Debt and a new arena

[Ajaxab]

I need some opinions on going into debt on an arena expansion. I am currently $78000 in the black and consistently selling out my 7000 seat arena. I've used the arenasizer utility and it suggests I expand another 12000 seats for a 19000 capacity. However, that would put me $230000 in the red. What is a reasonable debt load to carry?

[Easy Mac]

I try not to go into debt above 300K, and from there start to work the market to try annd get out of interest zone.

[JHandley]

I'm at 10,000 right now, and I could easily fill 15k and 20k arena's, however, I'm going to wait for the cash windfall from the end of the season before making a huge ugrade. I've got about 60k in cash right now, I figure with season ending prize money, promotion money and supporter fees, I should be around 250 to 300k.

The thing with debt is that interest is HUGE and if you're penny pinching now, trying to get every bit out of the cash you have, why follow a strategy whereby you're spending 10-15k a week and getting zero return on it? You're just giving away the money.

Additionally, I think it was Brillig who actually figured out how long it would take to get back to where you are right now after going into huge debt for a stadium upgrade. If memory serves, it was a good 10-12 weeks and that's if you don't lose any games and have perfect weather.

Anyway, that's just my thoughts on it.

[Jets80]

Originally posted by Ajaxab
What is a reasonable debt load to carry?

Once you get into the mid-high 200K in debt it starts to suck you in like a black hole. The interest piles on, combine weekly expenses and before you know it your in real trouble.

After learning my lesson with debt the hard way I make sure I don't go more then 100K in the hole and I don't go on crazy spending binges like I used to.

[NAIWF]

I would wait until the end of the season as well. I expanded the week after I got my team, so I only went $40,000 under after picking up some players as well. I can't imagine how much harder it would have been to get out of debt if I'd waited to expand after blowing the initial $300,000 on players. Also, keep in mind your stadium probably won't get built for 10-14 days so you'd still be getting 7,000 attendances while already having paid for the upgrade AND getting hit with interest payments of $11,000+ weekly.

[KevinNU7]

I just upgraded to 15,000 seats from 9,000 and I'm sitting at $3k black now.

I've got enough supporters where I think I'll sell out and I did the calculations and now the weeks where I have a home game should get me enough revenue to cancel out the weeks where I don't have one. If I can stay +/- $40k range and get some good pulls I'll be pleased.

[KevinNU7]

If you upgrade today it will be completed on June 8th, and be ready for league games in June 9th

[Nyarlahotep]

Originally posted by JHandley
I'm at 10,000 right now, and I could easily fill 15k and 20k arena's, however, I'm going to wait for the cash windfall from the end of the season before making a huge ugrade. I've got about 60k in cash right now, I figure with season ending prize money, promotion money and supporter fees, I should be around 250 to 300k.

The thing with debt is that interest is HUGE and if you're penny pinching now, trying to get every bit out of the cash you have, why follow a strategy whereby you're spending 10-15k a week and getting zero return on it? You're just giving away the money.

Additionally, I think it was Brillig who actually figured out how long it would take to get back to where you are right now after going into huge debt for a stadium upgrade. If memory serves, it was a good 10-12 weeks and that's if you don't lose any games and have perfect weather.

Anyway, that's just my thoughts on it.




That logic is just as flawed now as it was then. Even if you have tha cash, the arena is going to take time to pay for itself. If he has his stadium ready for games on June 9, and he sells out the three remaining home games he will have from that date on, the stadium will have almost paid for itself by generating over 200k extra income. Add in his end of season bonuses and the stadium will be free and clear including interest by the start of next season. A good training program should be able to float him until then. The key thing to look at is that he is losing income now by turning people away at the gates. If he promotes and doesn't do as well in div. IV, he may not sell enough seats for the upgrade to pay for itself all season, and wether you pay cash or get a loan, you want an investment to pay for itself in a reasonable time.

Ajaxab, if you don't think you can move up into auto-promotion range or you have any doubts about the new stadium selling out, you may want to do some quick research to see if you want to upgrade that big right now or not.

[JHandley]

Nyarlahotep,

The idea behind the logic is to stay out of debt. I absolutely agree that if he has the cash, then to do it. He said he was gonna go into debt to the tune of $230,000. That's some serious cabbage to pay interest on.

My thing is if he waits until he can get it as close to even as possible, with the cash windfall from the end of the season, from the sale of some trainee's. He won't be losing so much money to interest. Not only is the interest rate very high, it's a complete waste. Spending money on players, trianing staff and your arena are investments where you can recoup your money. Interest is just throwing it away.

The logic is that it doesn't make sense to go into heavy debt for a stadium upgrade, not that you should never upgrade since it takes so long to get back to where you were.

[Nyarlahotep]

If he could sell out a 19k seat stadium, which is throwing more money away, not upgrading or paying 11.5k interest?

[FrogMan]

I kind of agree with Nyarlahotep (damn that's tough to spell :) ) on this. If you are at just nearly breakeven with a 12k seats and fill you would be able to sell out a 19k seats, which would bring you give you a steady net revenue of say 10k in average per week (after deducting interest), then why not go for it? Yeah, interest is money burnt that you'll never see again, but what the heck, you only live once :)

Also, the thing is we don't really know how many supporters he has. Thinking you'll be able to fill your stadium and actually selling out home game are two quite different things. You could lose a gome or even two in a row, or get into a string of bad luck in terms of weather and then thedebt would be really bad...

FM

[JHandley]

Originally posted by Nyarlahotep
If he could sell out a 19k seat stadium, which is throwing more money away, not upgrading or paying 11.5 interest?

That's a fair point and I hadn't thought of it that way.

I would imagine it's a wash, or maybe losing a bit of money in the difference, but not as dramatic as it would appear given that you'll only sell out a 19k stadium every other week, but you're paying 11.5% every week, in addition to the extra stadium fees. However, that's just trying to add it up in my head and I have no actual figures to go with it.

It's still up to personal choice. I just can't stand debt. I would rather be patient and build slow, than build too fast. But, that's just how I look at things. There is a reasonable and valid arguement that the debt is manageable.

[Nyarlahotep]

Hehe, Nyar is fine FrogMan. I guess I just don't get this insane paranoia about debt that is so prevelant in this forum. I have no problem going into debt if the end result is worth more to me than the cost of the debt. People here a quick to say don't go into debt without looking at the actual situation. In this case it seems reasonable to me based on the team in question. He has lost one game this season (a 1-2 road loss) and has not allowed so much as 1 goal in the other seven games. They have a good shot at auto promotion this season and will keep the fans happy with their match results. Barring any bad luck (key injury, bad weather, etc.) going into debt now will pay off far more than waiting until the start of next season in a tougher division, especially considering the size of the upgrade. That stadium will generate about 67k more than a 7k seater if they can sell it out. With three home games coming after completion, that is over 200k in extra revenue. Next season they might not be able to sell out 19k (except for cup matches) and it will take much longer to make the money back. I guess that's the way to go if being able to say you didn't go into debt is more important than doing what is best for the team.

[Nyarlahotep]

Originally posted by JHandley
That's a fair point and I hadn't thought of it that way.

I would imagine it's a wash, or maybe losing a bit of money in the difference, but not as dramatic as it would appear given that you'll only sell out a 19k stadium every other week, but you're paying 11.5% every week, in addition to the extra stadium fees. However, that's just trying to add it up in my head and I have no actual figures to go with it.

It's still up to personal choice. I just can't stand debt. I would rather be patient and build slow, than build too fast. But, that's just how I look at things. There is a reasonable and valid arguement that the debt is manageable.


oops, it's 11.5k a week, not 11.5%. And the increased maintainance is about 8.2k.

[FrogMan]

I know what your saying Nyar. I am not so afraid to go into debt myself, but it might only be a reflection of my real life :)

I have actually simulated two scenarios for my stadium upgrade from 12k to 20k seat. The first one was getting the stadium before the first game of my two consecutive home games stretch (week 12 & 13) which would put me into debt by about 150-200k. The second scenario was waiting until after I had received my promotion money and then upgrading the stadium so it would be ready for my first home game of next season. I did it with some really conservative numbers, planning something like only 20 times my number of supporters for the two home games of this season. My conclusion was that either way that with scenario one, I'd have about 20k less at the beginning of next season than with scenario two. Throw in a little bit more crowd in my two home games and I'm all set...

FM

[Nyarlahotep]

I'm debating upgrading for my upcoming back to back home games as well. I just bought a new forward though, and I don't want to go into too much debt.

[FrogMan]

Ajaxab, I don't see your name in our officialish list of teams. If you want to see your team ranked, simply post your team information in dacman's stickied thread.

FM

[Ajaxab]

Thanks for all the help guys. I decided on a compromise and expanded to a degree that left me $115k in debt. I just wasn't sure I could live with being more than $200k in the hole. The renovation should be complete for my last three home games.

Frogman, thanks for the info. I'll post my team id on dacman's thread.

[FrogMan]

Originally posted by Ajaxab
Thanks for all the help guys. I decided on a compromise and expanded to a degree that left me $115k in debt. I just wasn't sure I could live with being more than $200k in the hole. The renovation should be complete for my last three home games.


See, we talk a lot (okay, I talk a lot :) ) but with the bunch of good Hattrick heads we have around here, there's plenty of ideas and help to be found...

Originally posted by Ajaxab
Frogman, thanks for the info. I'll post my team id on dacman's thread.

I saw you've already posted your team info. You'll be ranked with all the other 115 or so FOFCers this week. If you wanna help, look for the "post your game ratings" thread that I will start in this forum and post your game ratings after your league game is over...

FM

[Nyarlahotep]

Originally posted by Ajaxab
Thanks for all the help guys. I decided on a compromise and expanded to a degree that left me $115k in debt. I just wasn't sure I could live with being more than $200k in the hole. The renovation should be complete for my last three home games.


How man seats did you go to? I am pretty sure I would have said this expansion wasn't worth going into debt for.

[Ajaxab]

Rather than the recommended 12000 seat expansion, I expanded to half of that at 6000. The only loss is that $30k fixed renovation cost.

I think that in the future I will wait on expansion until I can pay for what I'm wanting. We'll see how it goes the rest of the year.

[Nyarlahotep]

I wouldn't have gone into debt for that, it will take too long to pay off. Good luck with it though.