Van Hees Strategic Advisory
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Football clubs in the Netherlands and Belgium forget to renew and innovate: clubs in the Eredivisie and Jupiler Pro League are trade for investors.
My stepfather always said: "There is no trade in a professional football organization." He made this statement around the 2000s, as a sponsor of Willem II. I have never agreed with him on that. The fact that the global football landscape has welcomed more and more billionaires throughout the years confirms my point of view. If you look at it from the perspective of a fan or supporter, I would have understood my stepfather, but my father was a businessman, and incredibly successful. The good man built a road construction and demolition company with roughly 300 staff members together with two of his brothers in about 40 years. During the spring and summer, these are the phases of the year where it was really busy in their sector, there were sometimes even months where 1,200 men were working for Van Hees. My stepfather and his brothers were not exactly stupid people. That is why I am still surprised by the statements from back then.
Perhaps he meant it from a business perspective, in the sense of how clubs were managed, and actually still are for the most part. But that is similar to what I mentioned in the previous paragraph regarding fans and the perspective on football. With those two viewpoints—the shared view of football—you will indeed always be short on time and money. Building a company usually takes years and arises from a vision and a plan, driven by passion and ambition. Football clubs present visions for the future, but let's be perfectly honest: those documents are filled with political correctness and clichés, and people rarely dare to name real, hard objectives or operational accountability. It is as if they are afraid to take responsibility if the vision isn't achieved. How can you expect to come across as professional and corporate as a football club if you don't dare to set goals? What is the sales pitch then when you talk to sponsors? What are you selling? Shall I say it? Hot air.
The biggest problem is that directors, general managers, and technical directors are just as much temporary figures as trainers/coaches and footballers. The only club culture being guarded is the club colors and the interaction with supporters. These are existing matters that essentially run themselves, don't they? Around those, a vision is then conceived, and because most directors and general managers do not dare to take responsibility in public visions for the future, a club cannot develop and grow. It does benefit the job security of those who designed and detailed the vision. There are directors and general managers who deliberately involve supporters in the vision through polls and such. This is done to bear as little liability as possible. Fans think they are more involved in the club through this, while it is purely about the responsible parties shifting liability. Quite sick, isn't it? In politics, they do exactly the same.
I recently read a vision from a club in Brabant, and it almost brought tears to my eyes. The result is that these types of clubs are often wandering, and they will never know a stable foundation upon which something can truly be built. Directors and others come and go, while the club in question slowly but surely goes under. This often also results in a poor youth academy and an even worse transfer policy. There are currently plenty of examples of professional football organizations that maintain this policy. This is the reason why a similar top three has generally existed in the Netherlands and Belgium for as long as anyone can remember. It is rare for other clubs to walk away with the national title. There are only a handful of clubs in both countries that might be able to challenge the top three in the future. For now, they have always just been pinpricks.
We see the result of this policy on the field every season. This is the reason why the competitions in the Netherlands and also in Belgium don't amount to much. Just compare our leagues to the Spanish, Italian, or English competitions. Even the French league is further ahead, and I even think the league in Saudi Arabia is already at a higher level by now.
In the first instance, there is a major reason for the lead of the aforementioned leagues: money. This is followed by innovation and modernization. Through large financial injections, clubs are suddenly managed as businesses rather than bureaucracies. A club like A.C. Milan, under the leadership of Berlusconi, was one of the first clubs in the world to be run like a business. Milan dominated for years, involving three Dutch footballers: Van Basten, Gullit, and Rijkaard. Nowadays, we have billionaires pumping money into clubs with a vision. Look at P.S.G., Paris F.C., Manchester City, and Newcastle United, for example. It is true that most of these clubs have debts, but they dutifully pay at least the interest every month, so what are you trying to say? Should we then stop taking people with a mortgage seriously? These professional football organizations often turn healthy profits alongside their debts. Debt does not necessarily have to be bad, something we in the Netherlands and Belgium often think it is. These types of football organizations are becoming increasingly professional in their business operations. Such clubs employ the absolute top tier of the corporate world, as well as top coaches and top players. The gap to these clubs is so large that it is virtually impossible for our clubs to reach their level, let alone surpass it.
The gap is so incredibly large that it makes it extremely interesting for investors to invest in a club in our leagues, or even take one over completely. If I had €40 million lying around, I would have taken over a club in the Netherlands or Belgium long ago. Running a football club the right way can be incredibly profitable. There is no market where you can create value as quickly and easily. This starts with the youth.
When a vision is written for a club, it must follow a specific order, starting at the bottom of the organization: the youth and their development. The scouting apparatus should be primarily focused on youth players. Players who have talent but are still playing on amateur fields, ranging in age from 8 to 16. You bring these kids in for nothing, and I believe that if the training program is well-structured, a large portion can progress to the first team. I am of the opinion that there is too little patience and a lack of proper guidance to get the maximum out of youth players. In that area, we in the Netherlands and Belgium lag far behind the top leagues. It is true that the mentioned clubs also make large incoming transfers. In fact, I believe they hold the records for incoming transfers in terms of costs. $25 million is an amount in the football world that no one blinks an eye at anymore, not even in our leagues. At the European top level, no one looks twice at amounts around $50 million. In a few years, people at the top level won't even be surprised by $100 million.
One reason is inflation, and the other is the global football market where leagues function as economies. It is the whim of the day that rules, leading to sums being paid for players where you think: is he really worth that? But anyway, that is another story. You can see that an investment of €40 million, which I mentioned in the previous paragraph, is relatively easy to earn back. One or two reasonable transfers ($25m), and you can already be in gross profit. But it could also be 4 transfers spread over 5 years. It could even be several smaller transfers spread over 10 years, and still, there is no harm done. The vision for a club's future must include the goal of producing high-quality players. Depending on the area where the club is located, combined with the scouting apparatus, it determines how many youth players actually break through to the first team. You include a target for this in the vision. By being concrete on paper, it becomes a responsibility of the club that everyone will then carry out. And supporters and sponsors are aware of the vision and the course being charted. The youth academy serves as a footballer factory where you pull players for your first team, but also to provide players to the global football market. The better the training, the greater the chance you deliver a talent who makes the first team and can be sold for several million or more after a few seasons. 10%-25% of the transfer money flows back to the club for the youth academy, and 25% flows back to the club to run the organization daily.
Of that 25%, 10% goes to the club's investment department. I am of the opinion that as a club you should establish a "treasury" for the future, regardless of the financial position. In fact: the larger the football organization, the larger the treasury should be. What if an investor ever wants to cash out and sell the club? Wouldn't it be nice if you, as a club, could buy back a large portion, preferably the majority of the shares? Literally no one in the football world thinks about this. I would include this in the vision, which I am currently laying out. Then we have 50% left, and that serves as a transfer budget for incoming transfers. You don't actually need the 15% that flows back for operational costs, because you have sponsors for that, allowing you to build up a reserve to innovate the club at the administrative level. The actual digitalization of the club. You do this by combining traditional income with social media, as outlined in blog #4: Football clubs and social media: in the Netherlands and Belgium that combination is still a bit of a thing, in combination with web3, and everything that comes with blockchain technology. You use that reserve pot for that, and I would include and explain all of this in the vision. Soon I will write a blog about Web3 and blockchain technology, don't forget to bookmark my website.
I would fill the treasury with, among other things, physical gold and silver, stocks, bitcoin, crypto, real estate such as the stadium, and land (around the stadium for future plans). This is also the only way to strengthen ties with the supporters as an investor(s). People will not doubt the good intentions of the investor(s). If you step into a club with money, you do it for a reason, and that reason should not initially be personal gain. It is important to build something sustainable, something that contributes to the collective and by which you will ultimately be remembered. Investors generally have enough money, so think of the collective first. The treasury ensures that you can eventually cash out once, but that depends on your input into the club and the resulting outcome. Has the club had a lot of success? Then you can, if you wish, cash out again fairly quickly and still remain a co-owner. With the treasury, it is possible to give the club back to the fans bit by bit through a fund. You purchase the club from a B.V. and place the club in a fund. The moment you as an investor(s) decide to cash out, shares flow back to the fund, because you sell your shares back to the club at market value via the treasury. Treasury = Your legacy. And you also describe this in the vision. Visions are usually around 5 years; I advise, and would personally opt for, a 10-year vision.
Later I will return to the treasury, because there are several other matters that come into contact with it. I first want to go deeper into the "talent factory" and value creation. Youth players come in for free, so the book value is 0, and through training you add value to a player every day. The moment the youth player knocks on the door of the first team, he already represents a certain value. In our competitions, this quickly amounts to €50,000 - €100,000. When a player starts playing minutes in the first team, the value often doubles. If he then also becomes decisive and a regular starter, we are soon talking about half a million in value. Value that has been created from nothing. It is therefore important that a youth academy is professional and that youth players are treated extremely seriously. I have said it before: there is no market where you can create value so quickly and easily. A player who costs nothing at the front end is therefore almost always pure profit. This is the reason to handle a player with extreme care. Everyone is different, and that must be taken into account. In my opinion, youth players are cast aside too easily. Even if only because of the value they already represent. Regarding personal and mental guidance, not much is generally done in the football world, and I would change that. And I would ensure that they are financially literate, so that a footballer can responsibly manage his own income and determine his own future after his football career. In this way, you deliver a fully-fledged football professional. In blog #2: Professional footballers, financial literacy, and large sums of money, I set out the importance of financial knowledge. He who does not honor the small is not worthy of the great.
A professional football organization is a company and brand, and the players are the assets. The club has a certain culture, club colors, and a support base. You can link a playing style, tactics, and strategy to this, which you include in the vision. This way you ensure there is a common thread running through the organization. During the 10-year vision, this is not deviated from, unless football and its perception change radically. I don't see that happening. A coach must therefore adapt to the club, but that applies to everyone in the organization. Ultimately, everyone in the organization is a passer-by. Whether it concerns the footballers or someone from the administrative office. In terms of incoming transfers, initially only purchases are made that are a direct reinforcement for the first team. In the Netherlands and Belgium, there are more than enough players walking around with whom you could build a successful selection. It is a matter of scouting well and daring to work with innovations. I would set as a goal in the vision that after 10 years at least 5 players in the first team must be footballers who come from the youth academy. This is the entire base and middle part of a football organization. The first team is the platform with the club assets that must provide the performance. The base supports and feeds the middle platform, and the top of a football club is the administrative part and the finances.
Directors such as a general and technical director are selected based on the vision. The general director manages the remaining staff, naturally in consultation with the investor(s). This brings us to a club's traditional income streams, such as matchday revenue (stadium & ticketing): season tickets, individual ticket sales, business seats, and hospitality. Sponsoring & partnership: main sponsors, kit sponsors, perimeter board advertising, and regional business networks. Media and broadcasting rights: the revenue generated through national competitions (Eredivisie/Jupiler Pro League) and potential European qualifying rounds or tournaments. Merchandise & fanshop: shirts, apparel, club items, and online sales. And commercial collaborations & catering: catering on and around match days, event rental of the facilities, and partnerships with local entrepreneurs. 10% of this income goes to the treasury. Because the traditional income is linked to what I outlined in blog #4: Football clubs and social media: in the Netherlands and Belgium that combination is still quite a thing, it is possible to earn back that 10%. This is a guaranteed revenue stream for the treasury, and that is where the magic happens.
I previously indicated that the treasury would be filled with, among other things, physical gold and silver, stocks, bitcoin, crypto, real estate such as the stadium, and land (around the stadium for future plans). By allocating 10% of the budget to the treasury every year for 10 years, you get a compounding effect, combined with the capital growth of the assets. I have identified 6 assets, so we must divide 10% by 6. That means that annually, 1.6% of the 10% flows to each asset. To give you an example of what compounding and capital growth do, let’s assume the 10% equals €1 million. 1/6th of €1 million is €166,000.
Let’s take gold as an example. Ten years ago, gold cost a little over €33,000 to €35,000 per kilogram, which equates to approximately €33 to €35 per gram or roughly €1,100 to €1,200 per troy ounce. By comparison: the price has more than tripled since then. If you add up all those annual purchases and value them at the current market price of approximately €126,500 per kilogram, we are talking about a total physical gold reserve of about 30 to 35 kilograms of pure gold bars.
Multiply that by the current gold price of over €126,500 per kilo, and you will find an amount ranging from roughly €3.8 million to over €4.4 million in gold value alone sitting on the club's balance sheet. The investment over a 10-year period is €1.6 million. And remember: we are only talking about gold here. 10 years ago, for example, one bitcoin cost approximately 586 dollars, and currently, the price stands around $75,000—just realize that. I hope you understand what a treasury can mean for a football organization, but also for investors, as explained. You could even choose to employ a trader to maximize the treasury. The returns would then be even higher, as you can anticipate market dynamics.
This is a summarized version of my vision for a professional football organization. As you can see, a professional football organization is a gold mine.
Has this blog inspired you as a club owner, director, or investor, and would you like to know more? Then please get in touch.