Almost a week ago, La Liga published the Squad Cost Limit of 20/21 season for all clubs in Primera and Segunda league. Despite of the impact of Covid, Villarreal was assigned of 145.2 million, 36.6 million or 33.7% increase from 19/20 season.
Squad cost limit is the maximum amount that each club can consume during the season, and includes spending on players, first coach, assistant coach and physical trainer of the first team, subsidiaries, and other sections. The concepts includes not only salaries, pensions, and bonuses, but also acquisition costs (including commissions for agents) and amortizations. Amortizations are calculated as purchase amount of the players divided by the number of years of the player’s contract.
The limit is calculated based on past years (past three years if I’m not wrong) financial performance of each club. Salaries and amortizations incorporated the majority of expenditures of a football club. As for Villarreal, salaries and amortizations took approximately 95% of total revenue for the past 6 years. Thus in a way, the limit reflects the club’s financial strength, especially during this pandemic situation. Though the club has not published its financial repot for 19/20 season, which is estimated to release after annual meeting, we could anticipate an increase in revenue at a growth rate less than the increase in the limit, shown as below.
How do we utilize the limit? We kind of already did, by incorporating Estupinan, Foyth, Rulli, Coquelin, Cuenca and most importantly, undertaking Parejo’s top-tier salary. Also we have already completed renewals of Pedraza, Fer Nino, Baena and Yeremi’s contracts. For an foreseeable future, we may see more renewals (Jaume, Manu and Asenjo manbe?) and signings (another CB?) as well.
Anyway, we shouldn’t be worried about the squad cost limit at the moment, as long as the club sticks to both its current financial and operational strategy. If you are wondering what the strategy is, please refer to my analysis of 18/19 financial report and 19/20 analysis after the financial report released.