]

Well, I dont, but I assume, as I just said, that the BBC journalist knew more or less what he was talking about. Should have an issue with what he wrote, then you might be better off querying him, rather than me, who is just quoting his figures as the BBC is traditionally a reliable (although not perfect) source of information. They are certainly not given to wild speculation or making rash assumptions as a general rule, although perhaps this particular journalist is? Maybe he is part of a wider conspiracy?

What on earth are you on about, PB? What conspiracy where?

You linked an article that gave the actual figures for revenue and wages for the FY ending 31st May 2010.

Unless that article has been amended or I keep on missing it, it says nothing about what Villa's budgeted wage figure for that year or any year was. It also doesn't appear to say anything about 66% of anything or £384k per week, does it?

Again, unless I am missing something in that article, I don't see why I ought to have an issue with its author. :?

Under normal circumstances, how would you plan a future budget? Say for the year 2013-2014? One might factor in some growth, or decline in revenue, based around various assumptions and trends and around predicted performance, competitor activity etc.

With regards to previous 'budgets' (as that's what you were posting about), I said before:

As I'd expect they did actually sit down and forecast financials when Reform Acquisitions took over, it would be interesting to discover the assumptions on which those forecasts were based.

Were I to guess then I'd probably say it was all geared towards achieving a CL place (and based upon us doing that) with Randy bankrolling that attempt (whether explicitly or implicitly).

As far as planning a budget, it would depend upon the drivers and I'd imagine that those come from Randy's goals, hopes and expectations.

In this specific case it would be rash to budget for an income that was 30% higher than the current figure, I'm not sure any accountant would get away with such a prediction. i think one might predict an income figure for 2013-2014 that was more or less what we have currently. So our future budget, assuming we have a reasonable business plan and not some wild eyed fantasy, is perhaps likely to be quite similar to our current budget...

It may well be (and ought to be) very different to any budget that was drawn up when Reform Acquisitions took over.

When you say 'a reasonable business plan', what do you mean?

A reasonable business plan to: comply with the FFP regulations; achieve a goal of CL football; stay in the Premier League; win the Premiership?

And the point is not to suggest that any one is necessarily less reasonable than another but that different objectives would demand different plans.

...as I have been (I believe) reliably informed, the wage cap is at 67% for UEFA competition

As I said in my previous post, it would be interesting if they have proscribed a specific maximum ratio so if you could point me in the direction of that I'd be grateful.

[ender4]

In that sense, given that a player towards the top of our wage scale earns about £50,000 per week, to lose £380,000 per week is a nett loss of something like 7 reasonably top earners from the wage bill. We still have some way to go to achieve that, as I would speculate that we remain something like £150-175,000 per week too heavy wages wise despite recent sales.

Assuming the players wages represnt the lion's share of the total wages the club pays and that the numbers from the 'Wages & Revenue (sustainability )' thread are correct ( ish ), which I believe they are, then the total sum as things currently stand calculates to a number between 40 mil and 50 mil per year. That's not nearly 88% of the turnover, unless the Villa pays really big money to ordinary employees, i.e. non playing staff.

PB & BG_VF - Our wages haven't decreased for 11/12, they will be roughly the same as last year 10/11 and the year before 09/10.

see opening post here:

http://www.villatalk.com/index.php?name=PNphpBB2&file=viewtopic&t=69948&start=0

also, i estimate the footballing staff wages to be around £60m out of our total wage bill of £80m. Not sure where you are getting 40-50m from, have you included employer NI & bonuses.

On top of that, you need to add in a couple of million wages for Houllier/MON, plus pay-offs to MON, Houllier, & for stealing McLeish.

It comes pretty close to £70m.

and then £10m on top for non-footballing wages.

[BG_Villa_Fan]

PB & BG_VF - Our wages haven't decreased for 11/12, they will be roughly the same as last year 10/11 and the year before 09/10.

see opening post here:

http://www.villatalk.com/index.php?name=PNphpBB2&file=viewtopic&t=69948&start=0

also, i estimate the footballing staff wages to be around £60m out of our total wage bill of £80m. Not sure where you are getting 40-50m from, have you included employer NI & bonuses.

On top of that, you need to add in a couple of million wages for Houllier/MON, plus pay-offs to MON, Houllier, & for stealing McLeish.

It comes pretty close to £70m.

and then £10m on top for non-footballing wages.

Haven't included payoffs, coach/staff wages, etc. Only the players ( rough estimates obviously ) :

Given : 55K

Guzan : 15K

Marshall+Parish : 5K

Dunne : 50K

Collins : 40K

Warnock : 40K

Young : 40K

Cuellar : 35K

Clark : 20K

Beye : 35K

Lichaj+Baker+Lowry : 10K

N'Zogbia : 55K

Makoun : 40K

Albrighton : 25K

Delph : 25K

Petrov : 50K

Ireland : 65K

Bannan : 10K

Hogg+Herd+Gardner, etc. : 10K

Gabby : 60K

Bent : 65K

Heskey : 55K

Delfouneso+Weimann : 30K

Calculates to about 43 mil per year.

[ender4]

Haven't included payoffs, coach/staff wages, etc. Only the players ( rough estimates obviously ) :

Given : 55K

Guzan : 15K

Marshall+Parish : 5K

Dunne : 50K

Collins : 40K

Warnock : 40K

Young : 40K

Cuellar : 35K

Clark : 20K

Beye : 35K

Lichaj+Baker+Lowry : 10K

N'Zogbia : 55K

Makoun : 40K

Albrighton : 25K

Delph : 25K

Petrov : 50K

Ireland : 65K

Bannan : 10K

Hogg+Herd+Gardner, etc. : 10K

Gabby : 60K

Bent : 65K

Heskey : 55K

Delfouneso+Weimann : 30K

Calculates to about 43 mil per year.

more or less i got to a similar figure - £45m.

then i added McLeish at £2m = £47m.

then average bonuses of 10% = £52m

then employer NI of 12.8% = £58m

then payoffs to MON/Houllier & Bham City of £6m = £64m

and i estimate the total wage bill will be £80m (should be pretty accurate based on previous year).

so that leaves £80m less £64m = £16m on non player/manager wages.

what i don't know is if AV pay anything towards player pensions, if they did make say 7% contributions, then that would be another £3.6m wages.

[PB]

Unless that article has been amended or I keep on missing it, it says nothing about what Villa's budgeted wage figure for that year or any year was. It also doesn't appear to say anything about 66% of anything or £384k per week, does it?

No, perhaps my use of the term 'over budget' has confused the more pedantic element on here.

The 'budget' I am referring to would be the 67% of wage/revenue 'target' which is I believe the figure UEFA intend to enforce. I also havent been able to find this figure anywhere written down (not that I have looked all that hard tbh, having better things to do), it is just what someone who I believe knows what they are on about told me. if he is wrong, then so am I. Even so, it would strike me that a figure of 67%, as I believe i have said more than once, should be about where the figure should be aimed at. We dont want to crash and burn.

When you say 'a reasonable business plan', what do you mean?

A reasonable business plan to: comply with the FFP regulations; achieve a goal of CL football; stay in the Premier League; win the Premiership?

And the point is not to suggest that any one is necessarily less reasonable than another but that different objectives would demand different plans.

[

I believe )as you appear to) that the original plan was to budget for a champions league place, or at least to put in place the funding to achieve that. Clearly that has been reviewed in the light of our failure in that regard and Manchester City's emergence (not to mention Liverpool's mad spending spree). So qualifying for the Champions League no longer requires sneaking past a faltering Arsenal, it also depends on other clubs with vast resources (compared to ours) failing.

If we were to put together a budget now, aimed at finishing fourth, would we be able to make the figures add up in a sustainable way? Probably not. Winning the title? Certainly not. Finishing upper mid table? Maybe.

I think the club needs to be run on a sustainable footing. We had a shot at buying into the elite, and it didnt work. Now we need to get our figures back in line with our income.

I suppose it is then possible that Randy would sell.