Liverpool transfer model? Edwards is largely to blame

[bluebell]

What is it? You have owners who want put any money in, but would rather pay off debts. When we do get players in, we seem to make generous payments to leaches, which some people call agents. We wait till the last 12 months of players contract to renegotiate a renewal or wave them good bye on a free, giving players all the leverage.
We buy one player at the top of our budget rather than scouting for 2-3 players who could be equally good but a fraction of the price with a lower profile.
It doesn’t make sense.

 

[Fabio]

We don't have one any more

 

[LeTallecWiz]

We don't have one any more

Seems like it.

 

[binomial]

The model is hope and pray Klopp can produce miracles....like it has been for 5 years.

This is what happens when you have a board and owners who are so out of touch with the game and probably communicate once a year. It's a shambles.

 

[Red Bird]

Looks as if the transfer committee broke up because its collective advice was ignored.

https://www.skysports.com/football/...ing-borussia-dortmund-midfielder-for-too-long

 

[StevieM]

What is it? You have owners who want put any money in, but would rather pay off debts. When we do get players in, we seem to make generous payments to leaches, which some people call agents. We wait till the last 12 months of players contract to renegotiate a renewal or wave them good bye on a free, giving players all the leverage.
We buy one player at the top of our budget rather than scouting for 2-3 players who could be equally good but a fraction of the price with a lower profile.
It doesn’t make sense.

Surely FFP means owners can’t put significant amounts of their their own money in for transfers. The only way to do it is to take out a whopping big loan which the club has to pay off.

At the time paying off debts frees up revenue to be spent in areas other than servicing or paying down the debt.

There’s a case for asking why we didn’t take out some loans to splurge on players when the interest rates were rock bottom, but things aren’t quite the same now.

 

[peekay]

Surely FFP means owners can’t put significant amounts of their their own money in for transfers. The only way to do it is to take out a whopping big loan which the club has to pay off.

At the time paying off debts frees up revenue to be spent in areas other than servicing or paying down the debt.

There’s a case for asking why we didn’t take out some loans to splurge on players when the interest rates were rock bottom, but things aren’t quite the same now.

@Beamrider can confirm but I think they did use the low interest environment to improve our facilities, new stands, training ground etc. While it might be frustrating for us, cant really fault them for that.

 

[Beamrider]

@Beamrider can confirm but I think they did use the low interest environment to improve our facilities, new stands, training ground etc. While it might be frustrating for us, cant really fault them for that.

Yes, this is correct. The funding for the Main Stand came from FSG and was initially interest bearing (less than 2% from memory) and then made interest free. They've taken repayments here and there but not on a fixed schedule so looks like they did that when there was spare cash (NB we'll have been 15-20m up on profits from the expansion so they've left more in than they took out.
The other two expansions (training ground, Annie Road) appear to have been "self-funded" (ie out of our own cash, restricting transfer spend). I expect they will have given Klopp the choice and he chose to leave a legacy rather than splash cash in the transfer market, because he's like that.
But as @Woland said at the time we discussed this previously, they could have borrowed for the capex and not cut back on transfer spending quite so much, and that would have been the smarter move, but I expect FSG had some ideological issue with that.

 

[binomial]

If it's true we've really spent 1.8bill on wages over the last 5 years then we're more screwed than I thought. Makes for harrowing reading, discretionary viewing is advised.

 

[peterhague]

Surely FFP means owners can’t put significant amounts of their their own money in for transfers. The only way to do it is to take out a whopping big loan which the club has to pay off.

At the time paying off debts frees up revenue to be spent in areas other than servicing or paying down the debt.

There’s a case for asking why we didn’t take out some loans to splurge on players when the interest rates were rock bottom, but things aren’t quite the same now.

FFP means you can't borrow at all for transfers, whether from owners or the bank.

Well, in theory.

 

[Beamrider]

FFP means you can't borrow at all for transfers, whether from owners or the bank.

Well, in theory.

It really doesn't. So long as you can service it and turn in revenue / profits, you can borrow or take cash from your shareholders, especially if you make a few high profit sales every now and then.

 

[bluebell]

Surely FFP means owners can’t put significant amounts of their their own money in for transfers. The only way to do it is to take out a whopping big loan which the club has to pay off.

At the time paying off debts frees up revenue to be spent in areas other than servicing or paying down the debt.

There’s a case for asking why we didn’t take out some loans to splurge on players when the interest rates were rock bottom, but things aren’t quite the same now.

We've all known FSG won't put money in regardless of FFP, that's not a secret. They're not taking money out of the club either. When it comes to transfers, there should be some coherent plan/model which reflects the reality of the club.
When money is tight, don't let players run down their contracts. This season we are losing 4-5. Don't wait till the last 12 months to renegotiate contracts which gives players all the leverage.
Agent Fees with the club seem to be higher than other clubs, why pay leaches so much?
We have an aging squad, most of whom will walk for free rather than being sold, maybe cash in on a couple now and get some revenue. Jota, Salah and Gomez are sellable assets. I hate to sell Salah, but he isn't getting younger and could still command a huge fee north of £70-80m.
Barca was/is in a predicament all of their own doing but still recruited, many of them free agents. Benfica buy players cheap as chips. Expand the scouting network, so you're finding the next Haaland or Bellingham before the likes of Benfica or Dortmund.

 

[Woland]

Yes, this is correct. The funding for the Main Stand came from FSG and was initially interest bearing (less than 2% from memory) and then made interest free. They've taken repayments here and there but not on a fixed schedule so looks like they did that when there was spare cash (NB we'll have been 15-20m up on profits from the expansion so they've left more in than they took out.
The other two expansions (training ground, Annie Road) appear to have been "self-funded" (ie out of our own cash, restricting transfer spend). I expect they will have given Klopp the choice and he chose to leave a legacy rather than splash cash in the transfer market, because he's like that.
But as @Woland said at the time we discussed this previously, they could have borrowed for the capex and not cut back on transfer spending quite so much, and that would have been the smarter move, but I expect FSG had some ideological issue with that.

Still think it's weird. Could have borrowed all that while interest rates were at once in a lifetime lows. They'd be paying it back at way under inflation at the minute, actually earning on their borrowing, and we might have a midfielder or two that would get in a rivals squad.

The short termism is fucking mad.

 

[King Binny]

Could the loan repayment to the owners been used for the club's recruitment plans instead (esp. when Covid was cited as a reason behind the transfer plan disruption)?

 

[Woland]

Lizards

 

[peterhague]

It really doesn't. So long as you can service it and turn in revenue / profits, you can borrow or take cash from your shareholders, especially if you make a few high profit sales every now and then.

Yeah but the loans are going out of the P&L (at least eventually) in transfer fees, so that increases losses and that affects FFP.

You can fiddle round the edges with 10 year contracts or whatever but ultimately the funds have got to come from the club. Again, in theory anyway.

 

[Donavan Ried]

We've all known FSG won't put money in regardless of FFP, that's not a secret. They're not taking money out of the club either. When it comes to transfers, there should be some coherent plan/model which reflects the reality of the club.
When money is tight, don't let players run down their contracts. This season we are losing 4-5. Don't wait till the last 12 months to renegotiate contracts which gives players all the leverage.
Agent Fees with the club seem to be higher than other clubs, why pay leaches so much?
We have an aging squad, most of whom will walk for free rather than being sold, maybe cash in on a couple now and get some revenue. Jota, Salah and Gomez are sellable assets. I hate to sell Salah, but he isn't getting younger and could still command a huge fee north of £70-80m.
Barca was/is in a predicament all of their own doing but still recruited, many of them free agents. Benfica buy players cheap as chips. Expand the scouting network, so you're finding the next Haaland or Bellingham before the likes of Benfica or Dortmund.

I can find nothing to disagree with here

 

[Beamrider]

Yeah but the loans are going out of the P&L (at least eventually) in transfer fees, so that increases losses and that affects FFP.

You can fiddle round the edges with 10 year contracts or whatever but ultimately the funds have got to come from the club. Again, in theory anyway.

But remember FFP is based on profits, not cash. I literally described Chelsea's transfer strategy in my previous post, funded by (interest free) loans from Abramovich. And also remember that FFP profit is not the same as profit before tax as there are all sorts of costs you can add back Chelsea owed Abramovich more than £1bn when he forfeited ownership, admittedly some of that was pre FFP, but it gives an indication. of how far you can deviate if you do it right.
Theory and practice can be very different.

 

[bluebell]

Could the loan repayment to the owners been used for the club's recruitment plans instead (esp. when Covid was cited as a reason behind the transfer plan disruption)?

View attachment 2602 View attachment 2604

Could the loan repayment to the owners been used for the club's recruitment plans instead (esp. when Covid was cited as a reason behind the transfer plan disruption)?

View attachment 2602 View attachment 2604

The amount we have paid back is £37m in 6 years or just over £6m a year. That's not the thing that's denting our budget, we are also paying off the drawdown we took during the pandemic. It's not rocket science, virtually each year about 2 players on average leave the club on a free. Had we sold Bobby last summer, how much do you think we could get, throw Ox and Naby in the mix.
Edwards takes alot of blame for this as does Klopp and the board. Get a Sporting Director like Zorch who has worked with Klopp and have a coherent plan in place.

 

[King Binny]

The amount we have paid back is £37m in 6 years or just over £6m a year. That's not the thing that's denting our budget, we are also paying off the drawdown we took during the pandemic. It's not rocket science, virtually each year about 2 players on average leave the club on a free. Had we sold Bobby last summer, how much do you think we could get, throw Ox and Naby in the mix.
Edwards takes alot of blame for this as does Klopp and the board. Get a Sporting Director like Zorch who has worked with Klopp and have a coherent plan in place.

I'm not as bothered about the amount as I was with the (what I personally perceived - so might be wrong), intent/priorities of the owners.

 

[Beamrider]

I'm not as bothered about the amount as I was with the (what I personally perceived - so might be wrong), intent/priorities of the owners.

I think from the owners' perspective, they put in £100m+ to fund the Main Stand. The expansion probably adds £15-20m per annum in additional profits. As @bluebell says, if they've taken back £6m per annum on average then LFC is still £9-14m better off per annum.
There are plenty of things I'd criticise them for but this one isn't really up there for me.

 

[peterhague]

But remember FFP is based on profits, not cash. I literally described Chelsea's transfer strategy in my previous post, funded by (interest free) loans from Abramovich. And also remember that FFP profit is not the same as profit before tax as there are all sorts of costs you can add back Chelsea owed Abramovich more than £1bn when he forfeited ownership, admittedly some of that was pre FFP, but it gives an indication. of how far you can deviate if you do it right.
Theory and practice can be very different.

But I was talking about profits.

I'm not sure where the disagreement is? Ultimately under FFP the scope to fund transfers with any kind of debt is really limited isn't it? Because you're adding expenses (amortisation) without increasing income.

 

[Beamrider]

But I was talking about profits.

I'm not sure where the disagreement is? Ultimately under FFP the scope to fund transfers with any kind of debt is really limited isn't it? Because you're adding expenses (amortisation) without increasing income.

The point is that profits are NOT the whole game here.
Not everything that hits the P&L in the accounts is counted for FFP - see Chelsea.
You can have all the profit in the world but you can't invest if you don't have the cash to spend - that's where borrowing comes in. A player deal is spent over 2 years in cash terms but takes 5 years to hit profit. Borrowing bridges the gap. And that gap just keeps rolling, it gets bigger, but so does the future income stream that covers up for past spending.
Clubs that choose to borrow or accept shareholder investment are always running away from the crunch. If they do it passably, or have enough buffer to deal with a downturn then that's fine, but if you do it badly (you spend badly or under-perform) or if the bubble bursts then you end up in an Everton scenario where it catches up with you eventually.

And when WE say FFP, we're thinking European style model, break-even, but most clubs are playing the Premier League model where they can lose £100m+ over three years and still be OK provided they have the funding, hence debt and equity injections.
The disagreement is that I think you're over-simplifying. If your hypothesis were right, FFP would work perfectly, but it doesn't because there is a lot of scope to game the system.

 

[bluebell]

Bayern Munich is a cash rich club that doesn't really spend. Yet, still manages to get top talent. Dortmund, Monaco, and believe it or not Real Madrid don't spend hugely but are competitive. This season Napoli recruited brilliantly to win Serie A.
Edward who was Sporting Director should get most of the flack. Much of the sham we see today is the result of his tenure.

 

[peterhague]

The point is that profits are NOT the whole game here.
Not everything that hits the P&L in the accounts is counted for FFP - see Chelsea.
You can have all the profit in the world but you can't invest if you don't have the cash to spend - that's where borrowing comes in. A player deal is spent over 2 years in cash terms but takes 5 years to hit profit. Borrowing bridges the gap. And that gap just keeps rolling, it gets bigger, but so does the future income stream that covers up for past spending.
Clubs that choose to borrow or accept shareholder investment are always running away from the crunch. If they do it passably, or have enough buffer to deal with a downturn then that's fine, but if you do it badly (you spend badly or under-perform) or if the bubble bursts then you end up in an Everton scenario where it catches up with you eventually.

And when WE say FFP, we're thinking European style model, break-even, but most clubs are playing the Premier League model where they can lose £100m+ over three years and still be OK provided they have the funding, hence debt and equity injections.
The disagreement is that I think you're over-simplifying. If your hypothesis were right, FFP would work perfectly, but it doesn't because there is a lot of scope to game the system.

I am oversimplifying because it was a two sentence post.

But basically I was right then. Over the long term the rules mean spending can't be subsidised. With caveats, hence the "in theory" stated twice.

 

[StevieM]

I am oversimplifying because it was a two sentence post.

But basically I was right then. Over the long term the rules mean spending can't be subsidised. With caveats, hence the "in theory" stated twice.

You’d be equally right in saying “spending can be subsidised, with caveats”.

 

[peterhague]

You’d be equally right in saying “spending can be subsidised, with caveats”.

No you wouldn't. It's not some grey area. Spending has to be self-funded, except for the allowed losses.

The caveats to that statement come from the persistent flouting of the rules, and UEFA's inability to properly enforce their spirit, rather than any major complexity.

 

[StevieM]

No you wouldn't. It's not some grey area. Spending has to be self-funded, except for the allowed losses.

The caveats to that statement come from the persistent flouting of the rules, and UEFA's inability to properly enforce their spirit, rather than any major complexity.

Well then - we should all stop complaining about FSG not opening their wallets to fund some transfers, because they aren’t allowed to.

The only way, then, we can buy any players is by increasing revenue (which FSG have been excellent at apart from transfer income) or decreasing expenditure, which would likely only be limited to reducing player salaries.

I suppose they could hike up tickets prices.

Donnervan’s going to be upset when he finds out that FSG selling won’t make any difference to funding new players.

 

[RedStar]

What is it? You have owners who want put any money in, but would rather pay off debts. When we do get players in, we seem to make generous payments to leaches, which some people call agents. We wait till the last 12 months of players contract to renegotiate a renewal or wave them good bye on a free, giving players all the leverage.
We buy one player at the top of our budget rather than scouting for 2-3 players who could be equally good but a fraction of the price with a lower profile.
It doesn’t make sense.

I said this last summer, but there is something fundamentally wrong with how the club is being run.

You can have a model where the club is self funding transfers on a rolling basis. This is how lots of clubs operate. This involves meticulous squad management to maximize the revenue you can extract from out going players. You move players on when they have peaked in value or performance level so that you can fund the next round of recruitment. You have to be ruthless. This is sort of the traditional self funding approach, a grossly simplified buy low sell high and reinvest the profit.

The other option is to build a strong squad and focus on retaining high quality players as long as possible to maximize the value you get from them, contract extensions are cheaper than new signings. Your wages blow out but you spend little on transfers. This has a shelf life as retaining the same players has a diminishing return both on and off the pitch. Ultimately you can get 3-5 years of high performance from a team and then you need to significantly invest in a rebuild because you have gone past the point where your key assets can be sold for large sums to reinvest.

It seems like FSG think we are operating the former and Klopp thinks we are operating the latter. You can't have a self funding transfer policy if you refuse to sell players at their peak, allow players to run down their contracts and offer lucrative extensions to guys in their 30s.

Which leads to the current predicament, a squad that needs major reconstruction to the tune of £200-£300m. Multiple players leaving for free and no sellable assets that can be used to fund a rebuild.

 

[Tinto]

Selling players at their peak means we never get to enjoy it though whilst enduring the trek up.

Not sure where the fun is in that