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Rangers must ditch the ‘you have to spend money to make money’ mentality

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rangers-logoAccording to Paul Brown, in the financial institution that is Forbes magazine, you do not need to spend money to make money, in fact you shouldn’t. He may have been talking about small business in the United States, but it is a point that the current Rangers board must take heed of.

Under former owner, Sir David Murray, Rangers debt sky rocketed to near £80 million in the noughties as he funded domestic success and tried to buy European glory. Ultimately this spending of tens of millions of the bank’s money eventually helped force Murray’s hand into selling to disgraced former owner Craig Whyte, who led the Ibrox side to administration and then liquidation.

Charles Green, who quit as Rangers chief executive last season, launched a successful share issue which raised, according to reports around £22 million for the then-Third Division side. But what was a damning indictment of the financial mess that the club was still in, as the fact that after buying up the club’s assets etc to the tune of £5.5 million and with the creditors left to dodge the moths left behind in the kitty for liquidators BDO, the club were still hemorrhaging around £1 million per month!

£1 million per month, even after the club’s highest earners in the guises of Allan McGregor, Steven Whittaker, Steven Davis, Steven Naismith and Maurice Edu departed for pastures new – either through the refusal to TUPE over their contract or being sold by the club. Envisage that collectively all five of those players – ignoring Broadfoot, Ness, Wylde and Celik – earned roughly £100,000 per week, that equates to £5.2 million [not including bonuses and not taking into account tax payment]. that was a sizeable reduction of the wage bill yet they are still losing money.

How?

The Rangers model and structure of the club under Murray, was reliant on the Champions League revenue of around £10 million coming through the door and up the marble staircase to the club’s coffers. Without that money, the club were hit hard financially and this ran into Whyte’s tenure before he decided to dodge the tax man, which hammered the final nail in the coffin of Rangers Football Club as we knew it.

Despite Green’s rhetoric of working within their means with no credit facility from a rich sugar daddy or a banking institution who had a chief who was pals with the owner of the club, the club secured a number of players on deals that would increase over the time of the contract – as the comedy act that was Francisco Sandaza blurted out over the phone.

If you are to believe several newspaper reports, including that of The Herald’s Michael Grant, the share issue money is now around the £8 million mark given the loss per month that Rangers are suffering, along with the purchase of Albion Car Park, Edmiston House and maintenance within Ibrox.

Another share issue is out of the question at this moment in time, even if they did announce a second one – would it be a successful as the first or would it flop like that one under Sir David Murray in the noughties? So where will they get the money to not only cover the loss of £1 million per month as well as fund new signings and further costs that a football club accrues over the course of a season?

Season ticket revenue has a huge part to play and with 28,000 tickets being sold already, it is a sizeable chunk to say the least. But they sold around 33,000 season tickets last season according to one report [although the Daily Mail put the sales at around 38,000]raising around £10 million as per Charles Green’s claims.

In the wake of the club going into administration and then liquidation, the club did not lay off any staff members – as the likes of Dunfermline and Hearts have done this season when administration burst down their respective doors. In fact, Rangers tried to sign former Gers striker Daniel Cousin – an attempt which flopped and which baffled many given their financial plight.

This summer, as Rangers prepare for the new campaign in the SPFL League One [Second Division] they have signed seven players that will go straight into the first team squad – Cammy Bell, Jon Daly, Steven Smith, Richard Foster, Nicky Law, Nicky Clark and Arnold Peralta. If you estimate that each of these players are on a minimum of £5,000 per week that will mean the combined addition to the Rangers wage bill would be in the region of £1.82 million [although as we know some of those players will be on a greater wage while others may be under that level].

In terms of departures, Carlos Bocanegra and Dorin Goian had their contracts mutually terminated as they sought new clubs along with the club looking to cut their sizeable wage off their list. 22-year-old Kane Hemmings was released and goalkeeper Neil Alexander looks a dead cert to leave Ibrox with his contract at an end and no other offer on the table.

Still with potential cuts looming over Ibrox still, the Rangers squad is ever-growing to a level that even the top SPFL Premier League clubs would balk at. Nevermind a side that was just promoted from the Third Division.

We also saw in the run-up to Green’s resignation, a streamlining of backroom staff roles. This included physio Pip Yeates, chief scout Neil Murray and reserve team coach Tommy Wilson departing Ibrox for different reasons. These departures would not boost the coffers as significantly as a player’s departure – such as the under-performer Francisco Sandaza or the injury prone Kevin Kyle.

According to Michael Grant in the Herald, Carlos Bocanegra, Dorin Goian and Neil Alexander’s departure have taken ‘around £45,000 off the weekly wage bill’. He also mentioned that interim chief executive Craig Mather is ‘picking up most of the money Green was on’ [around £260,000 per year]and commercial director Imran Ahmad’s [who departed the club following the release of information – that allegedly breached the data protection act – to a Rangers blogger]wage which was around £250,000 per year.

With that reduction in wages, Rangers have promptly brought in more staff. Rangers legend Gordon Durie has come in to take on the task of the reserve and youth coach, while they have also added a replacement for Yeates in the guise of Jim Henry, who is the head of Sports Science. A man who was sacked by Sunderland manager Paulo di Canio, who was less than impressed with the fitness of his new charges when he arrived at the Stadium of Light.

Grant adds that it ‘still costs around £1.5m per month to run Rangers and it works out that only around £1.1m is coming in’. Before adding, ‘Rangers are running at a loss, and at a loss taken seriously enough within the club for jobs to be under review with the likelihood of a number of redundancies around Ibrox. They have to put the brakes on spending. Mather has been asked by the board to cut costs and, inevitably, one of the routes he must go down is a cold, dispassionate look at which areas are carrying some expendable fat’.

The Herald journalist’s words are true, the Ibrox side must cut their spending. They have no Sir David Murray, they don’t have a nice bank manager to lend them tens of millions of pounds and they certainly can’t use the revenue stream of Ticketus that Craig Whyte utilised. So where does that leave them? Living off the remnants of the share issue coupled with the prospective £10 million revenue from season ticket sales. It won’t last long with the club continuing to run at a loss and they have no fall back when it does. That is why some observers claim that Rangers spending could see them teetering on the brink once again – but they cannot and could not fall into the abyss of administration again. If they did then it would not only lead to a fan revolt of epic proportions, but also a level of punishment from the governing bodies that is much harsher than they faced before last season kicked off.

That is why Mather talked about balancing the books in an article on the official Rangers website. Despite this need to balance the books, McCoist is still looking to bring in players to strengthen his already sizable squad, with the club announcing talks with former Hearts and Wolves defender Christoph Berra have taken place and former Rangers defender Sasa Papac acting as the smooth operator in an attempt to woo fellow countryman Boris Pandza.

Despite McCoist’ attempts to follow the ‘Hearts model’ of having everybody and his son [including the kitchen sink]in the first team squad by the sounds of it, a squad of around 30 players is unnecessary in the SPFL League One – even more so with no European football for the next few years at least.

Mather told RangersTV: “More of the squad could be moving on. There’s potential for that, I’m not going to sit here and hide it. Ally has made no secret of the fact he’d like to make one or two more signings if possible and in principle I have no problem with that. We do have to balance the books though and look at it accordingly. It would be good for the stability of the club if we can get a couple more moved on as well.”

Who would they move on though? They would have to be players on a sizeable wage compared to the rest to actually make a dent big enough to bring in two more signings. Looking at the current squad the only players that would fit the bill are defensive trio Anestis Argyriou, Sébastien Faure and Cribari, who never really set the heather alight in the Third Division. The only other candidate could be striker Dean Shiels, who would be deemed as surplus to requirements with the likes of Daly and Clark now at Ibrox.

So while the snapping up of signatures now make give the fans confidence to buy up season tickets, there is a real need at the club to reduce their wage bill enough to fit within the perfect model of wage bill to turnover percentage – which is usually between 30-40% of the turnover going out on wages.

Rangers will have no real problems on the pitch in SPFL League One, they will stutter every now and then I suspect, like they did last season but not to the same extent. The players they have brought in are experienced and quality signings for the league they are in – with Nicky Clark in my opinion the pick of the bunch.

The issue for Rangers once more is centered around their finances and after being run in an unsustainable model by a man who was throwing the bank’s money around as if he was playing monopoly, they must secure a business model and a sound financial footing that the club must adhere to, despite the clammer from the terraces for luxury signings who would bring quality football to their team.

Under Murray he brought in some greats to the Scottish game, there is no denying that.The likes of Laudrup, Gascoigne, Numan, van Bronckhurst, the de Boer brothers were all down to Murray and the millions he paid them. The fans didn’t care where the money came from, they didn’t care whether it came from the Bank of Scotland, Murray’s petty cash tin or Murray International Holdings, they craved success domestically and in Europe. They demanded to be better than their rivals Celtic at every opportunity and Murray to his cost and to Rangers, said yes more times than Meg Ryan in the restaurant scene in the film ‘When Harry met Sally’.

Craig Mather must get tough, the Rangers board fronted by chairman Walter Smith must get tough financially. If it means telling McCoist ‘no’ then so be it. If it means selling players from under McCoist then so be it. Rangers’ financially security is more important in these next few years than the type of players that they bring in. Whether they are foreign internationals, experienced Scottish journeymen or young kids with huge potential with dreams of stardom – the wage bill MUST fit within Rangers’ strict business plan.

The saying of ‘you have to spend money to make money’ should never be uttered inside Ibrox whether it is said by fans, manager or club officials, it would be on par with Murray’s ‘for every fiver Celtic spend, we will spend a tenner’.

Only time will tell if they will balance the books, but if they are to do anything between now and when they eventually reach the Premier League, they must cut costs and be ruthless when they do it. Players heads must roll, not the admin staff, not the cleaners, not the ordinary guy who loves working at the club. These staff may be easier to cut from the wage bill than the players, but the wages of a cleaner to the wages of a first team footballer, would be like comparing a fart to a hurricane.

If the Rangers board are running the club in it’s best interests rather than their own, then we will see players departing between now and the 1st September, when these new signings officially arrive en masse.

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About Author

scotzine

Andy Muirhead is the Editor of Scotzine and the Scottish Football fanzine FITBA. He is the Scottish Football columnist for The Morning Star and has written for a number of other publications including ESPN, Huffington Post UK, BT Life's a Pitch and has had his work featured in the Daily Record, The Scotsman and the Daily Mail.

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