Yes folks, it’s transfer window time! The ‘most wonderful time of the year’ (or something like that) when supporters fantasise about season-changing big-name signings. And never more so than when your team is in the drop-zone. Sound familiar? With Argyle heading, on current form, for a 42-point season and relegation, the calls for the club to get its chequebook out will be loud.

I argued previously that relegation could cost the club as much as £1.8m in lost revenue next season. On that basis, some level of investment in the squad would make clear economic sense if it significantly boosted the chances of retaining League One status. That comes, of course, with the usual big caveats that nothing in football is guaranteed and we could still go down regardless of who is signed this month.

The January window is the first real chance to see the philosophy of the new Home Park regime in action. Majority owner and chairman, Simon Hallett, has made it clear that his goal is ‘sustainability’. In simple terms, moving to a position where income and expenditure are in balance and the club is not reliant for survival on sizeable ongoing cash injections from a deep-pocketed owner. If we put aside our green-tinted spectacles for a moment, can we honestly argue against that position? In any business, consistently spending more than you earn on the basis that there will always be someone to step in and cover the losses would be madness. But that’s what so many football clubs continue to do. And it’s not like we haven’t seen clubs – including our own – crash into bankruptcy because spending and income were so badly out of whack.

The new Argyle chairman is an investment man by trade and so is well used to assessing businesses from a financial perspective. In the most recent season for which we have the numbers (2016-17) combined losses across the 24 League One clubs were £24.2m. I suspect it will have taken Mr. Hallett all of ten seconds to work out that the current business model of most EFL clubs simply doesn’t work.

Here are some specific examples from that 2016-17 League One season. In their last season in the league, Millwall made operating losses of £4m. Charlton Athletic managed a whopping £14.3m operating loss on turnover £7.6m while Oxford United lost £1.5m. Meanwhile at Southend, with operating losses of £2.1m that year, the club revealed that total debts to the owners had reached £17m. And if the numbers alone didn’t make it clear, Southend’s annual report stated that; “The club has been for many years, and will continue to be, reliant on its parent company for support.”

We don’t have figures for Argyle since the club has, until now, only published abbreviated accounts with no income or expenditure figures. But looking at peers, it’s pretty clear that the club is highly unlikely to be making any kind of significant bottom-line profit. However, that doesn’t seem to prevent constant demands on social media for the club to spend more of these non-existent ‘profits’ on playing staff.

Let’s look at that from another angle. One common refrain is that we have one of the biggest average gates in the league (true – last season it was the fifth highest) but we’re not spending money on players. But again, this convenient sound bite doesn’t really stack up when you start to dig into the numbers.

My best guess is that Argyle’s gate receipts last season were between £3.0m and £3.7m. The higher number is based on an estimate of the average price paid for a seat, which depends on what proportion of the crowd are season ticket holders, full price paying adults, under-18s or over-65s etc. The lower end of the range is derived from looking at clubs with similar average gates to Argyle that do publish full revenue breakdowns. Charlton Athletic, for example, had total ‘match day income’ of £3.2m (including hospitality, advertising and programme sales as well as ticket revenue) on an average gate of 11,162, roughly 700 higher than Argyle last season. MK Dons, with an average gate very close to that of Argyle at 10,307, had match day income of £2.9m.

So does Argyle’s match day income of around £3m mean there’s a big war-chest available to fund an expensive team of stars? Not really. At average League One wages, a 24-man squad costs, coincidentally, about £3m a year. Then you have to add the cost of management, coaching, administrative and ground staff plus, of course, any transfer fees. Again as a sense-check, Gillingham’s annual wage bill in 2016-17 was £3.5m; it’s unlikely that Argyle’s would be less than that.

So there you go. Argyle’s gate receipts probably don’t come close to covering the club’s wage bill, let alone transfer fees. Something to bear in mind the next time you hear someone say that money from ticket sales is being siphoned off into some fat cat’s pockets instead of being invested into the squad.

What about other revenue? The only thing we know for sure is that Argyle receives about £1.3m a year in payments from the EFL and Premier League and beyond that, it’s a guess. But we know that total annual income at Charlton was £7.6m, Oxford £7.1m, Walsall £6.6m, Gillingham £6.3m and Southend £5.7m, so Argyle is likely somewhere in that range. Add annual running costs to the wage bill and with that level of income, the club is probably operating in the red.

So it’s clear that buying a majority stake in Plymouth Argyle made absolutely no sense from the perspective of a ‘normal’ business decision. Quite the opposite, in fact, given the constant funding that most EFL clubs require just to stay in business. So by taking Argyle on, Simon Hallett has acknowledged that there’s more to football than balance sheets and profit and loss accounts; that includes its role in and responsibility to the community in which it is based and the intangible value of the heritage attached to English football clubs.

But just because there is an element of heart-ruling-the-head involved in owning a League One team doesn’t mean that when it comes to running the business on an ongoing basis, the normal rules go out of the window. Football clubs don’t exist on a special plane outside the realities of commercial life, they need sufficient income to pay the costs associated with running the business. Suppliers, employees, travelling costs, insurance, maintenance, rates, VAT and other taxes all have to be paid. Last time I checked, nobody says; “Oh, you’re a football club. Don’t worry about paying the bill.”

Hence the chairman’s insistence that Argyle needs to move towards financial sustainability rather than continuing to go down a path that has led to ruin for so many clubs. He wouldn’t be much of a businessman if he continued to throw money at a financial model that he knew was broken.

The problem is that it’s always easier to postpone the tough decisions to another day. We football fans are addicted to our clubs and, like any addict it’s always a question of ‘just one more’. Now don’t get me wrong. I am first and foremost a Plymouth Argyle supporter and my dearest wish is for us to escape relegation this season. If the chances of that could be significantly increased by splashing out on ‘just one more’ big signing, I’d probably say go for it.

But with my sensible head on, I recognise that’s not the right answer. It’s better to have an owner prepared to take the hard decisions needed to create a sustainable business model and a long-term future for the club than to keep praying for a benefactor willing to keep shovelling cash into an ever-deepening black hole. And it’s better to do that sooner rather than later.

It also helps that the 3-0 drubbing handed out to Oxford United on New Year’s Day, showing that there is considerable talent within the current Argyle squad, makes it easier to believe that we can escape relegation without trashing the profit and loss account. Whatever, supporters need to get behind the new Home Park regime and their plan for the club as it’s the only credible way forward for Plymouth Argyle in the long term.

And if you’re still not convinced, have a look at what happens when a club is taken over by a big-spender seeking popularity by splashing silly money. Just Google ‘Billericay Town’ and spend an hour reading about the pantomime that has unfolded at that club in the last couple of years. If that doesn’t put it all in perspective, nothing will.

Author: Colin Bradbury