Technology, Media, & Telecommunications Practice
Translating budgets
into quality: European
football’s value frontier
Longer-term strategies in managing European football clubs’ first teams can
create an annual competitive advantage of between €100 million and
€200 million.
by Oliver Bierhoff, Sebastian Flegr, Jörn Küpper, and Tilman Tacke
February 2024
Most professional European football clubs Previous research shows that most increases in team
aim for sporting success for two reasons: first, value stem not from net investment into new players
sporting success is what matters to players, fans, but from what we call “team value management”
and employees; and second, it is the basis of across three areas: development of first-team players,
business success. integration of youth players, and player-trading
excellence.2 The research also highlights the key
A team’s quality drives sporting success. A strong characteristics of clubs that have created capabilities
predictor of a team’s success at the end of the in at least one of the three areas, allowing them to
season—and therefore its quality—is the market outperform even clubs with higher budgets.
value of the team at the start (Exhibit 1).1 In the top
five European leagues, for example, the club with These areas of team value management have
the highest team value at the start of the season increased in importance in recent years for two
won its league’s title in three of four seasons over reasons. First, club revenues fell during the
the past five years. pandemic, eroding the overall financial situation
1
Here, we are referring to the aggregate transfer value of the players in the team. Note that the value of an individual player varies over time
according to several factors, such as their performance, age, and injuries.
2
“ The value pitch: The importance of team value management,” McKinsey, September 3, 2020.
Web <year>
Exhibit 1
<Title>
Exhibit <x> of <x>
The market value of a football club’s first team at the beginning of a season
is a strong predictor of its end-of-season results.
Correlation of team’s market value to points scored in respective league, 2021–22 season
Points scored
Premier League LaLiga Bundesliga
100
90
80
70
60
50
40
30
20
10 r² = 0.77 r² = 0.82 r² = 0.61
0
1.5 2.0 2.5 3.0 1.5 2.0 2.5 3.0 1.5 2.0 2.5 3.0
Serie A Ligue 1
100
90
80
70
60
50
40
30
20
10 r² = 0.88 r² = 0.72
0
1.5 2.0 2.5 3.0 1.5 2.0 2.5 3.0
Note: r2 values, also known as the coefficient of determination, range from 0 to 1; a higher r2 indicates a better fit of the regression model to the data.
Source: Mathieu Lacome and Eva Murray, Football Intelligence: A Hands-on Guide to Maximising Your Investments in Data, Dec 22, 2022; Transfermarkt
McKinsey & Company
Translating budgets into quality: European football’s value frontier 2
of many clubs and limiting the budgets that do these budgets relate to the quality of a team as
clubs could allocate to their first teams. Second, approximated by a team’s market value? We looked
additional financial regulations have placed at the relationship between budget and team value
constraints on clubs spending beyond their means. among the top (largest), midsize, and smaller clubs
Combined, these two factors have helped boost in our sample.6
the competitive advantage of clubs that can turn
limited budgets into higher-quality teams versus As one might expect, clubs with higher first-team
competitors that are less cost-efficient. This is budgets have, on average, better first teams;
why clubs with sound sporting models, such as this relationship is demonstrated by the positive
Real Sociedad in Spain and Atalanta BC in Italy, correlation we see in Exhibit 2. But comparing
have climbed the ranks despite having lower first- team quality and team budgets reveals two
team budgets compared with less successful additional findings:
competitors.3
— The value frontier helps identify the budgets
required to run teams in a value-oriented way.
The ‘value frontier’ benchmark for For example, in the 2020–21 season, a cost-
value-oriented budget allocation efficient club could run a team worth €600
The value frontier defines the highest-quality team million (similar to the market values of clubs
that can be run on a fixed budget—and can help such as Borussia Dortmund, Inter Milan, and
club management and owners understand whether Tottenham Hotspur) with an annual financial
their current budget is put to good use. We analyzed resource need (taking the balance sheet effect
more than 100 professional clubs across Europe.4 into account) of about €100 million.
Our work covers four seasons, from the beginning
of the 2017–18 season to the end of the 2020–21 — The analysis enables club leaders to estimate
season. The study seeks to address the potential gains of efficient team value
three questions: management. The budget gap between first
teams of similar quality at highly efficient clubs
— What is the budget needed to run first and at clubs that are lagging behind is huge:
teams efficiently? budgets differ by up to €200 million at top
and midsize clubs and by up to €100 million at
— How big is the competitive advantage that smaller clubs.
value-oriented budget management can create?
An important takeaway is that value-oriented first-
— Why do some budgets translate into high- team management allows clubs to systematically
quality teams while others don’t? outperform rivals with bigger overall budgets.
Indeed, in our sample of more than 100 clubs, some
Value-oriented budget allocation can create an of the top 20 operate with lower total first-team
advantage worth €200 million per year budgets than a substantial share of those ranking in
Total first-team budgets are the sum of wages, the mid-30s.
net transfer investment, agent fees, and the
changes in current players’ market value.5 How
3
Based on their relative value increase compared with other teams in the league.
4
Clubs that have played for at least three of the past four years in one of the top five leagues as well as clubs from the lower leagues that are
frequent participants in UEFA Champions League competitions.
5
By including the change in the financial value of players, our definition of “budget” aggregates annual cash flows and evaluation (balance
sheet) effects.
6
The top clubs are the 20 largest clubs by market value (more than €400 million at the end of season 2020–21) that typically play in UEFA
Champions League. Midsize clubs are the next 30 clubs by market value (approximately €200 million to €400 million at the end of season
2020–21) that typically play in UEFA competitions. The base clubs are the 54 clubs with the lowest market value in our sample (less than €200
million market value at the end of season 2020–21). These are either clubs from the top five leagues not playing in UEFA competitions or clubs
from smaller leagues playing in UEFA competitions.
Translating budgets into quality: European football’s value frontier 3
Web <year>
Exhibit
<Title> 2
Exhibit <x> of <x>
First-team budgets vary between leaders and laggards by as much as €200
million a year.
Premier League LaLiga Bundesliga Serie A Ligue 1 Outside top 5 leagues
Team 1,100
value,
€ million Manchester City FC
1,000
Liverpool FC
900
800 Value frontier4
Top 20 1 Atlético de Madrid
700
Real Sociedad Borussia Difference =
Dortmund
600 ~€200
500 AFC
Ajax RB Leipzig
400
Atalanta
300 BC
Mid 302
200
Difference = ~€100
100
Base 503
0
–50 0 50 100 150 200 250 300 350 400 450 500
First -team budget5 (€ million)
Note: While the value frontier and the lagging line are the same for the top 20 and mid 30 clubs, the base 50 group has a different value frontier and a different
line for lagging clubs.
1
The 20 largest clubs by market value, with team values >€400 million.
2
The next 30 clubs by market value, with team values between €200 million and €400 million.
3
The 54 clubs with the lowest market value in our sample, with team values <€200 million.
4
Displayed value frontier relevant for top and mid clubs is equal to 400 + 2 × first-team budget; for base 50, the value frontier = 100 + 2 × first-team budget.
5
Sum of first-team wages, average net transfer investment, and average agent fees minus the increase in players’ market values.
Source: McKinsey analysis of Transfermarkt and Off The Pitch data
McKinsey & Company
Translating budgets into quality: European football’s value frontier 4
A look at the clubs close to the value frontier shows less need to upgrade team quality via net transfer
that budget efficiency is not tied to a specific investments (Exhibit 4). This need for external
league. The best-performing clubs (in terms of how quality depends primarily on the ability of clubs to
their budgets translate into team value) compete successfully integrate players from the academy,
in all the major leagues as well as in the smaller recruit promising young talent at an early stage, and
leagues (Exhibit 3). Budget efficiency is thus highly develop players’ potential.
likely to be related to the quality of decision making
within each club. Importantly, the wage difference between players of
similar quality is not the primary reason for budget
Differences in first-team budgets reflect how differences between clubs; it’s the consequence
teams are built of different approaches to team composition. For
More than 80 percent of the budget gap between example, clubs that systematically and successfully
more and less efficient clubs can be explained by integrate young talent from their academies pay
how clubs assemble their first teams: clubs that lower wages than clubs that rely on experienced
can identify and develop players in-house have players bought in externally.
The best-performing clubs (in terms of
how their budgets translate into team
value) compete in all the major leagues
as well as in the smaller leagues. Budget
efficiency is thus highly likely to be
related to the quality of decision making
within each club.
Translating budgets into quality: European football’s value frontier 5
Web <year>
Exhibit
<Title> 3
Exhibit <x> of <x>
Clubs at or near the value frontier are represented in all the major leagues,
as well as in smaller leagues.
Top 20 clubs1 Mid 30 clubs2 Base 50 clubs3
Team value >€400 million Team value €200 million–€400 million Team value <€200 million
Liverpool FC AFC Ajax PSV FC Red Bull Salzburg
RB Leipzig Real Sociedad ACF Fiorentina SC Freiburg
Manchester City FC Atalanta BC OGC Nice Club Brugge
Borussia Dortmund Lille OSC Udinese Calcio KRC Genk
Atlético Madrid SL Benfica Getafe CF Racing Club de Strasbourg
Alsace
1
The 20 largest clubs by market value.
2
The next 30 clubs by market value.
3
The 54 clubs with the lowest market value in our sample.
Source: McKinsey analysis of Transfermarkt and Off The Pitch data
McKinsey & Company
Exhibit 4
Differences in team composition costs are responsible for most of the
efficiency gap between value frontier clubs and lagging clubs.
Budget differences between clubs close to the value frontier and clubs at distance from the value
frontier, %
Higher team composition costs Wage overpayment
Top 20 85 15
Mid 30 90 10
Base 50 85 15
Source: McKinsey analysis of Transfermarkt and Off The Pitch data
McKinsey & Company
Translating budgets into quality: European football’s value frontier 6
Getting as many decisions right making quality within the sporting department can
as possible: A framework for help clubs make fewer mistakes.
competitive advantage
While luck remains a large factor and operational There are many ways to improve decision quality
excellence in day-to-day work is vital, translating across the three team value management areas:
budgets into quality teams also depends greatly on development of first-team players, integration
about 50 sport management decisions every year. of youth players, and player-trading excellence
These decisions relate to identifying, developing, (Exhibit 5). In each of these areas, competitive
signing, retaining, and releasing talent—both advantage can originate from positioning, people,
players and technical staff. No club gets all 50 processes and tools, or structure.
decisions right, but efforts to improve the decision-
Exhibit 5
Football club models have several potential sources of competitive
advantage across areas of team value management.
Area of team value management
Development of Integration of Player-trading
first-team players youth players excellence
Positioning
People
Source of
Increasing
competitive
strength
advantage
Processes and tools
Structure
Source: “The value pitch: The importance of team value management,” McKinsey, Sept 3, 2020
McKinsey & Company
Translating budgets into quality: European football’s value frontier 7
For example, better positioning could improve a indicates that the majority of its first team’s
club’s image, helping attract players. Competitive value gains result from player development
advantages can also be related to people with rather than from net transfer investment.
specific skills (such as the quality of coaches in Thereby, being part of a multiclub model also
the youth academy), established processes and yields structural advantages in profiting from
tools (for instance, using a proprietary scouting the player development on farm teams, talent
database), or structural advantages (for example, a pipeline management, and developing technical
multiclub model that benefits from the synergies staff.
of multiclub cooperation). Of these, structural
advantages make the most consistent impact on — Integration of youth players. Real Sociedad
differentiating a club from others. doubled its team value in five years and
established itself in LaLiga’s top four. Strategic
Most multiclub models are now moving from a clarity and operational excellence in developing
phase of expanding portfolios toward a phase and integrating local youth players played a
of optimizing clubs within the portfolio. Clearly significant role in the club’s success; the club
defining and connecting the sporting models across strives to source 60 percent of first-team
the portfolio will be critical; in turn, doing so will put members from the academy.
additional pressure on single clubs to maintain or
strengthen their competitive positioning. — Player-trading excellence. S.L. Benfica has
remained among Europe’s top three clubs in
Differentiating competitive advantage: creating player value, which translates into
Examples from across Europe the largest transfer profits of all clubs over
An examination of European football clubs during the past decade. This is enabled by a dense,
the 2017–18 to 2020–21 seasons reveals a variety countrywide scouting network; a focus on
of team composition strategies across the three player development at the core of the club’s
areas of team value management. identity; and a trader mindset when acting in
the transfer market.
— Development of first-team players.
RB Leipzig’s upgrade into one of the three most — Cross-cutting. Liverpool FC offers an example
competitive Bundesliga clubs has more to do of a club building a competitive advantage
with how the club invests money than with the related to processes and tools across all three
amount of money it invests. A high percentage areas. By building capabilities in evaluating the
of young, world-class talent in RB’s squad performance and future potential of current and
Structural advantages make the most
consistent impact on differentiating a
club from others.
Translating budgets into quality: European football’s value frontier 8
external players, Liverpool FC has been able to As in many business sectors, immense pressure
compete with teams with much larger budgets. to demonstrate performance in the short term—in
This strategy is supported by a leading data the next game or the current season—often leads
science department and the development and to decisions that do not take longer-term effects
rigorous use of analytical tools. into account. Clubs’ top management teams would
be well advised to develop coherent strategies to
address the cost–value equation and engage in
longer-term planning. Success does not
Regardless of the strategy pursued, generating come overnight.
value through successful team composition
requires a planning horizon of at least three years.
Patience and continuity—both on and off the pitch—
are therefore essential building blocks for increased
cost efficiency and business success.
Sebastian Flegr is a consultant in McKinsey’s Stuttgart office; Jörn Küpper is a senior partner in the Cologne office;
and Tilman Tacke is a partner in the Madrid office. Oliver Bierhoff is a former managing director of the German Football
Association and a former professional football player.
The authors wish to thank Fred Burdon, Marcelo Leal, Pedro Mendonça, Tiago Palma, Moritz Schmude, Dan Singer, and Ben
Vonwiller for their contributions to this article.
Copyright © 2024 McKinsey & Company. All rights reserved.
Translating budgets into quality: European football’s value frontier 9
