I read with interest last week to see our neighbours Cardiff City signing Craig Bellamy from Manchester City. It made me think about business, football and the gamble that every organisation takes to grow and move forward. Should you gamble to achieve (and if so how much) or live within your means?
Cardiff have been trying for the last 6 years to get into Premiership to benefit from the estimated £90m a year of revenue it offers and as a result have built up a huge debt with a range of creditors including the Inland Revenue, local suppliers and other football clubs. Depending on who you speak to their current debts range from £25m to £35m and there is no doubt that their cost’s outstrip their revenue by some margin.
Although the club tries hard to grow its revenue’s each year (through season ticket sales and off the field income) that revenue can get eaten up very quickly when you sign players on £45,000 a week (as they have just done with Bellamy). It led me to think about the general gamble every business takes to grow their revenue and for how long should you continue to gamble?
I know for a fact as the owner of a Web based software company that you need to invest (gamble?) up front to build something in order to see revenue in the future. We had to (and continue to) invest in our company and product to ensure we can provide the best service possible but it also made me think ‘when do you stop the investment/gamble’ and focus on ensuring your revenues match your cost base (or hopefully surpass it!!).
It is a difficult decision for any business to take and there will always be those who gamble the house in the hope of the mansion but in the current economic climate, how much gambling should be done?
As a business you should always be looking to take some form of risk. It’s one of the joys of running something when you see something take off that you invested in. There is also the old adage of ‘speculate to accumulate’ which is good advice in this fast moving world when companies can move from nothing to massive multi nationals in just a few years (Twitter and Facebook are 2 of the biggest examples of this!) Very few successful businesses have been created without some form of initial gamble or risk I would suggest.
However, the gamble also needs to have a bit of caution thrown in. What is the backup plan if things don’t turn out as expected? Will the gamble put at risk the whole business and so put people out of jobs and customers without a supplier? In the football world that means ‘could’ we put the whole future of this club at risk with what were doing? What are the revenue scenarios with and without the gamble? Is the gamble physically affordable within the coming 3, 6 and 12 months? By considering these options, any business can look to take a reasoned view on the gamble and decide whether it’s the right thing to do. Maybe there is the option to gamble for a limited period of time in order to minimise the potential impact if things do go wrong?
Maybe part of me is a little miffed that our nearest rivals have just brought on board a quality new player who will no doubt help them win more football games!
However, part of me also believes that the additional gamble they have taken (adding an additional £3m a year to their cost base with no guarantee of extra income) is nothing more than reckless and just shows an organisation that wants to play at the high risk poker table. In the end, the gamble could pay off for them and if it does then good on them. It could come off if EVERYTHING else goes their way. However, football and business is generally not like this. There are more often than not problems on the path which need to be resolved and the question will be ‘does the gamble take into account these problems’ (such as a player injury in this case).
If they don’t and the extent of the gamble is so big that it cause’s the whole club to go under, will they then look back and say ‘if only we have lived a little more within our means’… everyone will have a different view and that’s what makes some big winners and other massive losers!
Let’s see what the signing of Craig Bellamy does for Cardiff City! My bet is massive losers but there again I would say that!