Argyle And The Salary Cap
All League Two clubs will once again operate under a salary cap for the new season.
The Football League have imposed a salary limit which restricts clubs to spending 55 per cent of their turnover on employee wages, however, Plymouth Argyle's recent history has shown that success and promotion can be achieved with a wage-to-turnover ratio of less than 50% because 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 the 2013-2014 campaign with the wage cap set at 55% of projected turnover for League Two and any club breaching the limit will be the subject of a transfer embargo.
Budgetary information must be passed to the Football League at the start of the campaign and that is updated as the season progresses.
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 largest in the lower divisions; which means that extra fans coming through the turnstiles will give manager John Sheridan 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 rising prices for 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, the two promotions achieved by Paul Sturrock 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 when a club spends beyond its limit on wages.
The last club accounts available from the previous regime at Home Park show that in season 2008-2009 when Argyle were still a Championship side they paid out a huge 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 further revealing financial information from the Paul Stapleton era is not currently available.
Can Argyle do it again and achieve promotion while limiting the wages to less than 55% of turnover?
Argyle's wage/turnover ratio 1995-2009:
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