Spurs plan for FFP

It has been an interesting summer transfer window and I've penned several articles on the success of Daniel Levy and his appointment Franco Baldini, a man Andre Villas-Boas has been wanting at the club since the day he arrived, well before that probably.

Financial Fair Play is around the corner and for the first time every English club will have rules in place that will restrict their spending. There are also UEFA restrictions which clubs must conform to if they are taking part in the Champions League or Europa League.

The basic principle of Financial Fair Play (FFP) is the football-related expenditure must not exceed football-related income (subject to certain exceptions). It was brought in because too many clubs were going into debt and administration from top leagues, Rangers, Portsmouth, Leeds, Southampton, Fiorentina, Racing Santander, Real Mallorca, Real Zaragoza and Real Betis for instance.

Until 2018 at least, clubs, because of an “acceptable deviation” rule will be able to lose reducing amounts provided those losses are covered by equity investment. Additionally there are salary 'loopholes' for pre June 2010 signed players. So it's not a cut and dried you are in debt you don't meet them situation.

For UEFA competitions clubs the maximum permitted loss over 3 seasons is €45m (£38m), if the owner injects equity then it reduces to €5m (£4.22m) over the same period. This is monitored via the annual accounts and there is no restriction on wages.

Punishments, of which there are 9, can begin in April/May 2014 and range from warnings to a UEFA ban.

The Premier League allows a maximum permitted loss over 3 seasons of £105m (€124.33m), if the owner injects equity then it reduces to £15m (€17.76m) over the same period. This is monitored via the annual accounts and projections. As for wages there is no restriction if they are below £52m (€61.57m) and a maximum increase if over of £4m (€4.74m) per annum plus any increased revenue from new commercial deals.

Punishments are points deductions and as yet undecided other sanctions. It has not been determined when these start although it is expected to be December 2014 for wages and equity breaches and Dec 2016 for exceeding loss limits.

To take part in the Premier League is one set of rules and to take part in UEFA competition are a more stringent set of rules, not exactly the one rule applies to all UEFA had hoped for. However for teams to compete in Europe UEFA rules apply so clubs will need to work towards those.

The Financial Fair Play rules (FFP) are a 90 page document of which break even is the key. There are rules on staying up to date with payments of transfer fees, wages, tax for instance. Break even is not cut and dried, you can still make a loss and pass the break even test! The figure changes from season to season and is taken over a period of time not at a set time. Also not all expenditure is included in the calculations so its all be a bit confusing to the football fan. This season is the first time clubs have to submit accounts to UEFA for FFP compliance.

Before we move on let me say that clubs are likely to increase the use of third party ownership which will increase money outside the boundaries and decrease transfer fees within it. The Premier League and Ligue 1 are the only two leagues who ban third party ownership. Platini wants to reduce transfer fees and club ownership of a player so plenty of challenges possibly for Premier League clubs in the future.

If you would like to read an explanation of FFP that covers it in more detail then there is a good explanation of it here: Financial Fair Play Explained

Chairmen must have these in mind as they prepare a strategy forward and plan their transfer spending. Spurs as we all know are run financially very well, last summer our net spend on transfers was approx £3.3m (€4m) and the season before we made a profit of approx £31.41m (€37.2m). This window has continued in similar vein:

Players Out - Transfer fee
David Bentley - Released
William Gallas - Released
Massimo Luongo - £400,000 (€473,644)
Steven Caulker - £8m (€9.47m)
Clint Dempsey - £5.8m (€6.87m)
Tom Huddlestone - £5.5m (€6.51m)
Jake Livermore - Loan
Benoit Assou-Ekotto - Loan
Tom Carroll - Loan
Scott Parker - £3m (€3.55m)
Gareth Bale - £84.39m (€99m) - potentially rising to £97.12m (€115m)
Total = £107.09 million (€126.80m)

Players In - Transfer fee
Erik Lamela - £25.57m (€30m) + potential £4.22m (€5m)
Roberto Soldado - £25.57m (€30m)
Etienne Capoue - £7.33m (€8.6m)
Nacer Chadli - £5.97m (€7m)
Paulinho - £17.04m (€20m)
Christian Eriksen - £9.8m (€11.5m)
Vlad Chiriches - £8.11m (€9.5m)
Total = £99.39 million (€116.6m)

The situation over the last 3 years in relation to transfers is a healthy very one despite bringing in 15 players in the last 2 years. But what of wages, all this talent brought in must mean we have substantially increased our wage bill, right. Well no there we have done rather well again over the summer:

Players out - Weekly wages
David Bentley £60,000 (€71,046)
William Gallas £60,000 (€71,046)
Steven Caulker £19,230 (€22,770)
Clint Dempsey £92,957 (€110,07)
Tom Huddlestone £19,230 (€71,046)
Jake Livermore £19,230 (€22,770)
Tom Carroll £19,230 (€22,770)
Benoit Assou-Ekotto £25,000 (€29,602) - estimate part of his wages QPR are paying
Scott Parker £70,000 (€82,887)
Gareth Bale £75,000 (€88,808)
Total = £459,877 (€544,543)

Clint Dempsey's wages look rather large but 7.5 million US dollars was the reported figure so I've gone with that. Even if you took £20K off it doesn't make a lot of difference to the equations. QPR may be paying all Benoit Assou-Ekotto's wages but I've set the figure at a reasonable amount assuming we are still paying the rest.

Players In - Weekly wages
Erik Lamela £66,000 (€78,151)
Roberto Soldado £67,307 (€79,699)
Etienne Capoue £60,000 (€71,046)
Nacer Chadli £24,660 (€29,200)
Paulinho £70,000 (€82,887)
Christian Eriksen £38,977 (€46,153)
Vlad Chiriches £19,867 (€23,524)
Total - £346,831 (€410,686)

In 3 years we have spent no money, improved the squad, reduced the squad age, increased the potential sell on value of players and reduced the wage bill by around £113,000 (€133,000) a week. A successful season in the Premier League could see Capoue's value for instance more than double. If you compare that to the players he replaced, Scott Parker was decreasing in value and Tom Huddlestone wasn't going to increase in value much either, if at all.

It's a fact of life that if you don't have Champions League football your best players will move on to get it. You try and keep them of course but sometimes it's impossible, Berbatov, Modric, Bale all went on strike to try to force moves through. Naturally you have contingency plans in place incase this happens. Our format has been to buy young talent and surround it with experience, especially under Redknapp who has a history of buying older players.

The arrival of Andre Villas-Boas allowed for a more long term outlook. Young talent from around the world ready for Premier League football is now the blueprint and a move away from the young British talent philosophy of David Pleat. Talent has been sourced from Spain, Italy, Germany, Holland, Brazil and Romania.

Of all the players brought in only Soldado will probably not increase in value given his age. He is one of only three signing from the 15 brought in to be over 25, Adebayor and Dempsey the other two, one of which, Dempsey, has already left of course. High resale values, because some will leave, increases football-related income and therefore the amount for football-related expenditure.

Over the next year the club can look to replace Benoit Assou-Ekotto and Emmanual Adebayor with younger players to reduce the wage bill even further and fit in with the business strategy.

On the playing front it's a gamble, a gamble that you can get all the new players to fit together, QPR couldn't, and that the talent they have shown in lesser leagues, Holland (Eriksen) and Romania (Chiriches) for instance, can be translated to the tougher Premier League. Further forward these young stars will have title aspirations with new young talent added around them.

The other major assistance to Financial Fair Play will be our academy and the loan system. If we can produce talent, develop it through the use of the loan system, we will generate players with a higher sale value, of course if a youngster turns out to be hugely talented we have a player for very little so expect to see Franco Baldini scour the world for young talent. Halilovic springs to mind, very young, very talented and for his age very expensive.

Finding talent young and developing it will be a key element in our future. I expect we will be active in South America and countries like Romania where talent can be plucked cheaply. I also expect we will become active in the overseas loan market more. Players like to play and foreign players develop quicker as a result, the Premier League requires ready made players. Forming a partnerships with a clubs like Ajax who have a history of developing players seems the next sensible step.

Financial Fair Play was approved in 2009 and it's quite clear Spurs have had and have a strategy in place with this in mind. Looking to the immediate future, the club require the new squad to gel and attain Champions League football. That will put the club in an even healthier position with the increased revenue and global exposure it generates. If the rumours of a massive sponsorship deal next year are true Spurs sit in a healthy position.

As with every strategy you must have an exit strategy if things don't go as you plan. Buying young talent that increases in value on reasonable wages means if necessary, certain players can be sold for a healthy profit and replaced with fresh new young talent. We seem to have everything covered.

It's a fascinating and exciting time to be a Spurs fan. Whilst this summer we have taken a gamble we have only done so as part of our overall business plan.

The future looks rosy, a lilywhite rose of course.

P.S. For those of you wondering where the next article in the tactical analysis series is, this time focusing on centre-backs, it is released tomorrow morning at 9.37am (09.37hrs) UK time.

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