This text is a follow up to my recent article "Sports Club Finances: 6 Basic Concepts"
The main idea of the Article above linked was to follow this other text: "Sports World and Economy: 3 Basic Concepts"
Even if you haven't read any of the articles above this article was designed to make sense anyway, so lets go...
Trade Offs by dictionary definition mean when you need to make a choice between two different options with pros and cons, for a rather grammar-oriented explanation please check here
The main idea behind this article was to have a look at trade offs lived by Sports Clubs throughout history, and how they affect the basic concepts of Assets, Liabilities, Income, Cashflow and else. If you would like to understand the definition of these just listed please check the links at the begin of this article.
I'd summarize the usual process as the attempt of planting seeds for the future, seeds of profits. There are several ways a Sports Club can improve financially, you can renegociate the debt, you can sell players, you can attract a new owner with fresh investments, the main aspects of the trade offs is they usually make present and future collide.
We have a classic example of a club investing in a Stadium, which in theory should generate more ticket revenue in the future. The whole point is the core concept that a good investment in future amounts of profit needs to be painful of affect the capacity of a club to be competitive is stupid and pointless.
I'm doing my best not to use Economy jargon here, but then again the main concept of this article is that you don't necessarily need to impact current spending to "plant" future revenue. Often times you hear in the press journalists saying "the club is living a modest season because of Stadium investments". Truth to be told the debt could have been spread over a longer period, or an investor could have bought the team and pay cash for the stadium then retrieve the money slowly over time.
Whenever you hear a discussion about a Sports Club or any given institution, a deep analysis of both or more paths possible is important.
Juventus made a bold decision to bring Ronaldo to the club, the spendings in salaries will not be little, but they trusted that Ronaldo could also bring money in over the upcoming seasons. How? Ticket selling, shirt selling, TV contracts, among many others. They shifted their strategy of spending wisely and trying to win UCL without having either Messi or Ronaldo, which was the rule over the past seasons.
Juve could do this because they are a financially well organized club owned by a family of investors with many years of experience in several sectors and countries. It was a calculated risk. The trade off was basically "spend less and try to squeeze the odds in finals against Barça and Real" or "Try to squeeze our wallets and buy ourselves one of the jewels of the football crown of today".
I would enlist as a well organized Stadium trade off stories the one of Atlético Madrid. They could hold Griezmann in spite of the restructuring and now have a good chance against the other La liga big ones.
Arsenal fans don't have good memories of "Stadium" stuff, and that is exactly the summary I'd like to present to my readers: Investments can be really good and bring future profits without necessary present sacrifices. We live in a world of abundant credit and investors willing to hear about good opportunities to invest their cash. Don't buy the idea that you need to plant today as a seed for a brighter tomorrow, this is in essence a fallacy which is better explained when you understand the concept of a trade off.