The Villans are one of five English teams to have lifted the European Cup, triumphing against Bayern Munich in 1982, but they are currently languishing in the lower reaches of the second tier.
Saunders, the winner of one League Cup crown during his three years at Villa Park, claims that the way the club has been run is to blame for the seven-time league champions' fall from grace.
Speaking to BBC Sport, he said: "Villa are bigger than Chelsea, Manchester City, Tottenham and Everton. Compare them to Tottenham, who were trying to break into the Champions League at the same time as [Martin] O'Neill was in charge, or Everton, who are trying to do it now - there is no difference in the size of those clubs.
"Villa are actually bigger than both of them. The difference is the way they have been run. That is the reason Villa have gone in the opposite direction. So instead of doing a Spurs, they have done a Sunderland - they were hanging on and just avoiding relegation for the past four or five years, but it was inevitable it was going to happen."
It was announced this week that Villa recorded an operating loss of £81.3m in their final season in the Premier League.