After much of the discussion over the past few weeks, and the divisions on whether Paul Lambert is the right man for the job because of his spending habits, it had me thinking – just how cheap is too cheap?
The easy way of knowing the answer to that particular question is by seeing the effect of cost cutting, with relegation being the main way of being the cut off point where cost saving becomes a moot point due to decreased income from Premier League TV rights.
So, with that in mind, some fans are questioning whether Lambert’s plans to go with younger, cheaper players may spontaneously backfire, leaving Aston Villa with a great looking wage bill, but at the cost of the club’s ever-present Premier League status. In the interest of fairness, let’s try and look at the wages being spent, and whether they could be spent better in different ways.
Two Not-Good-Enough Players Will Always Be More Expensive Than One Good Player
In order to establish a starting point of the discussion, we need to establish some facts and figures. Villa, as an enterprise, has had a short term revenue generation capability of around £80m – the figures may vary somewhat from that exact figure, but £80m is a fair bet on what the club has generated in recent years. Of course, the TV rights will raise that figure but, as John stated in his article yesterday, balancing books can take time.
Anyway, getting back to the figures for a second, a 70% wages-to-turnover ratio gives a £56m wage bill that the club can sustain. Doing the maths, this gives a 25-man squad an annual salary of just over £2m each, a weekly wage of around £43k a week. The reality is less as the reserves and academy need to be paid too.
At first glance, there would be some argument to say that the current wages – largely offered in and around £20-25k maximum on signing – are too low when considered against the club’s turnover. However, the reality is that the club have made losses in past years, and these losses have to be repaid from somewhere if the club is to be sustainable going forwards.
So, logically, a sustainable £56m wage bill could occur. Or could it?
It Isn’t Just Wages That The Club Have To Consider
One thing the above figure fails to include is a significant cost for football teams – transfer fees. If Villa did have a £56m wage bill, and no other costs apart from player spending – itself totally unrealistic – the club would have £24m net to spend on fees.
Of course, some might argue that £24m could well be enough to spend – especially given Lambert’s net spend of less than this amount in the summer transfer window – but that figure would be eaten into by other costs from sustaining the ground to paying out for other non-player expenses.
However, the figures do give us some context – £24m was spent on Darren Bent’s transfer fee alone, which doesn’t include his wages and signing fee. So, and we know this already from experience, spending so much ad infinitum was not feasible.
So lets get back to the core premise of this article – that the club may be going too cheaply into the market, and that spending more would work better.
Let’s start with transfer fees. As we’ve established, running a 70% of turnover wage bill means transfer fees are limited to 30% of turnover, likely much less – fees aren’t limited to the point that we can’t spend anything, but they are limited.
Now, yes, the increase in TV rights will, in pure financial terms, boost our turnover by around £30m more than previous seasons. On that basis, turnover could be £110m with a 70% wage bill of meaning £77m could be spent on players, a weekly wage of just under £60k, and a maximum £33m net spend.
So why don’t Villa spend it? After all, they have it, right?
Even With More Money, Things Have To Balance
A £33m net spend would certainly offer a boost to the squad – especially if it was something that could be sustained – but we have to ask how much we could, or would, spend if we are targeting a higher class of player.
We’ve seen already that Lambert is happy to spend £7-8m on a player if he thinks he will improve the team and, as I think we will all agree on, the players of that magnitude signed by the manager have done well – I’m not going to include Libor Kozak in that assessment as he hasn’t played 38 minutes for us yet, never mind 38 games.
But what if Lambert scaled up his options on transfers to the £15m mark? Surely that would work better?
In simple man-for-man comparisons, a good value £15m player is likely to be better than a good value £7m player. However, especially when we look at the youth focus of the team, just how do you spend £15m on a player who is young without a) him being chased by bigger clubs than Villa and/or b) his wage demands being too much, even at a young age?
Some might question, especially with the figures presented above, that there is more than enough slack in a correctly operating Villa to pay £60k a week or more to a real game changer, especially if that player could make a real difference for the club.
However, there’s more to spending money on wages than just the cost of those wages on the balance sheet, and here’s why.
Spending More Can Cause More Wider Issues
Lets imagine for a second that we go out and buy James Milner tomorrow. Whilst there is no doubt that Villa would be improved in the short term by such a capture, we’d have to assess the holistic impact of such a move.
Firstly, unless Milner took a massive pay cut to come to us – rather unlikely at best – he would be on more money than anyone at the club barring Bent. Though Milner is certainly a good player, is the addition of a player on more money than Christian Benteke going to go down well with dressing room harmony? Sure, younger players know older players earn – and possibly deserve – more money, but disparity can cause a lot of issues. If anything, we’ve learned Lambert wants to build a team that grows together – adding expensive players on expensive wages seems to be somewhat incongruous with such a vision.
Secondly, there’s the impact on the wages itself in financial terms. If Villa spend twice what they are budgeted for a player’s wages, they have to pay the cost elsewhere. Is Milner that good that he should cost the club two other players’ place in the squad? Or over three times what Benteke cost us last season for each year of his contract?
There’s no doubt that Villa have had a thin squad in the past. In fact, it is only recently that we have started to be able to pay for competition for places, a concept long absent in recent years. So buying a big player on Lambert’s net spend of £15-20m has been non-viable, especially when we consider that we haven’t been able to shed every player taking up a large part of the wage bill.
Going forward, things could change, but not massively. Even with the increased money from TV rights – something that will likely inflate prices in the domestic market, thus reducing some of that increased revenue – Villa aren’t able to throw mega-money around.
Why? In simple terms, Financial Fair Play has a three year book balancing term to it that means Villa would have to make that extra spending back, unless it was in approved areas like the academy system and, as we’ve seen with Manchester City, spending big doesn’t mean building a consistent dynasty, and Sheikh Mansour has spent more money so far than our owner has in total.
So, boring as this may be, the club are bound by circumstance. If our purchased players can play well and be sold at a profit, there will be increased turnover which means increased spending power – with Benteke our most saleable asset at present.
Apart from that, Villa, like every club around us, are bound by their turnover. If it can be increased, then we can see progress but, as with any process, that development of new revenue streams can, and will, take time – years, not weeks or months.
The future offers that potential of £40k or more per player, but only at the cost of spending comparatively low amounts on player fees so, given the general lack of correlation between high fees and low wages, it seems unlikely that the club can deviate from their £20-25k maximum without upsetting the dressing room and club profit margins – not short term anyway.
I know such a reality may not be the right answer that people want to hear, but it is what it is – Villa aren’t necessarily choosing the right or wrong path, simply the only one available.
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