How Should We Really Value a Football Club? A New Model for a New Era

Football has evolved into an immense global business, with Premier League clubs alone generating hundreds of millions of pounds each season from diverse revenue streams like ticket sales, lucrative commercial partnerships, and massive broadcasting deals. Given this extraordinary financial scale, one might reasonably assume that valuing a football club would involve a highly methodical and scientific process.

However, the unique characteristics of the football industry present significant challenges to conventional valuation techniques. Unlike typical companies driven primarily by profit, football clubs often operate at a consistent loss, are frequently owned by benefactors with non-financial motives, and are driven as much by prestige and sporting success as by financial returns. These fundamental differences mean that traditional valuation approaches—which excel for mature, stable businesses—often fall short when applied to football clubs.

This article will outline why traditional valuation methods fail in football, breaking down four common approaches and their major flaws. We’ll highlight how they miss the true value of a club’s most vital assets: its playing squad and powerful brand. And while models such as the Markham Multivariate Model (MMM) tried to crack this code with football-specific metrics, even they have their limits in today’s fast-changing game. Ultimately, we’ll introduce a new model offering a more accurate and comprehensive valuation for modern football.

Why Traditional Valuation Methods Fail

Football clubs are notoriously difficult to value using standard corporate finance techniques. Let’s take a closer look at four of the most commonly used approaches — and where they fall down in the context of football:

1. Balance Sheet Value (Net Asset Value)

This approach, which simply calculates a club’s value as Assets minus Liabilities, sounds logical. However, it simply doesn’t work in football.

For a start, squad value is significantly understated. Only purchased players appear as assets, and even then, their recorded value is amortised (depreciated) over the length of their contract. This means academy players and free agents, arguably the most value-accretive assets a club can acquire, have a book value of precisely zero on the balance sheet.

What’s more, a club’s internally generated brand value remains largely invisible in traditional accounting. While goodwill may appear on balance sheets from past acquisitions, it offers no direct recognition for a club’s organically built global fanbase, its significant sponsorship potential, or the vital strength of its reputation. This oversight becomes glaring when we look at the 2024 balance sheets of Liverpool and Brighton & Hove Albion. Despite Liverpool reporting £151m in net assets compared to Brighton’s £171m, the average football fan would unquestionably value Liverpool much higher. This intuition aligns with reality: any prospective owner would pay a substantial premium for Liverpool. This stark difference is a testament to Liverpool’s powerful intangible global brand, cultivated over decades of consistent success. This enormous international following provides critical resilience to external shocks and offers substantial avenues for extracting new revenues through technology and enhanced fan engagement.

2. Comparative Sales (Transaction-Based Valuation)

This method values a club by comparing it to recent sales of similar clubs, a technique used heavily in mergers and acquisitions under the assumption that past transactions reflect fair market value. In football, however, this approach is deeply flawed.

For one, buyers frequently have non-financial motives, such as prestige, political influence, or soft power, which can significantly inflate sale prices beyond pure economic rationale. Moreover, circumstances vary wildly between transactions. Moreover, circumstances vary wildly between transactions, even for clubs in the same league. For instance, the £305m sale of Newcastle in 2021 simply cannot be directly compared to a club like Burnley. While both are Premier League clubs, Newcastle boasts a much larger stadium, a significantly broader fanbase catchment area, a more extensive global reach, and a history of greater sporting success and brand recognition, all contributing to a vastly different valuation profile. Furthermore, minority stake sales often include complex contractual rights or future investment obligations, making them incomparable to full ownership transfers. The net result of these factors is an approach that often leads to cherry-picking optimistic benchmarks and inconsistent, unreliable applications.

3. Revenue Multiples

Valuing a club as a multiple of its annual revenue (typically between 1.5x and 3x) is a simple and scalable method, often employed in the media industry. Yet, its application to football clubs presents significant issues.

The fundamental problem is that revenue in football is inherently volatile. A single year in the Premier League, for instance, can easily double, or in Luton Town’s case, septuple, a club’s income. Crucially, broadcast income dominates the revenue streams of most Premier League clubs, which, while substantial, doesn’t necessarily reflect their underlying brand strength or long-term commercial health. Perhaps most critically, this method doesn’t consider wage spend. A club could theoretically be spending 120% of its income on wages and still receive a high valuation by this method, despite its unsustainable financial position. This approach, therefore, tends to significantly inflate valuations for clubs recently promoted to the top division and fundamentally fails to reward sound operational efficiency.

4. Discounted Cash Flow (DCF)

The Discounted Cash Flow (DCF) method, which projects future cash flows and discounts them to a present-day value, is widely considered the gold standard for valuing mature, stable businesses. However, for football clubs, its utility is severely limited.

The primary hurdle is that future earnings are simply too unpredictable. Factors like relegation, qualification for European competitions, and rapid swings in the transfer market make long-term forecasting incredibly unreliable. Furthermore, few clubs are consistently profitable, especially once transfer spending is properly accounted for. This means assumptions drive everything in a DCF model; even small changes in projected growth rates or discount rates can produce wildly different and often unrealistic valuations. Consequently, DCF proves too unstable to be a credible valuation tool for football, particularly for clubs outside the elite tier.

Method	Key Issue
Balance Sheet	Misses player value and brand; distorted by owner loans
Comparative Sales	Inconsistent, inflated, and deal-specific
Revenue Multiples	Ignores profit and efficiency; overly sensitive to broadcast income
Discounted Cash Flow	Too speculative and assumption-driven

A Step Forward: The Markham Multivariate Model

Given the significant limitations of traditional methods like DCF and net asset value, Tom Markham developed the Markham Multivariate Model (MMM) in 2013. This model was an attempt to build a football-specific valuation formula that incorporated multiple performance indicators, moving beyond a sole reliance on conventional accounting data. To this day, the MMM remains the only bespoke valuation method specifically designed for football clubs and is still referenced in club transactions.

The formula is:

• The initial component, Revenue + Net Assets, forms the model’s base value. Markham argued that revenue generation, encompassing all cash a club generates in a financial year, is “extremely important within the football industry and the underpinning factor of UEFA and the EPL’s financial controls.” By adding revenue to net assets – which represent a club’s total assets (like stadium, training ground, and player registrations) less its liabilities – the model combines a club’s operational scale with its underlying financial foundation. Net assets underpin a club’s ability to generate future revenue and thus form the backbone of the valuation.
• Next, the term (Net Profit + Revenue) / Revenue acts as a crucial profitability multiplier. Controlling costs has historically been a major problem for Premier League clubs, with player wages often outstripping revenue growth. Therefore, including a club’s net profit (after player trading) directly addresses this. This ratio is designed to reward clubs that demonstrate financial prudence and successfully generate income that surpasses their operational costs. Profitable clubs will see their base value enhanced, while loss-making clubs will have their valuation appropriately reduced.
• Finally, the ratio of Stadium Utilisation % / Wage Ratio % accounts for two critical aspects of a club’s health: fan engagement and overall cost efficiency. Markham noted that while broadcast revenues are relatively similar among Premier League clubs, match-day income can vary wildly, largely due to stadium size and how effectively it’s used. Thus, stadium utilisation reflects the club’s ability to attract and engage its fanbase on matchdays, a key indicator of demand and local support. The wage ratio, on the other hand, measures how efficiently a club is managing its largest cost base – player wages – relative to its income. Together, these elements offer insight into how well a club converts its popularity into tangible attendance and controls its most significant expenditure.

Strengths

The MMM represented a notable improvement over basic accounting methods, addressing several key shortcomings. It skilfully brings together multiple financial levers, encompassing a club’s revenue, profit, asset base, and cost control. By penalising wage inefficiency through the wage ratio, it encourages more disciplined spending, and by rewarding fan engagement via stadium utilisation, it acknowledges the importance of the matchday experience. Crucially, the model elevates revenue-generating clubs, which often reflect stronger brand value and thus, greater long-term viability.

Limitations

While the MMM was a significant leap forward, overcoming many issues inherent in traditional corporate finance valuation techniques and offering a straightforward calculation, the rapidly changing landscape of modern football reveals a number of practical and conceptual flaws within the model.

1. Double-Counting Revenue

The formula includes revenue in both the additive and multiplicative terms. When rearranged algebraically, it essentially behaves like a quadratic function of revenue:

This means that clubs generating very large revenues see exponential increases in their valuation, even if their underlying profitability or cost control is poor. In essence, the model rewards sheer scale far more than it does genuine sustainability. For example, revenue powerhouses like Liverpool or Manchester United are heavily favoured, even if other clubs, such as Brighton, might be outperforming them on critical aspects like recruitment or operational efficiency. This isn’t entirely without merit; it could be argued that by placing substantial weight on revenue, the model accurately reflects the premium placed on the “Big Six” clubs in England. Their significantly greater global appeal makes them more appealing long-term propositions for global revenue extraction and positions them as the kind of status symbols billionaires are willing to pay a premium for.

The heavy revenue weighting in the MMM becomes particularly problematic for non-elite Premier League clubs, often leading to substantial overvaluations. This disproportionate emphasis on revenue is problematic because the Premier League’s broadcasting deals have grown so immensely that they dwarf matchday and commercial turnover for even a mid-sized club. These broadcast revenues, while massive, are directly tied to a team’s volatile on-pitch performance and offer little insight into a club’s fundamental ability to sell its product directly to fans or its long-term commercial strength. They represent an incredibly unstable and unpredictable income stream, yet the model prioritises them.

Luton Town provides a clear illustration of this flaw. Following their 2023 Premier League promotion, their revenue surged to £132 million. Due to the MMM’s structure, this resulted in a Markham valuation of £479 million. Such a valuation would only be defensible if continuous Premier League participation was guaranteed. Yet, within just two seasons they face a return to League One, a league where their 2019 revenue was less than £8 million. The £479m valuation clearly no longer holds. The MMM fundamentally ignores this inherent revenue volatility, lacks sustainability assessment, and fails to reflect how easily a club’s primary income source can vanish overnight with relegation.

2. Undervaluation of Intangible Assets

Another significant flaw is the model’s reliance on net assets directly from the balance sheet, without any adjustment for the systematic undervaluation of player assets. Internally developed academy products and players signed on free transfers have a book value of £0. This means that clubs adept at building elite squads through intelligent recruitment or development – such as Arsenal and Brentford – have their most valuable assets systematically excluded from the model’s base valuation.

In fact, using the MMM, Real Madrid’s signing of Trent Alexander-Arnold on a free transfer, may paradoxically reduce their valuation. While his global appeal might generate a slight uptick in commercial revenue from increased shirt sales, his wages would significantly increase the club’s costs (and thus reduce the wage ratio), while his arrival, being a free transfer, wouldn’t boost the club’s asset base in the MMM’s calculation. This starkly highlights a fundamental flaw in the model’s ability to capture true squad value and market-based player worth.

3. Blind Spots in Owner Financing

Finally, the model relies on net assets without adjusting for soft financing from owners. It is common practice in football for owners to lend money to clubs through interest-free, repayable-on-demand, or subordinated loans. Take Tony Bloom at Brighton, for instance, who has funded significant stadium and infrastructure development via shareholder loans. These loans appear as liabilities on the balance sheet, consequently dragging down net assets. However, they are often unlikely to ever be repaid in a conventional sense. By including these in the valuation, the MMM effectively undervalues clubs that have benefited from such benefactor-backed investment models, even when those investments build tangible, real, and long-term value for the club.

A Modern Approach: The Kinnaird Valuation Model

Given the significant limitations identified in both traditional valuation techniques and even specialised models like the MMM, we propose a new, more robust framework: the Kinnaird Valuation Model (KVM). This model is meticulously designed for the complexities of the modern football economy, recognising that factors like a club’s astute squad management, and global commercial reach now often supersede outdated metrics like stadium utilisation.

The KVM’s core lies in its formula:

A fundamental principle underpinning the KVM is its use of three-year averages for all core financial variables—Total Revenue, Commercial Income, EBITDA, and Wages. This crucial adjustment smooths out the distorting effects of one-off spikes, such as deep cup runs or the sudden financial jump (or drop) associated with promotion or relegation, thereby ensuring far more consistent and reliable valuations.

Now, let's delve into the key components that differentiate the KVM:

Adjusted Net Assets

The KVM begins with a club's net assets, but introduces two critical adjustments to correct the systematic undervaluation seen in traditional accounts:

Firstly, we exclude 'soft' owner loans. These are often interest-free, subordinated, or repayable-on-demand loans from owners that, while appearing as liabilities on balance sheets and dragging down net assets, are rarely repaid in a conventional sense. Removing them provides a truer picture of the club's underlying financial health.

Secondly, we introduce an uplift for hidden squad value, addressing the glaring omission of internally developed talent and free transfers. This uplift is calculated using a ratio that reflects a club's actual player sale profits against its reported intangible assets over a recent period. Essentially, this term quantifies the 'extra' income a club can reliably expect to extract from its playing squad each season based on its proven history of developing and selling players for profit. For example, Brighton & Hove Albion, known for its shrewd player trading, has averaged nearly £100 million per season in player sale profits over the last three years. This figure is approximately 1.19 times their average squad book value over the same period, allowing them to receive a significant uplift (e.g., £168m x 1.18 for their 2023/24 valuation). This effectively acknowledges that their accounts dramatically undervalue their squad by around £200 million, recognising their exceptional ability to generate substantial profit from player trading.

Of course, this method primarily captures squad value for clubs that do sell players. For clubs like Arsenal, whose star academy graduate Bukayo Saka boasts a market value exceeding £100 million but a book value of £0 (as he hasn't been "sold"), an uplift will only materialise in future seasons, should Arsenal decide to sell him in the transfer market. Despite this specific limitation, the Kinnaird Adjusted Net Assets calculation represents a substantial and necessary improvement over merely using raw net assets.

Profitability Multiplier

Building on a concept from the MMM, the KVM also incorporates a profitability multiplier. However, instead of net profit, our model utilises EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation). EBITDA offers a clearer reflection of a club's operating cash performance, as it strips out non-cash expenses and transfer expenditure. This metric is also averaged over three years to effectively smooth out season-to-season variability caused by unpredictable factors.

Crucially, the profitability multiplier is engineered with a lower bound of 1. This design ensures that loss-making clubs are not penalised by this specific component of the KVM. Even if a club's EBITDA indicates a negative operating result, the multiplier will not fall below 1. This approach serves two key analytical objectives: First, it mitigates against double-punishment, recognising that the KVM's Brand Strength multiplier already addresses the sustainability of a club's wage bill relative to its commercial income. Second, a temporary negative EBITDA can often be a byproduct of strategic, growth-oriented infrastructure investments (e.g., stadium development, state-of-the-art training facilities, advanced youth academies) or other prudent long-term outlays. These investments, while impacting short-term profitability, are fundamental to a club's future competitive standing and revenue generation.

Brand Strength Multiplier

In modern football, a club's ability to effectively convert its brand into tangible revenue is increasingly vital for long-term financial stability. The KVM introduces a Brand Strength Multiplier to measure this. This multiplier can be viewed as an indicator of a club’s history, legacy, and global appeal, alongside the commercial department's efficiency in extracting revenue from that fanbase.

To illustrate its impact, consider the chart showing the top 10 Premier League clubs by their Brand Strength Multiplier. As anticipated, the traditional "Big Six" clubs dominate the top positions. These clubs possess enormous global fanbases, making them exceptionally attractive for major sponsorship deals and enabling them to sell merchandise across continents. Such income streams are highly reliable and demonstrate remarkable resilience to poor performances on the pitch.

Beyond reflecting inherent commercial power, the Brand Strength Multiplier also acts as a vital stabiliser for club valuations. Imagine West Ham United, for example, facing relegation from the Premier League. Their annual income would plummet significantly, as parachute payments fail to fully compensate for the lost broadcasting revenue. Under a model like the MMM, West Ham’s value would consequently crash. However, the KVM produces a more accurate representation of their value due to the softening effect of the Brand Strength Multiplier. We would anticipate their commercial income to fall less dramatically than their wages, leading to an increase in this multiplier. This mitigation effect would temper the impact of lost broadcast income, resulting in a more realistic and less volatile estimate of the club's true worth, even in the face of relegation.

Comparing the Models: KVM vs. Markham

Area	Markham	Kinnaird
Revenue	Quadratic-like effect (disproportionately high); based on static single-year data	Averaged over 3 years; linear weighting (single-term)
Profitability	Uses Net Profit (after player trading)	Uses 3-year average EBITDA (reflects operating cash performance)
Brand Value	Indirectly through Stadium Utilisation %	Direct Brand Strength Multiplier (Commercial Income / Wages, 3-year avg)
Squad Value	Static (based on amortised book value of purchased players; academy/free agents are £0)	Uplifted using player sale performance (actual profits vs. book value)
Owner Loans	Included (can distort net assets)	Excluded (removes impact of 'soft' financing)

The fundamental difference between the Markham Multivariate Model (MMM) and the Kinnaird Valuation Model (KVM) lies in their underlying philosophical approaches to valuing a football club. The MMM, while a pioneering step, remains largely rooted in a traditional accounting snapshot, which leads to an over-reliance on volatile single-year revenue figures and a significant undervaluation of crucial intangible assets like player talent and global brand. This philosophy results in valuations highly susceptible to immediate on-pitch performance and short-term financial fluctuations.

In contrast, the KVM is built on a philosophy tailored for the dynamic, modern football economy. By incorporating three-year averages for all financial data, explicitly valuing player trading potential, and directly assessing brand strength, the KVM shifts the focus towards long-term sustainability, strategic asset management, and commercial resilience, ultimately offering a more stable and comprehensive valuation that better reflects a club's enduring market value beyond its latest financial report.

A comparative analysis of Premier League team valuations for 2023/24, using both the Markham and Kinnaird models, reveals key differences. The KVM tends to assign higher valuations to the traditional "Big Six" clubs while tempering the valuations of less established Premier League clubs. This divergence is largely a direct result of the Brand Strength Multiplier, which brings the valuations of elite clubs more closely in line with real-world comparative sales, such as the £4.25 billion takeover of Chelsea in 2022. Conversely, the more conservative valuations for recently promoted clubs reflect the beneficial impact of using three-year averages, which significantly reduces the artificial revenue jump seen when clubs enter the top flight.