They’re the back to back holders of the German Bundesliga and fast becoming a force in Europe again, but what makes Borussia Dortmund, and football in Germany, so competitive?

Champions League contenders? (via uk.eurosport.yahoo.com)

By Fraser Lawrie – @fraser_lawrie

The year is 2005, and Borussia Dortmund is in financial turmoil.  On the brink of bankruptcy after becoming the first team publicly traded on the German stock market, it was a big risk; and it didn’t pay off. The original value of the shares had plummeted by over 80%, causing the club to sell off its best players and sell the naming rights of their stadium from Westfalenstadion to Signal Iduna Park. Thinks were looking bleak in Dortmund, to say the least…

The club owes a lot to their supporters, whose “We are Borussia” campaign resulted in Dortmund’s community of citizens, companies and public authorities combining to help repair the finances. This included some very understanding creditors and bank managers, who deferred stadium rent and interest payments until 2007. Fast forward 7 years and Dortmund are Bundesliga double winners and overall darlings of European football. So how does a team go from being on the brink of bankruptcy to one of the most feared teams in football? Well, Dortmund had a plan. Firstly, the club decided to sell its highest earners like David Odonkor and Tomas Rosicky in order balance the books. They then reinvested the money in their own youth academy, with the intention of creating world-class players rather than purchasing them.

Dortmund has definitely learned from their mistakes. Rather than their former business model of buying very expensive players with very high wages and basically gambling the club’s future on reaching the Champions league, the club invested in the BVB Academy, founded in 2011, and it has been integral to Dortmund’s recent triumphs. One of the most modern and best training academy’s in world football, it is there to develop the talents of players aged 19-23. The focus is well and truly on developing youth, as explained by managing director Thomas Treß, “it is better to make your suit from the cloth available, rather than spend money you don’t have on a fancy new outfit that falls apart a couple of years later.”

It also helps that the Bundesliga itself is in terrific financial shape. The redevelopment of stadia at the turn of the century in preparation for hosting the 2006 World Cup and very affordable tickets means all matches are almost always at full capacity. It is surely no coincidence that the Bundesliga has the lowest ticket prices of Europe’s five major leagues and consequently the highest attendances. Only the Premier League (€2.5 billion) has higher revenue than the Bundesliga (€1.7 billion), while the German league is more profitable at an operating level (€171 million) than its English counterparts (€75 million) with all other major leagues reporting losses.

The Westfalenstadion is a perfect example of thriving stadia in Germany. (via guardian.co.uk)

The league also operates under the “50-1” rule, meaning that shareholders must own a minimum of 50% of the shares of the club as well as a deciding vote. This stops any club from going through with a financially reckless decision from an individual owner and out of any excessive debt. The system works very well, with the Bundesliga debts being less than a third of those in the Premier League.

Even though Dortmund’s financial model is to sell at peak value, they have coped extremely well after selling their top stars. After playmaker and captain Nuri Sahin left in 2011, midfielder Shinji Kagawa stepped in. Coach Jurgenn Klopp simply tinkered with the team’s tactics, making them quicker going forward, suiting Kagawa’s game and helping Dortmund win their second Bundesliga in a row. Similarly, when the Japanese international was sold to Manchester United this summer, Dortmund had already signed his replacement, the highly talented Marco Reus from Borussia Mönchengladbach. Further proof that Dortmund is also tremendously savvy when it comes to transfers.

The Borussia Dortmund Chairman Hans-Joachim Watzke has said that the club are currently at the fifth stage of a five-point plan: “The first was the struggle for survival, the second restructuring, the third was development of a sporting philosophy, the fourth implementation and the fifth is sustainability.” Not only talking about their financial accomplishments, but also their accomplishments on the field. Basically saying they are clearly working hard to preserve this success, and don’t expect them to go anywhere soon. Strong words indeed.

They have so far stayed true to their word, extending the contracts of stars including Mario Gotze, Marcel Schmeltzer and Mats Hummels all to 2017. As well as tying down inspirational manager Jurgen Klopp until 2016.,They have shown themselves to be genuine contenders for the Champions League trophy this season, and it is well deserved. They have shown maturity beyond their years topping the “Group of death” over financial heavyweights Real Madrid, Manchester City and four-time winners Ajax. Winning the tournament is definitely not out with their capability.

In today’s world of Qatari oil rich owners coming in and simply buying trophies with an endless pit money, it is nothing short of a remarkable story at Dortmund; not just for German football fans but fans around the world. They have proven that you don’t have to throw ridiculous amounts of money into a club in order to be competitive. First-class management, effective scouting and a belief in youth development have delivered trophies as well as admirers all around Europe. Although a great tale, perhaps the modern game could learn a lot from Dortmund’s story. The game could use it.

How long can Borussia Dortmund continue to dominate German football? Could they take the Champions League title this season? Tweet us your thoughts @talkingbaws or comment below.