Back in 2004 Borussia Dortmund was on the brink of becoming bankrupt. The club wasn’t able to pay the players wages and recorded a loss of 55 million euros together with huge debts in the figure of an estimated 200 million euros. At its lowest point, the club even received a 2-million-euro loan from their rivals Bayern Munich.
Today, 12 years after the alarming situation, the squad is consisting of some of the most exciting young prospects in the world of football, they were bought for decent fees and produces one of the thrilling styles of football in Europe. Moreover, the club’s CEO, Hans-Joachim Watzke has declared in August this year after receiving an outstanding rating in a solvency index chart from the economic information company, Creditreform: “Achieving the highest possible rating from a respectable and independent company like Creditreform is yet another indicator that BVB is in excellent shape in economic terms too. Never in its 107-year history has the club simultaneously been on the kind of solid sporting and financial footing that it is now.”
Creditreform is a company which provides credit rankings and collects financial information about companies worldwide. In the company’s solvency index chart, Borussia Dortmund received the highest ranking of 100 points. This means that the club is in a superb position and in a low risk of becoming insolvent due to debt in the coming year.
Floating and Drowning
BVB09 is a club that was floated on the stock market in Germany back in the start of the current millennium. Today the club’s shares can be found in several markets across Germany such as the Frankfurt and Berlin and even digitally. In 2004, the club’s debts rounded up to around 200 million euros according to the club’s managing director, Thomas Treß, who was appointed in 2005 and since 2006 is in charge of the club’s finances, which makes him one of the central figures in Dortmund’s turnaround.
The club’s collapse came after the most successful spell the club had in terms of football and trophies. Between 1995 and 2002, the club clinched 5 titles including 3 Bundesliga titles and a historical Champions League title in 1997. The club’s debts were formed mainly because of high transfer fees in order to acquire players and high wages expenditures which simply exceeded the revenues generated from different sources of income. Another contributing factor was a lack of long sight planning of the club’s resources and a focus on what’s going in the present.
One of the main contributing factors to Dortmund’s slump was a value drop in the club’s share due to losing out to Belgian side Club Bruges in the third qualifying round of the UEFA Champions League in the 2003-04 season. Qualifying for the group stage of the Champions League results in big money for the participating clubs which now Dortmund didn’t have and planned on using. With expenditure higher than income together, alongside a faulty management, the debts rose and the fall was inevitable.
Stand Your Ground! or Rename It
In order to keep the club above water, firstly, it was decided to brand the stadium with the name of the company that wants to sponsor it. Known in those days as the Westfallenstadion, football fans these days will recognize it as the Signal Iduna Park. The local insurance company supports the club since 2005 and in 2014 an agreement was made to extend the deal until 2026. According to Forbes magazine, the current deals earns Dortmund 7,000,000$ a year.
In addition, the managing trio of Treß, Watzke, and Reinhard Raubel-the club’s president were able to rearrange the structure of the club’s loans with its creditors. Basically, the payback date was postponed and the interest rates were adjusted.
Adjusting to Modern Times
Those critical actions by the club’s management allowed Dortmund to regroup financially and plan into the future and resurrect the club back to where it belongs. Today, the club is debt free and as to most football clubs, the three main sources of income are TV broadcasting, commercial deals and match day related. Amongst the club’s sponsors is the sports clothing and gear company Puma, who is the club’s kit supplier since 2012, with the deal supposed to be taking place until 2020. The insurance company Signal Iduna which was mentioned earlier and Evonik, A holdings company which specializes in manufacturing chemical products. Evonik’s logo can be found on the club’s shirt since 2006 and have extended the deal in 2014 until the end of the 2024-25 season. The agreement with Evonik is valued at 300,000,000 euros.
The three are not only sponsors but also hold some of the club’s shares. Evonik holds 14.83%, Puma has 5% and Signal Iduna has 5.43%. The sale of the shares occurred in 2014 and 24.5 million shares were up for sale. Due to the sale, the club managed to raise around 140 million euros with a single share going for the price of 4.66 euros. Out of the 140 million that were raised, Dortmund announced that they will address 40 million to erase debts that were left. The rest of the amount will be invested in the club and will be held standby in case the club needs to improve its liquidity.
Sharing The Cake
On the 19th of August, this year, the preliminary financial figures for last year were published. The club recorded the highest income ever, 376.3 million euros, an improvement of 36.3% from the previous year. The increase in income led to an increase in the net profit which stands at 29.4 million euros, compared to a minor net profit of 5.5 million euros in the previous year, the club is certainly in the right direction. The board of directors even announced a dividend worth 0.05 euros per share.
The club came to realize who are their most valuable assets, and it may surprise you, it’s not those who are running on the pitch. In 2014 Joachim Watzke’s contract was extended until 2019, while a year later, Thomas Treß’s contract was extended by 5 years as well until 2020. With these two pulling the strings for a few more years the club’s future looks bright as the yellow stripes in the kit.
Dortmund’s revival story is even more impressive as it is not due to the wealth of a single owner. In Germany, with the unique ownership model of the 50+1 rule, which makes sure the ownership remains in the hands of the supporters or the sports association. It also forces clubs to be more calculated in their managerial and financial decisions.
As far as the resurrection on the pitch, the man in charge is Michael Zorc, a former player at the club and the one who appointed Jürgen Klopp and his successor Thomas Tüchel. Zorc is also involved in player recruitment, alongside his scouting team, they focus on building the squad from academy players and bringing in quality signings for reasonable fees.
Dortmund is keen on keeping the best talent in their squad but when the right offer comes they will opt for the sale for a much higher amount than the one they paid to get the player. The current squad was actually assembled with more money than usual. 110 million euros were spent to acquire 8 new players with the average age of 22. Nonetheless, the club earned that money by selling 5 players with an average age of 26. Among the incoming players, there’s an array of huge potential talent being chased by Europe’s top clubs. 19-year-old striker, Ousmane Dembele was purchased from French side Renaiss for 15million euros, 22-year-old Raphael Guerriero from French side Lorient for 12 million euros, and Emre Mor the 18-year-old promising Turkish talent from Danish side Nordsjaelland. If they won’t stay in Dortmund for many years they will probably be sold in the future for decent fees.
Talent and potential are not enough and Dortmund added to their side a bit of experience as well. The two players who combined to secure Germany the world cup title in 2014, Mario Gotze and Andre Schurlle were brought in. Schurlle arrived from Wolfsburg for 30 million euros, while Gotze returned home from an unsuccessful spell at Bayern Munich for a fee of 22 million euros and being joined by teammate Sebastian Rode for a fee of 12 million euros. Rounding up the business is La Masia produce, Marc Bartra, joining from Barcelona for 8 million euros.
In a world where most football clubs are struggling to be profitable and most certainly free from debt, Borussia Dortmund is the exception and a role model for other clubs, proving that it’s possible to be competitive on and off the pitch through planning and making the right decisions.