Norwich City: The Canaries in football’s financial coal mine
Norwich City’s chief financial officer Ben Dack speaks to AccountingWEB about cash flow, budgets and the challenge of crunching numbers in the volatile environment of the Premier League.
Norwich City’s recent 3-2 victory over Manchester City may have brought global attention, but club bosses realise it could be a high point and are budgeting for all eventualities this season.
Promotion to the Premier League under coach Daniel Farke after a three-year absence from the top flight was based on prudent spending. In 2016, the club splashed out £34.8m to strengthen the squad, with wages totalling £67.2m – but they were relegated. Senior executives at Carrow Road are now focused on avoiding the financial mistakes of the past to consolidate the club’s top-flight status.
Backed by joint majority shareholders Delia Smith and Michael Wynn-Jones, last year’s shake-up of senior management brought a fresh approach to running the club. Stuart Webber remained as sporting director, Ben Kensell was appointed chief operating officer and Zoe Ward became business and project director.
Norwich City’s chief financial officer Ben Dack has played a key role in transforming the club’s welfare since joining in January 2016. After relegation that year, he split up the club’s accounting operations into three divisions – football (the club’s Colney training ground, academy, physio and sports science) business (including commercial, catering, stadium) and player trading.
“It allowed us to focus budget holders and specialists in their fields to not get distracted by the larger noise,” Dack told AccountingWEB. “You look at it as separate perspectives … it focuses the minds a bit more.”
Part of his role is to outline the parameters of the three divisions, update budgets and help determine what cash from the football and business sides can be channelled into player trading business.
“When I joined it was very much hand to mouth,” he recalled. “We didn’t know what our cash flow position was per se. It was very difficult to plan. Now we have a robust plan, so we all know where we are on and off the pitch.”
Compared to the Championship, Dack is crunching bigger numbers in a Premier League awash with broadcasting riches. Norwich will pocket around £94m in EPL revenues, with additional broadcast income related to the number of televised matches featuring the Canaries and final league position.
Speaking of the CFO’s challenges, Dack said: “When you’re in the Premier League suddenly there is a higher price for things. Now you’re promoted, everyone expects more money from you, so everything costs more.”
“Being a self-financed club, because things cost more to acquire or run, from an FD’s perspective that beneficial [of promotion] is then eroded. You then have to pay more for what you wanted to pay for in previous plans,” he said, citing the example of a £3m player being offered for an inflated price after promotion.
We didn’t know what our cash flow position was per se”
Running the finance function of a self-funded club, Dack believes his CFO responsibilities are unique compared to similar roles in English football’s top flight. “The landscape is very different from my position to, say, an FD of Man City, who will go to City Football Group and then they can manage it centrally across its different clubs.
“Here we have to manage ourselves yearly. If we make a profit one year and the next year make a loss, it’s all about that break-even analysis,” he said. “Other clubs’ concerns will probably be around financial fair play models and whether they are going to hit the thresholds.
“Because we are self-financed we will never have that problem. Any deficit you put yourself into, you have got to get out of it. It’s not a case of us going to owners or investors and saying ‘we need to reduce the deficit, therefore can we have a cash injection into the club’. We don’t have that ability,” Dack explained.
Planning for the drop
Asked how Norwich City had prepared for the Premier League, Dack said officials had attempted to mitigate the financial risks by developing three-year plans for several different scenarios.
Dack underscored the challenges of planning amid the volatility of the football business compared to more predictable industries: “We have to forecast, and in some ways estimate when things are going to hit when they are going to land.”
Worst-case was relegation, returning to the Championship after a 20th place finish. “If you are relegated in 19th or 18th place, you have an extra £1.7m Premier League income. We then have a separate plan and projects in place,” he said.
Planning for the drop includes evaluation of the parachute payments that come from EPL coffers, designed to soften the blow of relegation. Dack and his team calculate “what player wages look like [they fluctuate according to EPL or Championship status], and the scenarios for the acquisition and disposal of players.”
Retaining Premier League status would be a successful season when Dack said the club can estimate “what surplus we have for next year and can look at what we do at the end of that one”.
It’s always the first year that’s the most painful.”
“Survival is number one for any club that gets promoted,” he said, adding: “In the first year of promotion there are so many trigger pins you have to then pay”. These include payments due to a player’s previous club if promotion activates additional fees and appearance-based wage rises and bonuses written into players’ contracts.
“It’s always the first year that’s the most painful. After that, you can start budgeting quite robustly and then you can work into that robust ticketing income, commercial income and such,” he said.
Dack has overseen the introduction of more automated financial reporting processes, with new accounting, retail, EPOS and stock systems installed: “It’s faster, more real-time data and having more of a cross-sectional analysis.
“Not so much just about ‘oh, we sold X on a matchday’, it’s ‘how much of what did you sell on a matchday and who is the target audience’. We are getting more educated data. That’s been in place a year and a half now and we are still learning from it.”
Norwich uses Microsoft Dynamics GP for financial reporting and Dack is eyeing up the benefits of using Dynamics 365 with CRM capabilities in the future.
“The idea is we’ll then be able to look at our fans and say ‘this one fan has bought X in retail, X at the kiosks, is a season ticket holder’. By having that CRM package, we can then just glue it all together,” he said.
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Mark Bisson is a sports business reporter and editor with over 20 years experience. He currently writes about Premier League and Championship clubs for football finance website, Off The Pitch.
An Olympic correspondent for more than 13 years, he has written for many UK and international sports business publications.
Mark is a former...