'Potential to be successful but it won't be easy' - sports finance expert on proposed Chesterfield takeover
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The Chesterfield FC Community Trust could complete the purchase of the club from owner Dave Allen next month if everything goes to plan.
The trust is the charitable arm of the club meaning finances will be tight.
The funding is understood to be coming from local councils, hence the recent delay in any progress because of the coronavirus and why the trust said their backers had “various “pressing matters to deal with.”
Other clubs such as Wycombe Wanderers, AFC Wimbledon, Portsmouth, Exeter City and others have adopted similar models over the years so Chesterfield are by no means the first and they won’t be the last.
There will no doubt be various challenges along the way and expectations will need to be realistic.
Dr Dan Plumley, a sports finance expert at Sheffield Hallam University, said: “It has the potential to be successful for Chesterfield in the next few years given where the club is at the minute. But it will take time. And it won’t be easy.
“You have to be transparent to the fans here. That’s the whole point of this model. You need to bring them along with you. You need to be realistic with them in terms of managing their expectations.
“Fan ownership is a great concept but the challenge with it always comes down to finance.
“Running a football club at any level isn’t cheap and many fan owned clubs have struggled in the past as you move up through the league structure.
“It can just about work at levels below League One but anything higher than that and it just isn’t a feasible ownership model with the way football is at present.
“The model of success is always heralded as Exeter City who have been fan owned for a number of years now but it would be very difficult for them to ever play higher than League 1 under that model of ownership.
“Swansea tried it years ago when they were in the old Division Four but as soon as they started moving through the leagues the fans couldn’t fund it and had to get private owners in to compete properly.
“It’s still only the minority of Football League clubs that follow this model so it is tough. You can see the appeal, of course, and it can work if done correctly, but if Chesterfield are aiming to get back in the Football League in the long-term then this model does present it’s challenges.”
The main obstacle for the trust will be to keep the costs and losses down while still being competitive on the pitch.
The Spireites had one of the biggest budgets in the National League this season and the club recorded a loss of £1.9m for the trading year ending June 30, 2019.
It is fair to say the days of chucking money at it are over for the Blues - whoever is in charge.
“This is the biggest challenge,” Dr Plumley said. “Especially in respect of the fans. There will always be pressure by fans to spend more on players in an attempt to climb the league table. Often this clashes with the idea of sensible budgeting especially at that level of the football pyramid so there is a real challenge here to manage the wider fan expectations particularly in the short to medium term.
“They (the trust) will definitely have to be creative. Further down the leagues clubs rely on their fans and a model like this puts even more pressure on the fans to provide financial resource for the club.
“This is of course also happening at time when the season has been curtailed and it is looking likely that matches will be played behind closed doors for some time because of the COVID-19 pandemic.
“It has to be long-term and it has to be a completely different style and approach to running a club. If you are looking for a short-term fix then you would be looking to bankroll a promotion push. This model is more about incremental building for the long-term and rightly so. It does have its limits though in terms of a ceiling you reach given the nature of the football industry.”
Town’s fanbase has been tested more than most in the last five years but they have still averaged one of the highest attendances in the division despite two seasons of struggle in the fifth tier.
And their loyalty will once again be called upon to give the trust a solid starting point.
When asked how much the trust will need to rely on the backing of supporters with regards to season ticket sales, Dr Plumley said: “Hugely. Lower down the league system, the fans are the lifeblood of the club from a revenue perspective as well as an emotional one.
“Clubs only generate revenue in three ways - matchday, commercial, TV. In the National League the latter two areas don’t account for much despite the BT Sport fee being quite generous. Clubs only get money from the EFL in solidarity payments for two years following relegation so once this goes it really is all about the fans buying tickets at that level.
“Further complicated and compounded by the situation we find ourselves in with football likely to be behind closed doors for some time. I imagine clubs will begin to offer streaming style ‘virtual’ seasons tickets where they can to counter this loss.”
League One Wycombe Wanderers had been 100 per cent fan-owned since 2012 until February when they sold to American businessman Rob Couhig.
The Wycombe Wanderers Trust (WWT) still owns the other quarter and they still retain ownership of Adams Park.
Nigel Kingston, chairman of WWT, said they had experienced “non-stop challenges to have sufficient cash both short and long term to survive.”
“In 2013 we had to sell and lease back the training ground and we launched Chairboys Funders, which raised £450,000 as loans from committed fans which were due to be paid back after five years,” he explained.
“Then in April 2015, again to raise funds, the trust launched the Community Share Scheme, and at the same time changed from a Ltd company to a Community Benefit Society. The share scheme raised almost £700,000 over a five-year period through fans committing funds for shares on either a lump sum or monthly basis.
“We also launched the 500 Club to boost the playing budget in September 2016 and have run this over three seasons since. It has raised a cumulative £170,000 and enabled the signing of a number of players key to our achieving promotion to League 1 in Spring of 2018.
“Without all the above schemes it would have been impossible to survive.”
After seven years in charge, the WWT board came to the conclusion that long-term survival of the club would only be possible with external investment and that remaining 100 per cent fan owned “was not viable.”
“The original aim was to remain fan owned, but the trust had to accept that this and financial stability were not compatible, so the decision was taken to seek outside investors,” Mr Kingston said.
“The trust retains a 25 per cent ownership of the club and still retains ownership of Adams Park stadium which is now free from all debt. The trust also has two directors on the board and is working closely with both the new owners and fans.”
When asked what advice he would give to the Chesterfield FC Community Trust, Mr Kingston added: “Make sure that they have the finances in place to ensure the short- and long-term survival of the Club. Cash flow is king and without it, the venture will fail.
“Create a board for the football club which is separate to the trust as they are the ones responsible for the day to day operation of the football club, while the trust should be operating more as a non-executive board.
“Keep the fans involved as much as possible especially in fundraising and volunteer activities.”
*Follow Dr Plumley on Twitter @DrDanPlumley and read more about his role at Sheffield Hallam University here