Various financial and non-financial indicators are used to measure performance. Borussia Dortmund uses these internally-defined performance indicators to guide its entrepreneurial actions and to select the focus of its internal reporting.
Financial performance indicators
From a wide range of possible financial indicators, Borussia Dortmund focuses on those specific indicators that in the past few years were primarily used to steer the Company.
First and foremost is revenue. Management uses this indicator to internally manage the Company, knowing full well that this indicator alone is not sufficiently meaningful. Nevertheless, it provides a clear indication of the Company's economic strength, especially when compared against that of competitors or when monitoring the Company's long-term revenue trend.
A decision by the IFRS Interpretations Committee (IFRIC) states that transfer proceeds may no longer be recognised as revenue but instead must be netted against the corresponding transfer expenses – including where necessary any residual carrying amount of the respective player registration – and recognised in profit or loss as net transfer income. In light of this, the management has decided to introduce "consolidated total operating proceeds" as a new performance indicator reflecting the Group's earnings power and as a source of funding for ordinary activities. Consolidated total operating proceeds are calculated as total revenue plus the gross transfer proceeds generated.
The result from operating activities (EBIT) and net profit or loss for the year are also used to manage the Company. These financial performance indicators play a key role in preparing the budget for the coming financial year(s), in interim controlling with respect to the earnings performance and when looking back on a particular financial year.
Another key performance indicator is the operating result (EBITDA). This is due to the considerable level of investment activity and the associated increase in depreciation, amortisation and write-downs. As a result, EBITDA (EBIT adjusted for depreciation, amortisation and write-downs) has been selected to better benchmark the Company's annual performance.
These indicators are rounded out by cash flows from operating activities and free cash flow, both of which the Company uses for internal planning purposes. The presentation in the statement of cash flows was also adjusted in light of the aforementioned IFRIC decision: Instead of being recognised under cash flows from operating activities, transfer proceeds received are now reported net of any directly attributable payments made in connection with the respective transfer in the new "Net proceeds from transfers" item under cash flows from investing activities. The same applies to changes in receivables and liabilities from transfer deals. The change does not have any impact on the free cash flow.
Free cash flow is defined as cash flows from operating activities plus cash flows from investing activities and is a key indicator used to ensure that cash flows from operating activities are sufficient to cover investments. Because Borussia Dortmund's strategic objective is to maximize sporting success without incurring new debt, free cash flow is a key indicator for the club. In light of steadily growing transfer sums, free cash flow is thus becoming increasingly important. Furthermore, it is an indicator used to determine whether Borussia Dortmund has sufficient funds to finance the steady dividend payments to its shareholders. Therefore, Borussia Dortmund strives to continuously optimise free cash flow.
Non-financial performance indicators
Borussia Dortmund's only non-financial performance indicator is the reach of its brand.
While it is impossible to measure the reach of Borussia Dortmund's brand, it is determined by a number of criteria that, when taken together, are representative of the brand's reach.
Some of these criteria are measureable, while others are not. Nevertheless, they are a reflection of the Company's appeal.
The number of criteria varies and they are thus exchangeable. While any one factor may be of relevance during a given season, this may not necessarily be the case in subsequent years. New media in particular constantly provides new value drivers: for instance, the number of Facebook fans or page impressions represent relatively new indicators.
Measurable criteria include, for example, the number of season tickets sold, attendance figures and television broadcast hours.
Awards, surveys and studies represent possible criteria that cannot be measured quantitatively. Another "soft" criterion is the deliberate selection of sponsors whose products and brand images are aligned with the Borussia Dortmund brand.
Borussia Dortmund's decision-makers receive reports about all criteria on a regular basis. Furthermore, taken as a whole, these are an indicator of the success of the Company's strategic alignment.