Markham Method of valuing football clubs
Tom Markham created a valuation method of valuing football clubs, it has become the one that has become recognised as perhaps the most reliable method to date. It’s an elegant solution that looks at revenues, the state of the balance sheet, profitability, stadium utilisation and importantly the ratio of wages to revenues.
The formula is simple: Club Valuation = (Club Turnover + Net Assets) multiplied by (Net profit or loss plus Club Turnover) multiplied by the stadium capacity utilisation and divided by the turnover to wage ratio.
Using the West Ham United 2019 Financial results released in January 2020 the calculation looks like this.
West Ham Revenue £190.7m + Net assets -£19.4m = £171.3m
Multiplied by Net Loss -£27.2m + West Ham Revenue £190.7m = £163.5m
(171.3 x 163.5) = 28,007
Multiply the total 28,007 by the London Stadium capacity/utlisation of 97.2% for 2019 = 27,224.34
Divide the 27,224.34 total by the wage ratio of 71.2%
You finish with a West Ham United valuation of £382,350,261
What a total load of nonsense. It fails to include any stadium or training ground assets (of which we have very little). The value in Chelsea’s ground would be massive, ours, zero as we don’t own it. Failing to include this in a club valuation is madness.