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The 10000Hours Numbers Explained


div

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With the deal to buy the club now agreed in principal with the selling consortium, it is up to the St.Mirren supporters to back the bid in sufficient numbers to give sufficient confidence in the business model to allow 10000Hours to go ahead and finalise the deal.

In short, 10000Hours is borrowing all of the money involved to do the deal and, like any loan, it's backers need to know they will get their dosh back.

Here is a rough model of how the numbers stack up as far as I am aware. I think this makes the whole thing clearer but maybe not.

I am using a few guesses and assumptions below, as I genuinely don't know exact figures relating to the agreed sale price or the amount being borrowed and at what level of interest.

Sale Price

The much touted sale price of the club was £2m. Whilst I do not know the exact figure that has been agreed in principle between the selling consortium and 10000Hours it is fair to assume I think that it will be a bit less than that. Let's for arguments sake say it is £1.75m. Might be more might be less.

Social Investment Funding

10000Hours has support for loans in place of somewhere around £1m. That money will come from social funders, plus contributions from the likes of SMiSA (if their members are still backing this - not sure if that is the case but sure one of those guys can give an insight).

The Funding Gap

So that leaves us with a difference of £1.75m less £1m = £750k. That money is due to the selling consortium as part of the deal. This money was originally coming from another lender, but they backed out of the deal at the last minute last year which caused the original deal to collapse.

I believe the selling consortium may have agreed that this "gap" can be paid back to them over a period say of 2 years. Similarly I believe the social investment funders are supportive that repayments on their loans do not need to start for a matching period of 2 years.

So, 10000Hours has 2 years in which to repay the funding gap, before it then starts to tackle the repayments of social investment loans.

Hope that makes sense and you are following !

The First Two Years - Where does the money come from ?

Let's say 1500 individual members each pay £10 per month and join 10000Hours. This equates to £15k per month, £180k per annum

Over two years that is £360k of income to 10000Hours.

The "87 Club" will offer individuals and local businesses lifetime membership of 10000Hours and a range of additional benefits that will be announced soon. These members will still only have one vote though. Their contribution will be £3k each one off.

If the 87 club allocation is fully taken up that equates to additional income of 87 x £3k = £261k

10000Hours proposes to rent the vacant void in the main stand and fit out as a supporters bar and function area. Lets suppose they can make £50k per annum profit from that. I am not sure what the deal is with the fit out costs are for that void but that is important obviously !

So over 2 years 10000Hours has;

Individual memberships = £360k

87 Club = £261k

Supporters Function/Bar = £100k

Total = £721k

So just short of meeting the funding gap (assuming it is interest free and assuming the figure I guessed is right !) but not a million miles away.

What happens after 2 years ?

Assuming the funding gap has been paid off now 10000Hours starts to tackle the repayments to the lenders. These lending agreements are over quite long periods, say 5-7 years or so. Remember at this point that steady income is coming in to 10000Hours at a rate of £180k per year from individual members and £50k a year from the void.

So they have £230k coming in. This obviously assumes no drop off and no increase in memberships.

The hope of course by this time is that 10000Hours is also able to raise further revenue by using the energy and ideas of it's members to generate funds, whilst at the same time the organisation will be looking to meet the conditions of those loans (and potentially reducing the amount payable) by delivering tangible social benefits to the local community.

I do not know what interest rates those loans are repayable at but it is fair to say that £1m of loans repayable over 5-7 years can be serviced against income of £230k per annum, especially if there is even more than that coming in.

What happens after all the money is paid off ?

Lets assume it takes 7 years from completion of the deal in 2012 to pay off every penny of lending.

In 2019 10000Hours has no borrowing, but still has, if members don't increase or decrease and all other situations stay exactly the same, income of £230k per annum. The members of 10000Hours would decide what happens to that funding but strikes me that it might be invested into the football club ?

Why the numbers are important.

You can see for yourself in the mock examples above that the individual and 87 club membership numbers are absolutely vital to the whole business model.

Without the right number of pledgers the business model simply does not work. With more members the funds are repaid off quicker and the organisation can begin to start supporting the football club business sooner.

It is important to realise that through all of the above the intention has to be that the revenues of the football club itself are not harmed in any way. The investment into 10000Hours needs to be "new" investment that does not harm income to St.Mirren FC. The rental of the void for example should provide the inverse, where the club starts to make revenue from currently vacant property.

Interested to know the thoughts on the above !

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That's helpful Div, and, as you say, the successful development 87 Club seems to be a key element of the initiative.

Thus far, we have a good idea of how many individual pledgers have signed up, but do we have any notion as to how the formation of the 87 Club is progressing?

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Div - thanks for typing this out - it certainly explains things a little better than I've seen them elsewhere (even if you've had to guess at the figures).

Can you clarify any on the following - previously when it was the CIC model a lot of other groups were funding the purchase in return for use of facilities/voting rights in the CIC. Is this no longer happening?

From what i understand above, all funding is now in the form of social loans etc, and all will have to be repaid, so does that mean that once all the loans are paid off the main income will be from the direct debits/void rental? If so I'd consider it far more likely that there seems a greater chance that the money could be reinvested in the team etc, rather than diverted to other projects.

I realise that most members are likely to be fans, but all that stuff about 'social memberships' who had no affiliation with the club and yet still had a vote appeared to be what some people were concerned about (or have I completely got the wrong end of the stick?)

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That's helpful Div, and, as you say, the successful development 87 Club seems to be a key element of the initiative.

Thus far, we have a good idea of how many individual pledgers have signed up, but do we have any notion as to how the formation of the 87 Club is progressing?

The 87 club details should hopefully be released this week, hopefully at the Thursday meeting.

The main crux of the 87 club is giving members benefits that do not cost St.Mirren FC revenue. The benefits have to be tangible to the people the package is aimed at (St.Mirren fans and businesses) whilst not harming revenue the club already takes.

An example might be offering 87 club members a discount on season tickets. This can't be done as it would hurt the football club.

If though they offered say, access to the directors lounge on matchday then that doesn't cost the club anything but means something to a prospective member.

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Div - thanks for typing this out - it certainly explains things a little better than I've seen them elsewhere (even if you've had to guess at the figures).

Can you clarify any on the following - previously when it was the CIC model a lot of other groups were funding the purchase in return for use of facilities/voting rights in the CIC. Is this no longer happening?

From what i understand above, all funding is now in the form of social loans etc, and all will have to be repaid, so does that mean that once all the loans are paid off the main income will be from the direct debits/void rental? If so I'd consider it far more likely that there seems a greater chance that the money could be reinvested in the team etc, rather than diverted to other projects.

I realise that most members are likely to be fans, but all that stuff about 'social memberships' who had no affiliation with the club and yet still had a vote appeared to be what some people were concerned about (or have I completely got the wrong end of the stick?)

As far as I am concerned once the loans are all paid off, or at any time that 10000Hours thinks it can afford to, then the members could decide on a motion to give money to the football club and to the all important playing budget.

At the end of the day we are all St.Mirren fans for one reason and that is the football team. The one thing that unites every St.Mirren supporter is a wish for the team on the park to be successful.

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The Funding Gap

So that leaves us with a difference of £1.75m less £1m = £750k. That money is due to the selling consortium as part of the deal. This money was originally coming from another lender, but they backed out of the deal at the last minute last year which caused the original deal to collapse.

I believe the selling consortium may have agreed that this "gap" can be paid back to them over a period say of 2 years. Similarly I believe the social investment funders are supportive that repayments on their loans do not need to start for a matching period of 2 years.

Have they tried Ticketus for the £750k, I understand they're right gullible. whistling.gif

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Have they tried Ticketus for the £750k, I understand they're right gullible. whistling.gif

To be fair I think Ticketus get a bit of bad press on the back of the Rangers debacle.

Loads of football clubs have used Ticketus in the past to bridge cash flow problems by borrowing money against future season ticket revenue without any problems.

Buying a whole football club using that revenue though is clearly not a good move.

One of the most re-assuring things for me about the 10000Hours deal is that although there is borrowing and debt involved we know exactly where the money is coming from and the debt isn't secured against the club.

Anyone else buying the club, unless they are a multi-millionaire lottery winner with money to burn, is going to borrow the money from somewhere to do it and if they are doing that they are almost certainly going to secure it against the football club in some way or other.

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Let's say 1500 individual members each pay £10 per month and join 10000Hours.

There'e 1027 pledgers (although only just over 800 have completed their DD forms) - isn't assumming the Co-op will reach 1500 members optimistic?

The main crux of the 87 club is giving members benefits that do not cost St.Mirren FC revenue.

So what are the "perks and benefits" that REA is promising on the 10000hours website, (and which you've just confirmed)? Will the £10/month subscribers also get "perks and benefits" and if so how will this affect the money the club gets?

10000Hours proposes to rent the vacant void in the main stand and fit out as a supporters bar and function area.

I've never understood this part, if it's so easy why hasn't the club done it? Further to this where is the cash coming from, is the link with Kibble back on, or will the Co-op not just have even more debt to pay off?

Why the numbers are important.

Finally what are the minimum numbers for the sale to go through? Is it 87 + 1500?

*************************************

No intention of going along on Thursday but if you're willing to post some of the info on b&warmy I don't see why you're not prepared to answer the questions raised - after all not everyone can attend on Thursday.

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Thanks Div - that clears up some questions I had. I’m still pretty agnostic on the proposals at the moment – but would like to be convinced.

Looking at the figures, I have three real concerns:

(i) We know that existing directors/shareholders have invested their own cash when the club has needed short term financing to tide it over. In the new model, it seems that there will be no scope for this type of short term loan from the 10000H - which means the club may have to borrow from elsewhere to bridge the gap where necessary. That type of non-director loan will come at a cost – and potentially plunge the club into longer term debt.

(ii) If it takes approx 7 years to clear the debt - it will be some time before any 'new' investment in the team from the 10000H will happen. Even then, £230k will probably pay for only 1 or 2 players by 2019.

(iii) There is no guarantee of the £230k per year continued income. Of course, given that the debt is with the 10000H and not the club, I'm less concerned by that - but I still think it could be an issue.

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There will be no discounts offered to TTH members on club services or goods, but you are right in saying that I guess the members could vote that through if they wished further down the track.

The main crux of the 87 club is giving members benefits that do not cost St.Mirren FC revenue.

Slight shift in policy there or did the original statement reply only refer to the £10/month dudes?

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Let's say 1500 individual members each pay £10 per month and join 10000Hours.

There'e 1027 pledgers (although only just over 800 have completed their DD forms) - isn't assumming the Co-op will reach 1500 members optimistic?

The main crux of the 87 club is giving members benefits that do not cost St.Mirren FC revenue.

So what are the "perks and benefits" that REA is promising on the 10000hours website, (and which you've just confirmed)? Will the £10/month subscribers also get "perks and benefits" and if so how will this affect the money the club gets?

10000Hours proposes to rent the vacant void in the main stand and fit out as a supporters bar and function area.

I've never understood this part, if it's so easy why hasn't the club done it? Further to this where is the cash coming from, is the link with Kibble back on, or will the Co-op not just have even more debt to pay off?

Why the numbers are important.

Finally what are the minimum numbers for the sale to go through? Is it 87 + 1500?

*************************************

No intention of going along on Thursday but if you're willing to post some of the info on b&warmy I don't see why you're not prepared to answer the questions raised - after all not everyone can attend on Thursday.

Pretty much what I was going to post, still many huge gaps and blatant problems before I can see any deal going through.

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The main crux of the 87 club is giving members benefits that do not cost St.Mirren FC revenue.

Slight shift in policy there or did the original statement reply only refer to the £10/month dudes?

BtB there was always and is always the potential for member benefits. It's just that the membership would need to vote them into existence.

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No intention of going along on Thursday but if you're willing to post some of the info on b&warmy I don't see why you're not prepared to answer the questions raised - after all not everyone can attend on Thursday.

I am happy to try and answer your questions to the best of my knowledge. Sure someone will correct me if I am wrong. I am not part of the 10000Hours bid team so I don't have all the answers.

There'e 1027 pledgers (although only just over 800 have completed their DD forms) - isn't assumming the Co-op will reach 1500 members optimistic?

I don't think so. There are a few members who have asked to increase their contribution from £10 a month to £20, £30, £50 a month. Those members would still get one vote same as everyone else but would have 2, 3 or 5 times as much equity stake in 10000Hours as someone paying £10 a month. I do not know the specific target of individuals that they absolutely need to do the deal but it will more sensibly be expressed as a monthly income figure eg; 15k per month for example.

So what are the "perks and benefits" that REA is promising on the 10000hours website, (and which you've just confirmed)? Will the £10/month subscribers also get "perks and benefits" and if so how will this affect the money the club gets?

The perks and benefits of 87 club membership will be designed in such a way that they do not harm revenue the club takes. For example members won't get discounted season tickets or discounted corporate hospitality, but they might get an offer of using a room in the stadium for hosting a business meeting, an invite to the directors lounge, the sort of thing that has an intrinsic value to the buyer but which does not affect the clubs revenue.

I've never understood this part, if it's so easy why hasn't the club done it? Further to this where is the cash coming from, is the link with Kibble back on, or will the Co-op not just have even more debt to pay off?

The deal with Kibble has never been off as far as I am aware. I don't know the ins and outs of the fit out costs so rather than just make something up I will say I genuinely do not know the answer to how the fit out costs are being met and by whom.

Finally what are the minimum numbers for the sale to go through? Is it 87 + 1500?

Again it makes more sense to talk about financial numbers rather than individuals. The model has a financial tipping point it needs to get to in order to meet it's financial repayments and get the confidence of the funders that it can start off with a sustainable business model even before it has started trying to generate it's own revenue.

I don't know what that figure is which is why I typed out all of the above initially to try and get show how the numbers might work.

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Guest somner9

Unfortunately Div in your genuine attempt to explain the figures it only IMO shows what is unknown and where any cashflow problems can be plugged from.

As Bud highlights above no one "as far as I can tell" knows what 10000 hours are going to get in the way of fully honoured pledges, 1500 might be a good number to show how the loans etc can be repaid, but It is a wait and see exercise on what actual direct debits are honoured, maybe 800? as suggested.

The fit out of the void to a supporters bar still isn't being explained to the pledgers etc... it's a six figure sum in addition to those you list above, where is it coming from???

And an issue that they seem determined to get right over at the Well Society "Cashflow"! they estimate they need a buffer/contingency outwith business as usual of £1.5million to cover the parts of the season when ST sales have all been paid & spent and theres some emergency with the playing budget (serious injury/player needed). I haven't seen or heard any mention of this, where do 10000 hours expect it to come from? because sure as eggs we'll need it

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The main crux of the 87 club is giving members benefits that do not cost St.Mirren FC revenue.

Slight shift in policy there or did the original statement reply only refer to the £10/month dudes?

Any "benefits" or "perks" offered to ANY 10000Hours members, be it individuals or 87 club members cannot be detrimental to the existing revenue of the football club.

That has always been the case IMO, has never changed.

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Unfortunately Div in your genuine attempt to explain the figures it only IMO shows what is unknown and where any cashflow problems can be plugged from.

As Bud highlights above no one "as far as I can tell" knows what 10000 hours are going to get in the way of fully honoured pledges, 1500 might be a good number to show how the loans etc can be repaid, but It is a wait and see exercise on what actual direct debits are honoured, maybe 800? as suggested.

The fit out of the void to a supporters bar still isn't being explained to the pledgers etc... it's a six figure sum in addition to those you list above, where is it coming from???

And an issue that they seem determined to get right over at the Well Society "Cashflow"! they estimate they need a buffer/contingency outwith business as usual of £1.5million to cover the parts of the season when ST sales have all been paid & spent and theres some emergency with the playing budget (serious injury/player needed). I haven't seen or heard any mention of this, where do 10000 hours expect it to come from? because sure as eggs we'll need it

You are spot on. Cash flow is a real problem in football clubs and many times over the past few seasons the directors on the current board have put their hands in their own pockets to bridge cashflow issues. That has been done without any trumpeting, and I believe in a lot of cases they directors never asked for their money back either once the bump had been negotiated.

That is a big concern of mine too. Maxi Group was used to provide a short term loan for that same reason last season I believe, not sure if that would be the same situation going forward but you are definitely right to raise it as a very valid point.

On the void fit out costs I will get more details, again a good point and one that needs answered.

On direct debits my information is that there is currently 800 completed direct debits in place, obviously that is not enough and the aim is to try and get as many fans on board as possible. It's a chicken and egg as the funders need to know the numbers are there before they will release the dosh, 10000Hours need the numbers to be there so they know they can repay the debts, and a lot of the supporters won't sign up for something they don't think is going to happen or they can't understand.

If it all went through and delivered what it says on the tin then I'd hope that a lot more would sign up.

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BtB there was always and is always the potential for member benefits. It's just that the membership would need to vote them into existence.

Fair enough! whistling.gif

I am happy to try and answer your questions to the best of my knowledge. Sure someone will correct me if I am wrong. I am not part of the 10000Hours bid team so I don't have all the answers.

I don't think so. There are a few members who have asked to increase their contribution from £10 a month to £20, £30, £50 a month. Those members would still get one vote same as everyone else but would have 2, 3 or 5 times as much equity stake in 10000Hours as someone paying £10 a month. I do not know the specific target of individuals that they absolutely need to do the deal but it will more sensibly be expressed as a monthly income figure eg; 15k per month for example.

OK - you don't necessarily need 1500 subscribers to get £1500/month.

The perks and benefits of 87 club membership will be designed in such a way that they do not harm revenue the club takes. For example members won't get discounted season tickets or discounted corporate hospitality, but they might get an offer of using a room in the stadium for hosting a business meeting, an invite to the directors lounge, the sort of thing that has an intrinsic value to the buyer but which does not affect the clubs revenue.

Erm, not sure I'd agree with you on these two points.

Again it makes more sense to talk about financial numbers rather than individuals. The model has a financial tipping point it needs to get to in order to meet it's financial repayments and get the confidence of the funders that it can start off with a sustainable business model even before it has started trying to generate it's own revenue.

I don't know what that figure is which is why I typed out all of the above initially to try and get show how the numbers might work.

Say £261k plus £500k over two years?

I'm happy with that answer! thumbup2.gif

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Guest somner9

You are spot on. Cash flow is a real problem in football clubs and many times over the past few seasons the directors on the current board have put their hands in their own pockets to bridge cashflow issues. That has been done without any trumpeting, and I believe in a lot of cases they directors never asked for their money back either once the bump had been negotiated.

That is a big concern of mine too. Maxi Group was used to provide a short term loan for that same reason last season I believe, not sure if that would be the same situation going forward but you are definitely right to raise it as a very valid point.

On the void fit out costs I will get more details, again a good point and one that needs answered.

On direct debits my information is that there is currently 800 completed direct debits in place, obviously that is not enough and the aim is to try and get as many fans on board as possible. It's a chicken and egg as the funders need to know the numbers are there before they will release the dosh, 10000Hours need the numbers to be there so they know they can repay the debts, and a lot of the supporters won't sign up for something they don't think is going to happen or they can't understand.

If it all went through and delivered what it says on the tin then I'd hope that a lot more would sign up.

I know for a fact a lot more would sign up, but they are being denied full disclosure on how things like the Void fit-out costs and repayment will be set up!

the money has to come from somewhere, and somewhere will obviously want it back plus interest, why wouldn't they. That would follow (big assumption) that the profits from supporters bar would be going to pay off the fit out for a considerable period. It would be better imo to tell everyone what the arrangement here is and let them decide, If it all comes out after the event and it's not what some/many expected then a few D/D's might get chopped

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Any "benefits" or "perks" offered to ANY 10000Hours members, be it individuals or 87 club members cannot be detrimental to the existing revenue of the football club.

That has always been the case IMO, has never changed.

See for me it's always been a question of faith in the CIC - I don't have it.

Edited by Bud the Baker
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Guest somner9

See for me it's always been a question of faith - I don't have it.

Ironically for me if someone is putting in 3k a year then they can run naked round the pitch at half time eating as many sausage rolls as they can handle.

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Ironically for me if someone is putting in 3k a year then they can run naked round the pitch at half time eating as many sausage rolls as they can handle.

If we're talking about the 87 Club the £3,000 is a lifetime membership.

The Cost is £3000. It is basically a Life Membership of the CIC.

The £3000 will be converted to Foundation shares (have a look at the draft Articles) once all the debt has been repaid.

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Guest somner9

If we're talking about the 87 Club the £3,000 is a lifetime membership.

Even more reason for naked half time revelry if their chucking 3K in and still have to pay for a ticket each season/week.

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Ironically for me if someone is putting in 3k a year then they can run naked round the pitch at half time eating as many sausage rolls as they can handle.

87 Club Membership will be £3k up front payment, covering "perks and benefits" for a period of (I think) 5 years. Will include lifetime CIC membership. It's not £3k per annum.

So actually when broken down it's a lump sum payment but it's £600 per annum for 5 years versus £120 per annum for individual.

It's a lot to stump up in one go but as a local small business I'd be happy to put that cash in if it meant I'd be able to network with other like minded "St.Mirren Friendly" businesses in Renfrewshire. I'd be confident that I'd get that money back in no time.

In actual fact I get a lot of my existing work from within the St.Mirren community. I did a website yesterday for a client who was introduced to me by a fellow St.Mirren supporter.

Of course the "87 club" isn't restricted to 87 members. If 100 businesses or individuals (or more) signed up to it then fantastic.

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