Argyle And The 55% Cap
All League Two clubs will once again operate under a salary cap for the 2012-2013 season.
The Football League have imposed a salary limit which restricts clubs to spending 55 per cent of their turnover on employee wages, however, in Plymouth Argyle's recent history success and promotion was achieved with a wage-to-turnover ratio of less than 50%, with one promotion falling nearly 15% below the current 55% limit!
Argyle's last three promotions in 1996, 2002 and 2004 were all achieved by spending less than 50% of their turnover on wages.
The Salary Cost Management Protocol will apply to all clubs in the Football League for this campaign with the wage cap set at 55% for League Two and any club breaching the limit will be the subject of a transfer embargo.
Argyle owner James Brent has said several times that the club will operate within a set budget, and rightly so, with the salary cap playing a big part of the new and sensible economic era at Home Park.
Transfer fees paid out to sign players in the lower leagues are now the stuff of pure fantasy but Argyle can still compete with other League Two clubs when offering wages, courtesy of the spending power of the Green Army.
The Pilgrims' are fortunate that their fanbase is one of the biggest in the bottom division; which means that extra fans coming through the turnstiles will give manager Carl Fletcher more financial muscle when attempting to sign new players.
Although, it should be pointed out that since coming out of administration the club do have some historic debts to pay, namely £200,000 a year.
Player wages have increased dramatically over the last ten years or so but this hike has partially been compensated by the rising cost of season tickets, match-day tickets and more focus placed on income from commercial and corporate business.
Each of Argyle's last three promotions all happened with a wage-to-turnover ratio of less than 50%.
The Wembley play-off final win in the 1995-1996 season saw the club spend 40.8% of their turnover on wages and still enjoy a successful season.
Similarly, two recent promotions were also built on sound financial management and paying affordable wages with 43.1% of turnover spent on employee wages in the 2001-2002 Division Three title winning season and 49.1% of turnover paid out on wages when winning the 2003-2004 Division Two championship.
So Argyle themselves have recently proven that promotion and success can be achieved by operating under a salary limit of less than 50% of turnover.
The other side of the coin is that Argyle are the perfect example of what happens to a football club when it spends beyond its limit on wages.
The last club accounts available show that in 2008-2009 when Argyle were still a Championship side they paid out a staggering 87.2% of an £8.6 million turnover on wages; with the wage bill hitting £7.5 million for that season.
We all know what happened after that and because of the financial problems and the administration process that followed the club missed two annual accounting periods, so any up-to-date and revealing financial information is not currently available.
Argyle's wage/turnover ratio since 1995: