British Rugby: Profitable and Aiming High

It is not the best time for England's rugby team – lambasted as "boring" after last weekend's Six Nations draw against Scotland and not expected to produce much better in the final clash with France on Saturday.

Off the field, however, the sport has never been healthier. "Twickenham is now one of the best stadiums in the world, we have a solid financial record and we have clear plans for the future," says Francis Baron, the tough-talking head of the Rugby Football Union (RFU), who steps down this summer after a 12-year stint turning the sport's governing body from a financial basket case to a profitable business. "What I am most proud of is our financial transformation – and the £100m we've been able to invest in the community game as a result."

Ensconced in the RFU's spanking new offices – the last phase of a £140m redevelopment of Twickenham's South Stand – the evidence of that transformation is all around us. But it has been a long road. The RFU will celebrate its 140th birthday next year, but rugby was not professionalised until 1996, so the business of the game is a youthful 14.

When Mr Baron took over as the first RFU chief executive in 1998 – headhunted from the travel group First Choice Holidays – there was no escaping the scale of the challenge. "My wife said I was nuts," he says ruefully. "There was a fight over who runs the game and the battles between the old, amateur RFU and the entrepreneurs who came in and bought up the clubs were all over the newspapers every week."

Not only that, but the whole industry was haemorrhaging cash. The 14 Premiership clubs (now reduced to 12) were losing more than £40m annually between them, and the RFU was in the red to the tune of £10m and close to breaching its banking covenants. "It was not a good start to the professional era, but it was a major business challenge," he says.

Far from the childhood dream of the sports fan, the reality of the business of sport is no easy ride, says Mr Baron. "It is more all-consuming even than running a big plc," he says, with some relish. "If you get involved in any sport at a senior level it just sucks you in, not least because all the matches are played at the weekend so there is no proper time off."

Sport also needs an even harder head than other commercial activities. "Successful businessmen who buy into rugby clubs often seem to leave their business sense at home because they get so emotional about the sport," Mr Baron says. "The key thing is to be committed, but you have to avoid getting emotionally involved."

Back in 1998, the first task was to shake up the RFU itself and turn it into a commercial organisation, which involved losing a third of the 100 employees in the first 12 months. The second step was to set a clear strategy, and get the 1,900 clubs that make up the RFU membership to buy into it. Armed with an eight-year plan, the newly professional RFU team set out on a gruelling round of roadshows.

They met with considerable scepticism. Not only did the mass of volunteers running clubs think they knew better about how to run the sport; they also resisted the new-fangled, commercial approach, and they were intensely suspicious of both the RFU's self-imposed revenue targets and the political battle with the owners of the professional clubs. But the immense effort at communication has created a culture unique to rugby. "We are different from any other major sport because no one else plans long term in this way," Mr Baron says, fresh from last year's launch of the third multi-year strategy.

The core of both the original plan and its successors was to establish a string of different ways of making money. Television and sponsorship deals do play their part. A new deal with Sky (BSY) last year netted the RFU £85m for the next five years of international games, the Six Nations brings in another £50m or so per year, and individual clubs have their own separate deals for Premiership games. But the sums are a far cry from the eye-watering deals that have catapulted football into the financial premier league, and rugby was forced to look elsewhere. "We decided we weren't going to be dependent on the vagaries of the TV and sponsorship marketplaces," Mr Baron says. "We wanted a more robust model with other revenue streams associated with rugby."

Where once the RFU's income came from just three places – ticket sales, TV and sponsorship – now it has a whole portfolio of extracurricular interests that produce more than half its revenues. And it has its eye on several more. First came the hospitality and catering division, handling corporate entertaining at Twickenham, then a travel business, putting together packages around away games, and an entertainment arm, organising off-season concerts at the stadium that can clear up to £1.5m in profit for single weekend for a big name. The Rolling Stones, U2 and Iron Maiden have all played at Twickenham, and Mr Baron claims it is a better venue than Wembley because at least the visitors can park their cars.

It was the South Stand development that really changed the character of the organisation. The RFU offices were only the last phase of a multi-year project including a hotel and health club which opened last year, and 80,000 sq ft of conference and exhibition space that opened the year before.

The numbers tell the tale. While recession hammered the economy last year, the RFU's new divisions all sailed over their targets. Corporate hospitality sales and the conference business have seen sales running nearly a third higher than internal budgets. Occupancy rates at the hotel have averaged 63 per cent so far, pushing revenues 25 per cent higher than forecasts. And 2,600 members have signed up to the gym in the first five months, taking it two-thirds of the way to its first year's target.

And with the stand complete, the RFU is moving on to new challenges. It is in the process of setting up a property management company to manage its expanding portfolio of local houses and to develop the 114-unit housing complex in the North car park currently waiting for planning approval.

The other big opportunity is retail, and the option of expanding Twickenham's rugby-themed shop on to high streets and into department stores. "Timing is crucial and the retail market is still having quite a tough time, but we are starting the conceptual planning," Mr Baron says.

But such schemes will be for his successor. Mr Baron has already far out-stayed his original plan to do the job for three years, and the hunt is on for a replacement to take over after this summer's AGM. "After 12 years, I want to go back to business," he says.

His successor will also take on the challenge of hosting the 2015 World Cup. Twickenham's success – which required bidders to be able to underwrite an £80m ticket sales guarantee to the International Rugby Board – was a fitting measure of the financial strength so central to the RFU's progress. "We are probably the only union in the world with the balance sheet to provide that guarantee," Mr Baron says. "But we can do it because we are a strong union."

All we need now is an equally strong England team.

Francis Baron: Up and Under

1998-present: chief executive of the Rugby Football Union

1994-1998: chief executive of First Choice Holidays

1984-1994: managing director of WH Smith's media division

1974-1984: Guthrie Corporation, various roles rising to regional chief executive of Europe, Middle East and Africa

Postgraduate jobs at Spillers and Marconi

Mr Baron is married with 3 children

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