It's nearly four years since a football club last took the decision to float on the Stock Exchange. In itself, that is revealing. After an initial burst of enthusiasm as the business community took notice of the financial possibilities offered by football's booming popularity, realism has taken hold.

That realism is primarily based upon the volatility of football shares. Not many businesses are quite so dependent on the results of the company footie team, let's face it. Equally, not many businesses have to deal with such stupendous wage inflation, spending most, if not all, of turnover on paying a few key staff. Additionally, there is a growing awareness that clubs differ from the normal commercial models, with different priorities and stronger pressure from customers. To quote Peter Varney, Chief Executive at Charlton:

"The City would probably like to see us giving a dividend - and that's probably what deflates the share price - and the fans would like to see us spending the money on players. The City buys shares to get a return from their investment and as we don't offer a dividend it's probably one of the reasons the City has turned away from football shares. If we did offer a dividend instead of buying that striker I think I know what the supporter shareholders would say."

Put simply, it is just not as easy as it once was to encourage institutional investors to buy shares in football clubs. This harsher climate has been responsible for failed flotations - the last, at Nottingham Forest, raised just £2m of the expected £20m - and sliding share prices.

The answer is, of course, to match realism with realism. Notably, the target figure of £5m is a modest one. Of course, it could be argued that such a small sum of money will make little difference to the club's ability to pay the transfer fees and wages required to build a Premiership-quality side. True. Nevertheless, that's rather encouraging, in a curious way - it'd be worrying if such a fundamental decision was being taken just so that we could secure the services of Ashley Ward. Rather, the board's stated intention to use the money to buy the freehold of Vicarage Road, something that is utterly essential for the long-term future, and to further improve the infrastructure of the club is reassuring.

It will be fascinating to gauge the City's reaction when it analyses the club's past performance and future plans. As ever, this analysis will decide whether the flotation is a success or a failure. While Tim Shaw has already made a point of stressing the desire for supporters to take advantage of the public offer, Watford would not appear to have a large enough fanbase to carry a flotation alone.

So, how will the City view Watford? With the exception of a highly profitable season in the Premiership, the club's financial performance has been consistently poor over the last decade. Under Jack Petchey, annual losses of around £1m were so regular that no-one batted an eyelid. While promotion to the top flight may have provided an opportunity to get the bank account looking healthy again, the Financial Times made a point of highlighting a loss of £3.5m in the last financial year, a figure which tells an entirely different story, when it reported the club's decision to float.

The directors are asking potential investors to buy into a vision, then. It is no coincidence that this announcement comes at the start of Gianluca Vialli's first season as Watford manager and, therefore, at a time when interest in the club's future is at a peak. The sub-text is clear enough - you're investing in a club that's destined for the Premiership.

How this sits alongside the previous business plan - to build a company with such a strong attachment to its supporters and the local community that its financial success is less dependent on winning football matches - is unclear. Similarly, using the money generated by flotation to secure an asset like Vicarage Road for the long-term is an entirely sensible decision that doesn't quite fit in with the financial gamble of an apparently rising wage bill and hopes of Premiership riches. That's not surprising, in many ways. While this is undoubtedly an opportune moment to go for flotation, it's also a time, right in the middle of the transition between two famous managers, when Watford Football Club is slightly unsure of its identity.

The success of the flotation depends on the ability of the club to persuade the City that its future performance will be rather better than its financially grotty past, therefore. In that respect, the interests of supporters are no different from those of investors. Indeed, you could argue that the latter are rather more used to considering the long-term than the former.

With or without flotation, Watford Football Club cannot afford a period of stagnation like that experienced prior to Graham Taylor's return. Nor can it afford to get carried away with its new-found affluence. If a stock market listing rams certain key points home to all concerned, then that is perhaps enough in itself to make it worthwhile.

For a start, it would be absolute madness for a club of Watford's size and stature to place all its eggs in the basket marked "Premiership". Even leaving aside the lunatic scramble for promotion from the First Division, the blunt truth is that the top flight of English football is changing rapidly, and it is not changing to the advantage of the Watfords of the world. As domestic competitions are devalued, so a reduction in Premiership numbers becomes more and more likely. That isn't to say that we shouldn't strive to be part of it, merely that you wouldn't want to bet your house - or your football club - on it.

In that respect, pressure from the City would probably be welcome. Much of the anger that is vented by supporters against the influence of business in football clubs is misplaced. That is, it fails to identify that many issues emerge from what are fundamentally amateurish, out-dated practices, not from the involvement of business itself. Face it - most clubs, including Watford in the not-so-distant past, are run in a way that would send any private company to the wall in just a few months, as customers fled to the competition. The future lies in becoming a more dynamic, imaginative, forward-thinking business. It's a process that's already been started, commendably, in the last couple of years. That it continues is far more important than promotion, for investors and supporters alike.

In many respects, not least a common player in Nigel Wray, the experiences of Nottingham Forest are particularly interesting. While that flotation may have been something of a disaster, it left shares in the hands of thousands of supporters...and that may also be the effect of Watford's more modest call for investment. The result was that ordinary fans were able to influence key events.

In 1999, Nigel Doughty, a lifelong Forest fan, offered to invest £12m in the club. His conditions were tough - he wanted full control; for the money to go directly into the club rather than to bail out the deeply unpopular, fractured plc board; for Irving Scholar - bizarrely, the director of football - to be removed; for Martin O'Neill to be recruited as manager. Well, three out of four ain't bad.

That these things were achieved is down to the organisation of supporters. Despite opposition from Scholar and company, the proposals were voted through by a majority of 57% at a shareholders' meeting. Incredibly, an estimated 97% of small, Forest-supporting shareholders voted in favour. Thus, the influence of the plc upon the club was diluted. Whatever the future holds, fans were able to have a tangible, vital effect at a massively important moment in the club's history.

So, the possibility of greater influence for supporters is there, whether by direct involvement in the plc or the external pressure of large numbers of independent shareholders. You just wonder if this is what the current board has in mind.

Frankly, who knows? A few hundred words, and I'm not much the wiser. Which, at this time of speculation and little substance, is perhaps appropriate.