Wages v turnover and shit...

[Buddha]

Lifted this from rawk - thought it was worth thinking about...

Having read a lot of posters discussing whether or not wages are impacting on transfers I thought it would be useful to bring to people's attention the excellent Swiss Ramblers blog and his completely essential analysis of club finances.

http://swissramble.blogspot.co.uk/

His most recent update of Liverpool's finances is from May 2012 and I urge those who haven't read it to do so. It's long but very accessible, very clear and certainly gives you an excellent insight into where the club is financially. Certainly by the end you will feel the club is in a better place, but not as well off as it could be and with some improvement required across the board.

http://swissramble.blogspot.co.uk/2012/05/liverpool-keep-car-running.html

I bring it up here because I wanted to post the following graph from the Swiss Ramblers blog. It shows wages to turnover and how they have increased to unsustainable levels since exiting the CL.

A good rule of thumb for wages to turnover is about 50-55%. Liverpool are currently running at 70% of wages to turnover, one of the highest in the PL (as shown by this excellent graph from the same source.

 

[Hansern]

Yeah, I read that on Rawk earlier today. Insane that we've nearly doubled our total wage bill from '06.
We definetly need to get it reduced by 15% or thereabouts. CL footy will also see it decreased mind.

A bit ott claiming its one of the highest percentages pr turnover in the league when its nr 10...

 

[FoxForceFive]

Ross will fucking jizz in his pants when he sees this.

Tbf though it's definitely true, this is blatantly something that Fucks up our club & needs rectifying.

Unfortunately I think it means about 3/4 years of relative mediocrity (pushing for fourth every season & that's it).

 

[mark1975]

You can see why we've consciously been trying to lower the wage bill, and probably why Carroll will go.

 

[FoxForceFive]

Another thing to note is what rafa said, which is true.

He said that with some odd (& irregular) exceptions, the wage bill league matches the league positions, this is more true the higher the position.

 

[mark1975]

Rafa and Rosco can't be right in the same thread. Matter will become anti-matter and all that shit.

 

[Hansern]

Think a pretty high percentage of this entire forum have been on about lowering the wage bill. Its not something new at all.

Rafa should own up for a lot of high wages given to players who arent good enough.

 

[justdoit]

Didn't Arsenal have some kind of wage structure that every single one of their player seemed to be underpaid?
Didn't Liverpool have some kind of fuck up structure that we paid every player well over 100k per week? From the reports I read they at least included Joe cole, aquilani, Glen Johnson, Maxi, Jovanovic, Kuyt, Carra, Gerrard, Torres.
So how could it be possible that we were barely above arsenal on wage level? I learn here that arsenal are some kind of dream model we should learn from? Should we also keep up with their wage level?

 

[FoxForceFive]

Didn't Arsenal have some kind of wage structure that every single one of their player seemed to be underpaid?
Didn't Liverpool have some kind of fuck up structure that we paid every player well over 100k per week? From the reports I read they at least included Joe cole, aquilani, Glen Johnson, Maxi, Jovanovic, Kuyt, Carra, Gerrard, Torres.
So how could it be possible that we were barely above arsenal on wage level? I learn here that arsenal are some kind of dream model we should learn from? Should we also keep up with their wage level?

Arsenal offset that by not playing large fees. That's why they can pay the wages.

Paying the huge transfer fees & the wages as well isn't something our club can do, esp when the players tend to be nowhere near the value they should be.

 

[hmmmmm1]

To be fair to Rosco, he has banging this drum for well over 12 months

 

[peterhague]

As mentioned, most of the problem is just due to having built a squad to compete for the league and the CL, consistently over 4 or 5 seasons, and then unexpectedly dropping out and being stuck with the contracts. No doubt there'll be some sickening deals on the books, but the effect is magnified because we all concentrate on ours and rarely hear about the ones other CL clubs will no doubt be suffering. If you actually look at the graph then the wage bill just rises at a steady pace in line with income for the first few years, as you'd expect, because the rises in income is what drives wages in the industry. People always compare us to Spurs without ever actually crediting the fact that, while they've improved, at no stage have they ever had a period of 5 years like we had challenging for the CL and the title. You've got to compare like with like.

I don't doubt Spurs have been better run than we have, and that we've made some bad mistakes, but you still need a sense of proportion.

 

[StevieM]

Think a pretty high percentage of this entire forum have been on about lowering the wage bill. Its not something new at all.

Rafa should own up for a lot of high wages given to players who arent good enough.

Sorry - those figures make it clear that the wages to income spend was perfectly well managed until 2010 - which coincides with loss of both CL football and Rafa.

The wage bill continued to rise, but at a faster rate than income.

 

[justdoit]

As mentioned, most of the problem is just due to having built a squad to compete for the league and the CL, consistently over 4 or 5 seasons, and then unexpectedly dropping out and being stuck with the contracts.

Exactly.

----------------------------------------------------------------
Excerpt from http://swissramble.blogspot.co.uk/2012/05/liverpool-keep-car-running.html

Their adventures in last season’s Europa League only generated £5 million, which was significantly lower than the money received by England’s four Champions League representatives: Manchester United £44 million, Chelsea £37 million, Tottenham £26 million and Arsenal £25 million (average £33 million).
----------------------------------------------------------------

So £28 million(£33-£5 million) was the estimated money we lost due to playing Eupora instead of CL in 2010/11. If you adjust the figure, our "wages to turnover" ratio in 2010/11 would be 60.8% (i.e 129M/184M+28M) if we could qualify for the CL. The figure would be pretty consistent with our previous 5 years "wages to turnover" ratio ( and probably even longer if more stats are available). But of course you did not hear our "wage bill problem" every single day in those years.

Conclusion? Wage bill is not the problem! Unable to qualify for the CL is! Arsenal's so-called healthy wage structure paid about as much as our so-called fuck up wage structure!

 

[peterhague]

Well, I still think the wage bill is a problem, just that people need to be realistic about what competing at the highest level was inevitably going to do to it. There's no doubt, though, that we lost control of things a bit from 2009 onwards. Johnson, Aquilani, Degen, Cole, Jovanovic, and Maxi were/are all being paid more than their value to the team, even after taking into account the lack of a fee for the latter four.

But, yeah, I basically agree that the problem's been massively exaggerated.

 

[keniget]

If 9 times out of 10 league position correlates with wage spend than our wage bill is absolutely the core problem. We are getting nowhere near value for money from this group of players and haven't been for a few years now.

Handing guys like Downing 80k or whatever contracts has killed us.

 

[Fox]

fucking mancs turnover is depressing

 

[Hansern]

Sorry - those figures make it clear that the wages to income spend was perfectly well managed until 2010 - which coincides with loss of both CL football and Rafa.

The wage bill continued to rise, but at a faster rate than income.

So Voronin, Degen, Jovanovic, Dossena, Aquilani etc had nothing to do with Rafa getting in the absolute wrong players and increasing our wage bill?? His yearly free transfer signing was shocking.

And when Rafa left we were not in the CL anymore either.

 

[jexykrodic]

I think believing unverified figures put out on the 'swiss ramble blog' may be unwise.

The central theme of the writer that new money to fund spiralling wages and costs in the EPL is becoming scarce is probably correct and that TV revenue may be diminishing is probably a good guess as internet feeds get better.

It never fails to amaze me how any piece written is lapped up as gospel. It's magnified by underqualified interweb posters who no doubt will be appearing shortly to say 'I told you so'.

"Swiss ramble'...really?

 

[Mystic]

I think believing unverified figures put out on the 'swiss ramble blog' may be unwise.

The central theme of the writer that new money to fund spiralling wages and costs in the EPL is becoming scarce is probably correct and that TV revenue may be diminishing is probably a good guess as internet feeds get better.

It never fails to amaze me how any piece written is lapped up as gospel. It's magnified by underqualified interweb posters who no doubt will be appearing shortly to say 'I told you so'.

"Swiss ramble'...really?

Sky Sports just signed a new hugely improved TV deal with the premier league, so probably not.

 

[jexykrodic]

Sky Sports just signed a new hugely improved TV deal with the premier league, so probably not.

Does it mean all Premier League teams will now become profitable?

 

[hmmmmm1]

You would ever more worried if you was an Aston Villa fan looking at that - 91%!!

Makes scum achievements even more galling seeing them under 50%

 

[LarryHagman]

If 9 times out of 10 league position correlates with wage spend than our wage bill is absolutely the core problem. We are getting nowhere near value for money from this group of players and haven't been for a few years now.

Handing guys like Downing 80k or whatever contracts has killed us.

There are very few players in our squad who give us value for money. Which is why 90% should have a value at which we are prepared to talk.

 

[peterhague]

So Voronin, Degen, Jovanovic, Dossena, Aquilani etc had nothing to do with Rafa getting in the absolute wrong players and increasing our wage bill?? His yearly free transfer signing was shocking.

And when Rafa left we were not in the CL anymore either.

But on the other hand, you have to recognise that some of those 'wages' on free transfers were really just the result of not having to pay the transfer fee, and so the wage bill is artificially inflated. It's not the wage bill per se you have to analyse, but the total cost of the player. As for Rafa, he was just the manager, so presumably would've had nothing to do with the actual contract negotitations. That's the responsibility of the people actually running the club.

 

[mark1975]

But on the other hand, you have to recognise that some of those 'wages' on free transfers were really just the result of not having to pay the transfer fee, and so the wage bill is artificially inflated. It's not the wage bill per se you have to analyse, but the total cost of the player. As for Rafa, he was just the manager, so presumably would've had nothing to do with the actual contract negotitations. That's the responsibility of the people actually running the club.

If you have a wage structure it's separate from the transfer fund, usually. So it's still the manager and clubs responsibility to stay within or not stretch that structure. So essentially, if your reasoning is correct, free transfers 'should' impact on transfer funds. Usually the reason we take free transfers is because of a lack of transfer funds. As for managers not being involved in contract negotiations, I fail to believe this with Rafa as for one, it would have an impact on his available funds if all of the above is the case, and secondly, he would be all too aware that taking a player on a free represents it's own issues in terms of contractual amounts.

 

[dantes]

Why would you keep the wage/turnover ratio the same as opposed to the net difference of turnover - wage? If the players see the club has increased it's turnover they are not going to sit back and do nothing. The costs and overheads are roughly the same, so they'll be like what the fuck gives why do you need the extra money? You ran the club with £50m last season, so why do you need anymore this season? Give me the fucking money bitch! And you have to give it to them.

All the club can hope for is to keep the net difference the same, or to increase it very gradually. Players won't think oh the club made 5% more this year, so I'm happy with 5% more too. They will only see the absolute figure that the club make £5m more and want their fair share of that £5m. So naturally the wage/turnover ratio is going to increase.

 

[Buddha]

You don't "have" to do anything Dantes if you're running the club, bar make sure paying competitive wages in the marketplace.

Man Utd won't pay their players extra just because they've signed a bumper new Chevrolet deal.

 

[peterhague]

If you have a wage structure it's separate from the transfer fund, usually. So it's still the manager and clubs responsibility to stay within or not stretch that structure. So essentially, if your reasoning is correct, free transfers 'should' impact on transfer funds. Usually the reason we take free transfers is because of a lack of transfer funds. As for managers not being involved in contract negotiations, I fail to believe this with Rafa as for one, it would have an impact on his available funds if all of the above is the case, and secondly, he would be all too aware that taking a player on a free represents it's own issues in terms of contractual amounts.

I'm not sure if you're trying to argue with or against me on the first point. I don't see how money paid as tranfer fees and money paid as wages are different. It all ultimately comes from the same pot. I don't think there's even an issue of cash flow and debt interest, because both obligations (transfer fees and excess salary due to a free agent) tend to paid fairly comparably over the period of the contract.

As for Rafa, clearly he'd be aware of the issues. But all managers are - does it then follow that all managers are responsible for negotiating salaries? To me this is a matter for the owners, usually passed on to a Cheif Exec type.

 

[kingjulian]

The line charts make it look worse than it is....if i see the numbers it's a lot smoother than that, in that context what Dantes says about keeping the turnover-wages difference in manageable space is more important.

 

[dantes]

You don't "have" to do anything Dantes if you're running the club, bar make sure paying competitive wages in the marketplace.

Man Utd won't pay their players extra just because they've signed a bumper new Chevrolet deal.

But what I said is not far off how players and their agents determine what a competitive wage is in the marketplace. Just a few years ago £40,000 a week was considered crazy money, and now players like pastrami are getting three times that. Our turnovers is nowhere near doubled in that time period let alone tripled. So they must be looking at the clubs turnover, bullshitting about how sky are paying billions to have the useless fuck on TV every week, and so therefore he deserves a percentage of that increased turnover.

 

[dantes]

Either that, or they cited the biofuels-induced inflation levels which are fucking the price of pasta and olive oil.