What Business Can Learn From Football and Crowdfunding
Written by: Craig Mckenna, Published on: December 1, 2011
These days, big business and big football clubs are getting themselves into a whole heap of do-do.
Some are on the verge of bankruptcy, some have been bailed out by the state, and some have even called in the receivers.
We may not shed a tear over their demise. But the problem with big constellations imploding is that they usually take down many smaller stars with them.
The supply chain for a club like Manchester City (£195m debt), or a business like Thomas Cook (£200m debt), consists of 1000s of smaller companies that are often well run, tightly managed and not burdened with extra-terrestrial levels of financial borrowing.
Football Business Leadership
The football industry is taking baby steps towards fiscal responsibility and showing leadership in financial controls.
In 2009 UEFA (European football’s governing body) introduced ‘Financial Fair Play’, a canny system to ensure the financial playing field is as fair as possible for football clubs. It is a way to restrict clubs from running up huge debts while trying to “buy” success on the pitch. As a result, clubs are allowed to lose just £38.5m in total over three years.
Financial Fair Play has received a lot of criticism but personally I can see the benefits to football as a whole. Anything that stops clubs coming under risk of financial ruin can only be a good thing.
If it is implemented properly there will be an undoubted period of extreme growth pains. But the clubs will come through it, resulting in the amounts invested becoming more focused on transfer fees, wages and youth development. This will certainly sharpen the minds of the clubs and the club owners.
Surely business can learn from this kind of principle?
After all, while Thomas Cook is allowed to get into £200million of debt, smaller competitors can’t get any lending at all. The smaller travel companies then end up suffering the tighter margins that ensue from the major travel company having immense buying power. Consequently, the smaller company can’t compete and either folds or struggles.
New Media, New Business Solutions
It’s not all doom and gloom for smaller companies. A viable business plan will still attract funding. It may cost more to access but it’s still there in principle.
What’s more, there’s a new kid in town that goes by the name of crowdfunding. Crowdfunding opens up completely new hemispheres of opportunity for start-up and growth-focused companies.
In fact, there is an air of gold rush growing among in the businesses community. This follows the recent success of the Rushmore Group raising £1 million in crowdfunding from Crowdcube. The investment, raised in only four weeks, sets a new record for the largest amount of money raised using a crowdfunding website.
Again, football has led the way in crowdfunding. In 2008, Ebbsfleet United Football Club was bought by approximately 26,000 people each paying £35. The money was raised online through My Football Club and the club is now controlled and managed by the members (the crowd), even taking decisions regarding transfers and team selections.
As confidence grows in the use of crowdfunding as a sustainable tool for business growth, we can only look forward to a complete transformation in how companies do business as they begin to deploy customers as investors, advocates and brand ambassadors.
Over To You
Do you agree or disagree? All comments are most welcome and I’ll be happy to answer any queries on this piece or on crowdfunding in particular.
Don’t forget to ‘like me‘ (that just sounds so needy – they really need to change that!) on Facebook and ‘follow me‘ for up-to-date breakthroughs on Twitter.
You can also email me on craig.mckenna@thegrowthacademy.com or call me on my mobile: 07717 316 014
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