Financial Analysis (4) - Budget Change Distribution
Nov 8, 2015 17:02:16 GMT -5
David_ExposGM and Sean_RedsGM like this
Post by Tim_GiantsGM on Nov 8, 2015 17:02:16 GMT -5
During the season our owners provide us with estimated budgets for the next two seasons, but when we enter the off-season the estimates may be revised presumably based on team performance. What can we expect in terms of budget increases/decreases?
This chart presents the distribution of budget increases and decreases by ranges (e.g., $1m-$4m; $5m-$8m; etc.) for teams earning a profit and for teams incurring a loss.
Observations
For profitable teams receiving a budget increase (48% of the total), 68% of the increases - approximately 2/3 - were for amounts of $12m or less. Teams incurring losses rarely (3%) seem to receive increases. In 80% of the instances when they did, the increases were for amounts of $4m or less.
In total, 69% - approximately 7/10 - of all teams receiving budget increases were awarded increases of $12m or less.
Some profitable teams were hit with budget reductions (29% of the total). In 59% (or approximately 6/10) of the instances when they were, the decreases were for amounts of $8m or less. Of the unprofitable teams that were hit with budget reductions (15% of the total), 46% experienced decreases of $8m or less. However, it seems that reductions may be severe. Budget reductions of at least $21m were experienced by 32% of unprofitable teams hit with budget reductions.
In total, 54% of all budget reductions were for amounts of $8m or less.
In summary, the majority of budget increases were for amounts of $12m or less while extreme increases of $21m or more were very rare (3% of the total). The majority of budget decreases were for amounts that most of us probably can live with without too much disruption. Extreme budget reductions of $21m or more occurred more frequently (9% of the total) than for budget increases.
Conclusions
Each year, virtually every budget amount will be adjusted upward or downward. For most teams increases and decreases will be in the seven digit range. That said, one can expect that each year a number of teams will be rewarded with or assessed amounts of $10m or more.
On Deck
What contributed to extreme budget reductions of at least $21m? And why would a team be assessed a reduction of $42m - the maximum budget reduction assessed to a team in the test league?
This chart presents the distribution of budget increases and decreases by ranges (e.g., $1m-$4m; $5m-$8m; etc.) for teams earning a profit and for teams incurring a loss.
Observations
For profitable teams receiving a budget increase (48% of the total), 68% of the increases - approximately 2/3 - were for amounts of $12m or less. Teams incurring losses rarely (3%) seem to receive increases. In 80% of the instances when they did, the increases were for amounts of $4m or less.
In total, 69% - approximately 7/10 - of all teams receiving budget increases were awarded increases of $12m or less.
Some profitable teams were hit with budget reductions (29% of the total). In 59% (or approximately 6/10) of the instances when they were, the decreases were for amounts of $8m or less. Of the unprofitable teams that were hit with budget reductions (15% of the total), 46% experienced decreases of $8m or less. However, it seems that reductions may be severe. Budget reductions of at least $21m were experienced by 32% of unprofitable teams hit with budget reductions.
In total, 54% of all budget reductions were for amounts of $8m or less.
In summary, the majority of budget increases were for amounts of $12m or less while extreme increases of $21m or more were very rare (3% of the total). The majority of budget decreases were for amounts that most of us probably can live with without too much disruption. Extreme budget reductions of $21m or more occurred more frequently (9% of the total) than for budget increases.
Conclusions
Each year, virtually every budget amount will be adjusted upward or downward. For most teams increases and decreases will be in the seven digit range. That said, one can expect that each year a number of teams will be rewarded with or assessed amounts of $10m or more.
On Deck
What contributed to extreme budget reductions of at least $21m? And why would a team be assessed a reduction of $42m - the maximum budget reduction assessed to a team in the test league?