The Most Valuable Sports Team In The World Overextended Itself – It Should Be A Warning For The Rest Of Us
By | Robert Glazer | Entrepreneur, Author, Keynote Speaker & Board Member | Founder & CEO Acceleration Partners
Last Sunday, Lionel Messi, one of history’s greatest football players, held an emotional press conference to say his official goodbye to FC Barcelona. In doing so, Messi left the only club he has played for in his illustrious 18-year professional career.
Unlike many athletes who leave their teams, however, Messi, the face of Barcelona for almost two decades, did not become a free agent because he was looking for a big pay increase. The reason for his departure is much more surprising.
Despite being one of the world’s most valuable sports franchises, Barcelona is now at least one billion dollars in debt. The team overextended itself in its drive for championships, particularly by giving huge contracts to several players who weren’t worth the money. Because Spain’s largest football league, La Liga, restricts how much money overleveraged clubs can spend, Barcelona is suddenly unable to afford its greatest player, even at a lower salary.
Barcelona is in a unique financial situation because the club is extremely valuable, even if it isn’t profitable. Barcelona’s ownership group could sell the club at any point for a massive windfall, even with its debt burden, and as a result they have likely been much more focused on winning than on profitability.
Knowing that, Barcelona’s abrupt belt-tightening is a wake-up call. If even FC Barcelona can’t live within its means, what does that say about the rest of us?
Once upon a time, we saved for the things we wanted to buy and bought them once we could afford them. However, over the past few decades, we have seen a dramatic increase in the use of credits cards, personal loans and home equity loans, allowing us to borrow money for purchases we could otherwise not afford to make. The latest iteration of this trend is the rapid growth of the Buy Now, Pay Later (BNPL) loan industry.
