Queens Park Rangers director of football Les Ferdinand says the relegated Premier League club have "got it badly wrong".
The Hoops are also battling a potential 'Financial Fair Play' fine from the Football League of up to £58m.
Ferdinand believes the team suffered from buying pricey imports - and that it must now develop its youth players.
"Unfortunately we got it badly wrong," he said. "But the intention to do it right was what it was all about."
Disastrous recruitment policy
Ferdinand insists QPR must instigate a change of policy after spending heavily to find success in the Premier League, which backfired.
"Certainly there was a lot of money thrown at it in the wrong direction and we're suffering the consequences right now," he admitted to BBC Radio 5 live.
"We've found ourselves in this situation now and we need to regroup and realise what this club is and where it is and the best way forward for this club in everything we do.
"Realistically we can't afford to go out and pay £20m, £30m, £15m on players. We have to start regrouping and producing a crop of players who can play for this club."
QPR have begun legal proceedings against the Football League, and say they are challenging "the legality of the Championship Financial Fair Play rules".
The west London club are alleged to have spent more on salaries than rules allowed when they were in the Championship two seasons ago.
QPR revealed a £9.8m loss in March, but £60m of loans were written off by owner Tony Fernandes and other shareholders, which could be ruled to be against the Football League's Financial Fair Play rules.Ferdinand said: "It's difficult for me to comment on the fine at the moment. The situation is we've gone down to the Championship and we have to cut our cloth accordingly."
Best way forward this summer
On the future of manager Chris Ramsey, Ferdinand said the club would have to wait until the end of the season - and "obviously the FFP report will have a lot to do with where we go and what we're able to do".
He added: "QPR have always been a family club. It's a club that's bought players in, maybe from the lower divisions and not always sold them on for bigger money.
"We've gone away from that. I wouldn't say we've bought bigger players, but we've attracted players that command high salaries and we haven't had much return from that.
"If you look at our development squad, the youth team, we haven't had someone come through that and play for the first team on a consistent basis for 16 years now and that's unheard of for a club like QPR."