Leicester could face financial meltdown if they ignore squad value calculations as their current status is grim reading

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Looking at all transfer acitivity done by Leicester since 2011 you will find a number of interesting aspects to look at. As we have earlier talked about, ignoring these scenarios will be of great consern, but hopefully the club have their own calculations under control.

The current cost of the squad at present after the signing of Wout Faes is €364million. This is a net price paid for all players in the squad today and of course what potentially must be drawn into the kitty as books of €120million in losses last year must be seen in this picture.

We have not drawn previous losses and current depth into the picture, but hopefully the club will be in healthy hands as ownership and sponsors can be of help. Brendan Rodgers has signed players still at the club for fees in the region of £200million and at this point standing at the bottom of the table.

These are transfer fees counted for Vestergaard, Daka, Soumare, Perez, Faes, Castagne, Justin, Praet and Tielemans. The sale of Fofana was one most needed as the net total of signings and sales from 2011 until today, do see a negative balance of €180million including cost for players at the club at present.

Looking back to the season when Leicester returned to the Premier League you had a cost value of the squad as you entered and made a number of signings that sums up to €41,5million. Looking at the total revenue of that season you do have a picture of nice reading as Leicester ended 14th.

To manage the climb from 14th postion up to the top of the table Leicester invested in Okazaki, Kante, Benalouane, Inler, Gray and Amartey at a cost of €45,7million. Sales during that season added up to €13,1million. The players sold had a cost value in total of the same amount. David Nugent made that total look good as he signed for free from Portsmouth and sold to Middlesbrough for €5,6million .

The squad cost had then been added with €32million to get up to the very top. This was grand use of money and everything well spent as the next chapter might have blinded people who do not make squad cost calculations.

Interesting views as Leicester entered the big time and ignored their squad cost as we are looking at the use of money going forward. They sold Schlupp and Moore for €15million, they had a squad cost value of 0. Kante was also sold for €35,8million, he carried a cost of €9million. The big mistakes often done is that players without any squad cost is replaced with new signings with a heavy transfer fee on their head. The risk of losing money on a player is there as soon as he carries that cost and possibly is not seen as a first team regular and will in this situation not be suited to increase his transfer value.

The money coming in from the sales of Schlupp, Moore and Kante was not at all enough to cover the signings of Zieler, Musa, Slimani, Mendy, Ndidi and Kapustka, as the net total of those transfers added up to €92,1million. This made a new rise in squad cost and also taking in the net loss of Gokhan Inler of €7million, you do see that after the Premier League winning season Leicester have ignored many important value measures as everything looks very difficult.

The squad cost value has now gone through the roof and as the years moves forward you cannot ignore these numbers as they will hunt you like the devil. If you cannot manage to get the money back on an asset you buy, you have to take the losses and be able to cover them all.

An example to look at is Jamie Vardy. He did come with a transfer fee and if Leicester gives him away for free, they have not been able to get the money back that they invested as his goals and fantastic games of emotional value never will be seen from an accounting point of view. His transfer fee will probably by now be depreciated, but still as an asset you have invested in, the only way to get him seen as a positive investment is from a sale done, this is how money talks.

The key for Leicester going forward is of course to balance the books as well as being able to cover the depths build up during years of overspending. The major problem occure when your squad cost is on a level that sees the risk of losing heavy amounts of money on a player carrying a major transfer fee on his head, and you just have to write it off as a loss if you decide to realize.

Selling players after a short life at the club could also be a tragic affair. If you do not gain money from the sale you will have to realize losses. Next summer or as early as January TCF believe a new major asset will be on his way out. James Maddison looks the perfect selling object as he carries a squad cost of €25million and hopefully his transfer can cover heavy losses on Youri Tielemans as his net cost will either be €45million or reduced with the fee possible.

One interesting thought is to look at the squad cost of today and see how you can be able to get the money back for the group at present looking at the different values. Leicester players are today at Transfermarkt seen valued to €478m, the squad cost of players are €365m. But looking at those values you have to take other more serious calcultions into the picture. Vardy, Evans and Albrighton do all carry values, they will not gain any transfer fees when leaving. Seeing Tielemans valued to €55.0m, his value will only be valid if he signs a new deal. What is concrete is the squad cost, what you do not know is the price you will get from a sale.

Khun Top has pointed out how important the academy will be going forward and ignoring the potential of players of that status could be costly learning. The club do carry heavy depth and hopefully that will be possible to sort out without seeking new ownership at the club.

The ground rules going forward would be;

  1. Invest in your own academy getting as many players as possible into the first team
  2. Calculate your squad cost and be sure that you can get your money back for each player you sign
  3. Sell players on that are not seen as first team regulars and add quality for less money
  4. Never sign a player for a major fee if you do not believe he will be used as a first team regular
  5. Do not use money on players you have no plan or idea on how you can develope and bring forward
  6. Never use money on any player if you have to make loans in the bank to carry the cost

Leicester as a football club is a minor among the major clubs in England and as they try to compete they need to understand their position. Fanbase is the major factor and not owners, because owners at some point needs to realize their financial positions and without a major global fanbase and revenue sizes of higher levels you are depending on owners able to carry out financial challenges on their own.

20 years ago or so we did see how £11million from the sale of Emile Heskey was used in wrong spending. This all ended up in a relegation and later administration. The money in play this time is of much larger scale and hopes are that Leicester can avoid relegation, but it looks grim as we do see a sporting and financial challenge at the same time.

Last time around we had a major meltdown at the club and of course avoiding a relegation will be a good start as we look forward to the next game coming up. Worried is a word too little.

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