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Planning Ahead

I often bang on to my clients about the importance of planning ahead and I was reminded of this again this week, when reading about the Raheem Sterling transfer.

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For non-sports fans, Raheem Sterling is a (Liverpool fan’s feel free to add your own embellishment here) footballer who transferred from Liverpool to Manchester City this week for a reported transfer fee of £49 million. You could debate who got the best deal here (not including Sterling’s agent) - Liverpool got an incredible amount of money for a player who did not want to play for them and Manchester City got a player they needed, potentially for the long term and money is no object to them - but I consider the real winner is Queen’s Park Rangers.

20% of Any Transfer Fee

QPR sold a 15-year old Sterling to Liverpool in 2010 for around £500,000.00. Crucially however, the contract also contained a sell-on clause meaning that they would get 20% of any transfer fee should Liverpool sell Sterling on. The effect of this therefore is that almost £9 million of the sum received by Liverpool has to be passed onto QPR. This is around 18 times the initial transfer fee and is essentially money for nothing. All it took is a little bit of forward planning.

Of course there are opportunities like this in business, the obvious one being when land is being sold, including a provision that you share in the benefit should the land ultimately become much more valuable (for example if it becomes eligible for development). A similar one is if you are selling a company or shares in a company, and that company has a product, or process, that is going to make it a lot of money in the future. Again you can include a clause in the agreement to ensure you share in its success.

You Don't Know What You Don't Know

I am a big believer in the expression, “You don’t know what you don’t know”. By taking advice before you make big decisions you can find out what you do not know and reveal opportunities you may otherwise have missed. This is likely what QPR did and as such they have received a fee for a player, who is not even theirs, only a few million short of their record transfer fee received.