Blackburn Rovers incurred an operating loss, before player trading, of £3.3 million in the last financial year 2006/07.
Chairman John Williams told the Lancashire Telegraph the loss was caused almost entirely by an increase in 'football costs', with the wage bill rising by 10 per cent over the period, from £33.37m to £36.71m.
Turnover for the year was £43.3m, compared to £43.4 million in 2006, which meant the wages to revenue ratio was 85 per cent - an increase of eight per cent on the previous 12 months.
However, while Williams accepts such a ratio is uncomfortable', he said the club made a conscious decision to invest in the squad, with 10 new signings made over the period, based on the belief that player acquisition costs would soar in 07/08 on the back of the new TV deal.
"The twin objective of being able to produce a cash neutral result, and a break even position at operating level, has been our mantra for the last few years and we've managed to achieve that," said Williams.
"This time, however, we have departed from that with an operating loss, but that was really as a result of acquiring a substantial number of new players in the two windows that made up the last financial year.
"We actually brought in 10 because we took the strategic view that it would be a much more expensive exercise 12 months later, once the new TV deal kicked in, and that has proved to be the case.
"So, although we don't enjoy running with losses, because in the long run that would be unsustainable, we believe in this instance incurring a loss was an acceptable exercise.
"This year, we predict there will be a reasonable operating profit (because of the new TV deal) but that will be offset by last year's loss so, over the two years, we expect to keep to our break even plan."
Average attendances also grew by 1.2 per cent to 21,262 (21,015) but, while he was pleased with the rise, Williams concedes it is still an area where Rovers find it difficult to compete with the rest of the league.
"We are trying to be in the top half of the league and to do that, we believe you need to pay top half wages, because there is a clear correlation between the wage table and the league table," said Williams.
"That's not a problem as long as you've got a big turnover.
"The problem is the differential between ourselves and the clubs around us, and I don't mean the Champions League clubs, I mean Tottenham, Aston Villa, Manchester City and Everton, is made up almost entirely of gate income.
"We all get roughly the same money from the TV deal, but where those other clubs are better off is the money they receive through the turnstiles."