The global football industry attracts some of the most powerful and recognizable brands in the world, such as Nike, BMW, Samsung, Budweiser, Coca Cola and McDonalds. In contrast, many clubs and organisations struggle to break even and meet their responsibilities of paying creditors and the tax authorities. This degree therefore is essential to produce commercially astute business and finance graduates for this ever-expanding industry.

Over the last few decades the business of football has grown significantly. The worldwide broadcasting of sports events by local media conglomerates, and the rapid acceptance and development of sport sponsorship have changed the traditional business model of football clubs, which historically has relied on match day revenues.

The globalization of football has, on one hand, brought football clubs additional revenue, generated primarily by commercial activities such as the sale of broadcasting rights, sponsorships and licensed merchandise. On the other hand, football clubs now must commercialize in order to remain financially competitive and sustainable in light of increased costs and Chelsea have made this a big focus of their corporate activities in recent years.

Maintaining a sustainable financial position may require football clubs to make significant investments and they can get help here with objectives such as:

• Improving on-field performance (buying the best or more promising players);
• Improving/increasing national and international branding through effective marketing initiatives (promotions, sponsorships, etc);
• Enhancing the sustainability of its business model, and diversifying its revenue stream by expanding beyond broadcasting rights and tickets by focusing on merchandising, sponsorship, and stadium revenues.

Reaching these objectives may require investment in new technologies, personnel, manufacturing, new or renovated venues, financial and legal representation, and marketing initiatives. A primary question for many football clubs is where to obtain the additional capital needed for these specific investments? There is a variety of options available to clubs interested in raising capital, including those potentially offered by the capital markets such as:

• Issuing corporate bonds;
• Initiating an IPO (Initial Public Offering);
• Integrating a football club’s fan base into a shareholder structure.

However, to date, only a few European clubs (Juventus, Roma, Lazio, Borussia Dortmund and Manchester United are some examples) have initiated IPO’s or have financed their revenue programs via capital markets. This limited number demonstrates how difficult it is for football clubs to enter capital markets and, perhaps, how reluctant capital markets are to embrace football clubs.

Financial lessons from football
From portfolio allocation to fund selection to navigating volatility, there’s a lot you can learn about financial planning from football. They include:

Don’t focus too much on being a forward
The responsibility of forward players is to be aggressive and score goals for their teams. But forwards alone can’t win matches.

Financial lesson
An aggressive investment strategy focusing on mid-cap stocks or mutual funds can be rewarding in a bull run, but beware of their equally quick meltdown when the market falls. High returns come with high risk.

Beef up your defence
Defenders are responsible for not allowing the ball to go past them. They prevent losses.

Financial lesson
Limiting your losses by boosting your defence against sharp market corrections is as important as creating scoring opportunities.

Act as a referee for your investments
A neutral official on the field, the referee enforces rules and hands out punishment to players, if required.

Financial lesson
Arrive at decisions dispassionately, instead of letting emotions take over, particularly in a volatile market.

Do not commit fouls while investing
Breaking the rules of the game is termed as foul, and invites punishment.

Financial lesson
Resist the temptation to stray away from your financial plan. Deviating from rules-based investing can compromise your goals.

Contributed by guest author Darshan Shah.