By Jim Butler, CEO - Club Benchmarking

Originally published by the National Club Association in Club Director Magazine, Fall 2019

Jim Butler CEO Club Benchmarking“Those who cannot remember the past are doomed to repeat it.” Those words from philosopher and poet George Santayana have been on our minds lately as we work with boards across the country, helping them prepare their clubs to withstand future economic uncertainties. While the U.S. is currently on a record-breaking streak of economic expansion, history tells us that the next recession is inevitable.

Recently, we came across a 2014 article in the McKinsey Quarterly that captured our attention with its relevance. “Building a Forward-Looking Board” was written in the wake of the 2008-2012 economic downturn. Reflecting on the demise of companies that succumbed during that period, authors Christian Casal and Christian Caspar cited “negligent, overoptimistic, or ill-informed boards” as a major contributing factor. They observed that governance suffers most when “boards spend too much time looking in the rear-view mirror and not enough scanning the road ahead.” That condition, in our experience, is endemic in the club industry.

Changing Club Dynamics
The club industry has undergone fundamental changes as a result of both the economic downturn and the market’s transition from Baby Boomers to less golf-centric Generation Xers. Member counts dropped due to decreased discretionary spending and a shift in the interests of prospective members. Clubs once focused solely on golf were forced to reevaluate their culture, traditions, programming and infrastructure in order to remain competitive.

Club leaders who recognized the impact of those societal changes were compelled to break their focus on “the rear-view mirror” in order to develop more forward-looking strategies. Some have been successful, but for many clubs the evolution has been difficult and slow. The upshot of the article by Casal and Caspar is this: Building a forward-looking board requires a clear roadmap if current and future leaders are to function as a truly strategic governing body. In the club industry, boards ready to lay a solid foundation for the future should consider the following steps:

  • Evaluate and Re-Center the Board Agenda: If agendas focus on operations and the income statement’s budget vs. actual (rear-view mirror) rather than strategic (scanning the road ahead) it’s time to make a change. Make time in every meeting to review the strategic plan, evaluate risks and opportunities in the local market and assess the effectiveness of your governance model.
  • Connect Strategic Plans to Operating Business Plans: A strategic plan not directly tied to the club’s operating business plan will wind up gathering dust on a shelf. The most effective plans identify where you want to go AND how you’re going to get there.
  • Ingrain Balance Sheet Focus in the Boardroom: Board turnover necessitates repetition. Every board and committee orientation should include an introduction to the club’s balance sheet and those metrics should be revisited on a regular basis throughout the year.
  • Develop a Forward-Looking Capital Plan: Sustainable financial success is rooted in the capital ledger and manifests on the balance sheet as property, plant & equipment. Clubs must have a comprehensive (including an up-to-date Capital Reserve Study) and accurate capital plan that assures future capital resources meet future capital needs. Seventy-five percent (75%) of clubs in the industry are not generating the capital necessary to properly maintain and re-invest. The shortfall of capital must be addressed prior to the next recession.
  • Monitor the Competitive Landscape: Scanning the road ahead requires a clear understanding of your local market and the external factors impacting your members’ connection to the club. Introduce reliable business intelligence into the planning process to promote informed decision-making and stimulate strategic discussions.
  • Partner with Industry Allies: The business of running a club has grown increasingly complex and boards are often faced with issues outside the skillset of volunteer leaders. Invest in partnerships with service providers and associations like NCA that offer the club-specific resources, expertise and experience to support you on your path to strategic leadership.

Jim Butler is a recognized leader in data science and academic research. Serving more than three decades as a professional club manager, he has a wealth of operational experience and a proven track record in real estate sales and capital improvement and renovation in gated communities. Jim welcomes your questions or comments and he can be reached at 

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by Steve Mona

Over the course of my 39-year career in the golf industry, I’ve earned a reputation as a guy who likes to stay busy. At the end of 2018, when I stepped back from my role as CEO of the World Golf Foundation, I accepted a new position as Executive Director of We Are Golf and senior advisor to new WGF CEO Greg McLaughlin. This summer, I gained yet another opportunity to serve the industry I love when I joined the team at Club Benchmarking.

Steve TagI’ll be wearing two hats, as a member of the Club Benchmarking Board of Directors and as their newly minted Director of Governance & Leadership. Since the Club Benchmarking announcement came out, I have received a flood of calls and emails. There have been plenty of congratulations, and more than a few people expressed curiosity about what I had planned for this next chapter in my career. Could the serial CEO they knew really be a data geek in disguise? As it turns out, the answer is yes – I don’t think I saw it coming myself, but it’s a great fit and I couldn’t be more excited about it.

The genesis for my involvement with Club Benchmarking was meeting Jim Butler at Florida Golf Day several years ago. Jim, who was General Manager of Grey Oaks Country Club in Naples at the time, represented the Florida Chapter of the Club Managers Association of America, and I was CEO of the World Golf Foundation, the group that led the organization and execution of Florida Golf Day. Jim and I worked together closely for several years on both Florida Golf Day and the establishment of the Florida Golf Alliance

Around that same time, I was introduced to Club Benchmarking Founder Ray Cronin at the National Golf Foundation’s Golf Business Symposium in Chicago. Ray was rapidly expanding the impact of Club Benchmarking at that time and I was impressed with his grasp of the essence of what made private clubs successful. In January of this year I ran into Jim again at the PGA Merchandise Show in Orlando. He had transitioned to the CEO role at Club Benchmarking in late 2017 and as we discussed my own transition from the WGF, he wondered if I might have interest in potentially joining the Club Benchmarking team.

Months later, I met Ray and Jim for dinner at TPC Sawgrass in my hometown of Ponte Vedra Beach, FL. The conversation covered a range of issues, pertaining to the golf industry generally, and to governance challenges faced by volunteer leaders in a not-for-profit business specifically. That evening, a lightbulb went on for me. Joining Club Benchmarking would allow me to apply my years of studying governance and leadership in the nonprofit sector to the advancement of strategic governance in clubs through adoption of data-driven leadership. Over the course of the next few months, we read, studied and worked together to create a forward-looking plan for addressing and advancing the practice of governance in clubs.

One of my first assignments with Club Benchmarking was to author an article for the Fall 2019 issue of Club Business Magazine, a collaboration between Club Benchmarking and the National Club Association that carries the tagline “Insight for Strategic Club Governance.” In that article, I outline a seven-step process of governance that will help private clubs create an optimum governance structure for the Board of Directors and chief staff executive. I will share each of the seven areas, along with practical examples of how they may be successfully implemented, in upcoming posts in this space.

I also will show how the most important issues facing the golf industry can be understood and applied for the benefit of private clubs, using data as the foundation for my conclusions. The work in which I have been deeply involved over the past decade in the area of diversity and inclusion will form the basis of much of my commentary. I look forward to taking this journey with others who are vested in the success of private clubs. Our need to connect with like-minded people has never been greater. Few institutions provide that opportunity better than private clubs.

Steve Mona 400Steve Mona's career includes leadership roles with the Northern California Golf Association, United States Golf Association, Georgia State Golf Association, World Golf Foundation and Golf Course Superintendents Association of America. Both Golf Digest and Golf Inc. magazine have recognized him as one of the "Most Powerful People in Golf." A native of New York, Mona earned a bachelor’s degree in journalism from San Jose State University (CA). Steve invites (and appreciates) all comments, even those that challenge or disagree with his thinking. He can be reached via email at 

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It's time to stop planning one year at a time and start building capital budgets with a clear vision for the future of your club

Summer is flying by and the capital and operating budget process will soon be upon us. Annual operating budgets are always a challenge, mainly because dues increases are notoriously unpopular with members. You know what's even more daunting? Trying to develop a capital budget that provides adequate funding for necessary capital repairs and replacements without a clear understanding of how much you're going to need and an accurate timeline for when it will be needed. Without that critical information, staying ahead of member expectations and keeping your facility up to date becomes a nerve-wracking guessing game.

Guessing Budget

The most effective way to plan for capital expenses both near- and long-term is through an independent, objective, comprehensive analysis known as a Capital Reserve Study. This powerful management tool identifies capital repair and replacement expenses looking forward 20 years. Clear and concise, a Club Benchmarking Capital Reserve Study charts out these expenses for evaluation and confirmation and becomes a reliable roadmap to the future for senior management, finance committees and boards.

Contact us now for a no-obligation quote for your club.

Capital Planning Testimonial:

The Peninsula Golf & Country Club - San Mateo, CA
David Nightingale, General Manager

"On behalf of our Board of Directors and Long-Range Planning committee, I want to thank Club Benchmarking for the thoroughly professional work your team did for the members of The Peninsula Golf & Country Club. You were laser focused on our numbers and, most importantly, you answered every question completely and offered clear solutions to our capital funding and debt service challenges. Our Long-Range Planning Committee was very impressed with the Capital Reserve Study and the all-important Capital Strategies Modeling which identified a course of action that allows us to fund our debt and meet our annual capital needs into the future. These living documents will enable the management team, Board and Committees to stay on course. I consider the work you performed for The Peninsula Golf & Country Club to be essential to how great clubs operate and I’m very proud to have been part of the team that worked together to establish this solid foundation for the Club’s future."

Read a Capital Planning Case Study
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Originally published by the National Club Association, Club Director Magazine

A CLUB’S AMENITY MIX makes a difference. Clubs with expanded offerings command higher initiation fees and attract more members. The yellow slice in the pie charts below represent the percentage of fixed operating expense allocated to non-golf sports and recreation (i.e., racquet sports, fitness, aquatics).

Yellow Slice Chart

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Originally published in NCA Club Director Magazine Fall 2018

CLUB BENCHMARKING DATA REVEALS a “Tale of Three Cities” happening in the club industry, and we are deeply concerned about what appears to be a growing divergence. According to our research, one-third of clubs are prospering and growing, one-third are “going sideways” and one-third are falling further behind every year. The metric we use to measure prosperity and growth is the compounded annual growth rate (CAGR) in net worth over time, aka Members’ Equity or Unrestricted Net Assets.

In our club industry version of Dickens’s classic tale,
the difference between the “haves and have nots” comes down
to mindset. Prosperous clubs are focused on programming and
investing to deliver a compelling member experience. 

The Club Benchmarking research team has analyzed net worth over time (2006 thru 2018) for more than 300 clubs. Thirty- five percent of those clubs have seen their net worth decline in absolute terms (worth less today than in 2006). Currently, the median CAGR for this group of clubs is 2.1 percent, which is below the inflation rate for construction during that same period. Only 37 percent have CAGR at or above 3.5 percent— Club Benchmarking’s recommended target. For contrast, the upper quartile representing the healthiest clubs, has a growth rate of 5% or more.

The Best of Times and The Worst of Times
In our club industry version of Dickens’s classic tale, the difference between the “haves and have nots” comes down to mindset. The prosperous clubs are focused on programming and investing to deliver a compelling member experience. They reap the benefits of that focus through increased capital contributions from their existing members and from new members paying healthy, consistently increasing initiation fees. Our data proves clubs that have invested consistently over the last 10 years are experiencing a corresponding, quantifiable increase in members equity (net worth) over time, whereas clubs that have restricted their capital investments are seeing the opposite effect.

For those declining clubs, the focus is on operational results, cutting costs and restricting investment rather than on the member experience and the health of the balance sheet. Reversing the downward spiral will require leaders of those clubs to commit to changing the behaviors that are driving their decline. We offer a complimentary Net Worth Over Time analysis and report for clubs interested in taking the first step. Visit to learn more

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Originally published by BoardRoom Magazine March/April 2018

DIYCapitalReserveStudy (1)

Medical advancements like joint replacement have made it remarkably easy for aging club members to rebuild their crumbling physical infrastructure with the installation of a brand-new hip, knee or shoulder.

We all have a friend or golf partner who’s gone through it, but probably none who would have ever considered performing their own surgery or even worse, asking a member of their regular Saturday foursome to take up a scalpel. 

There’s no debating that the best person for such a serious job is an experienced medical professional. Preferably one who is properly trained in their field of expertise, armed with a track record of successful outcomes and proper tools for the task at hand. There are just some situations where a do-it-yourself approach should never be considered an option.

While Baby Boomer members line up to replace parts in the hope of revitalizing their golf games and social lives, their clubs are also experiencing the effects of time. Club leaders across the country are slowly waking up to the reality of aging infrastructure and deteriorating physical assets and the impact of that decline on their club’s long-term financial health. Those club leaders share a common bond in that the decision to accept a position on a private club board carries with it a legally binding fiduciary obligation to protect and grow the assets of the club. The board is tasked with providing strategic direction and a vision for the club’s future. With that responsibility comes a requirement to ask and answer some tough questions: For example, “What is the club’s ability to add new amenities?” “When should the greens be replaced?” “How much longer will the carpet and furnishings hold out?” “Where will the money come from to make those things happen?”

Unfortunately, as these difficult questions surface, some club leaders will perpetuate a common pattern of kicking challenges down the road to be dealt with by a future board. Other club leaders will recognize the importance of studying the club’s physical assets, but wrongly conclude that a do-it-yourself approach will be “good enough.”

Typically, in this DIY scenario, the assignment lands on building maintenance staff and accounting team members armed with little more than a depreciation schedule and/or the capital asset schedule. In the end, like a DIY surgeon attempting to assess and treat an aging patient, well-meaning staff members lack the time, tools and expertise to perform this critical task. The result is, predictably, an imprecise and inaccurate
depiction of the club’s future capital needs.

According to Club Benchmarking data, more than 60 percent of private clubs in the United States are currently underfunded for future capital expenditures. For many clubs, the gap exists because they lack accurate documentation of the scope, condition and life expectancy of their club’s physical assets.

The alternative to this risky and inefficient DIY approach is an objective, third-party, professional capital reserve study (CRS) to inventory, assess and prioritize capital needs well into the future. A professional CRS provides the financial starting point for strategic planning and is a critical component of fulfilling a board’s fiduciary responsibility.

Based on findings from our research and interaction with hundreds of club boards, we believe the need for professional capital reserve studies in the club industry is urgent. In direct response to that need, we recently expanded Club Benchmarking services to make professional capital reserve studies more widely available. Led by the industry’s foremost CRS expert, Paul Mueller, our team of Club Benchmarking CRS specialists is on a mission to deliver studies that meet these goals:

  • Help boards meet their fiduciary duty to inventory and then protect, preserve and grow club assets
  • Foster a long-term strategic view of club leadership
  • Proactively identify capital spending needs and identify any future gaps between needs and resources
  • Equip board and committees to make fact-based proactive decisions
  • Arm club executives with information to plan accurate annual budgets
  • Instill member confidence in financial plans and projections.

Our proven process of financial analysis, staff interviews and onsite inspections creates a foundation for impartial, fact-based decisions and serves as the critical input for long-term financial planning. 

From Our Video Library - Capital Reserve Study Process & Application

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Originally published in the Experts Corner Spring 2018 NCA Club Director Magazine

Member satisfactionMember satisfaction and member loyalty are related, but the terms are not interchangeable. Ask yourself this question… Are your club’s most loyal members always satisfied? Probably not. Loyal members are often the first to offer constructive criticism when an amenity or service misses the mark. They may not be satisfied, but their strong desire to help the club improve is a manifestation of their loyalty.

On the other hand, satisfied members are not necessarily loyal members. Members exhibit loyalty when they recruit others to join the club, maintain their own memberships year after year and speak positively about the club in the community. The two constructs are very different, with loyalty outweighing satisfaction in long-term benefit to the club. The bond that links them together is “attachment.” Our published research on Predicting Member Loyalty confirms that members with a low degree of attachment to the club are likely to resign, while highly attached members are likely to renew for another year. 

What is Attachment?
Attachment is defined in psychology as a strong bond between an infant and a caregiver. Marketing researchers began to study attachment because it had a direct impact on a consumer’s commitment to a brand. This research discovered and described a specific type of attachment called “place attachment,” which refers to the relationship between people and a particular place. In clubs, place attachment plays a major role in member loyalty.

Place attachment, in the context of a private club, functions as the bridge between member satisfaction and member loyalty. Satisfaction influences attachment which in turn influences loyalty. Clubs create loyal members when a personal attachment is developed through the club’s culture and offerings.

Place attachment has four components: 1) Place dependence measured through the member’s connection to the club’s amenities. 2) Place identity measured by how closely a member's personal values align with the club’s values. 3) Social bonding describes the connection with other members, with club staff, and with family members using the club as a host for these relationships. 4) Place affect describes the feeling of belonging to the club and the emotional affect it bestows upon the members.

* Dr. Jim Butler, CCM, conducted his academic study of member loyalty as a PhD student at Iowa State University

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Golf Course Maintenance BudgetsThe industry debate over how much a club should budget to maintain its golf course seems never-ending, and that’s understandable. The course consumes a significant portion of the cash required to run a club and it is also one of the most visible and member-impacting amenities, so a high degree of focus is justified.  

As a start, let’s consider the following scenario: While the median club in the country spends close to $1.2M on course maintenance, two clubs within a few miles of each other spend $700K and $1.75M respectively on their 18-hole courses. We all know, and have probably played at, clubs on both ends of this spectrum.

The Usual Discussion
Since we began working in the club industry in 2010, we’ve had the opportunity to interact with leaders of hundreds of clubs across the country. Typically, the discussions we hear about course maintenance budgets involve benchmarks such as cost per hole or cost per acre and a variety of specific characteristics ranging from type of grass to geographic location. To understand the way in which these factors might be used determine how much money a club spends on course maintenance, we undertook extensive analysis of club industry data, studying clubs that range in annual revenue from $1M to $40M, exist in nearly every state in the country, have nine through 108 holes, grow every type of grass and see variation of seasonality, weather conditions and rainfall.  

The Business Model View
The data revealed that while traditional benchmarks (cost per hole, cost per acre, cost per member, type of grass or geographic location) may represent the actual spending of an individual club, the simple fact that the club up the road is spending more on their course than you are is not enough to justify a decision to beef up the budget. So, how much should you be spending? Contrary to conventional wisdom, our research clearly shows that the answer is ultimately not determined by some combination of physical characteristics. The reality is that clubs spend what they can afford to spend.

Before you dismiss this idea as random or arbitrary, consider this: The amount a club can afford to spend is eminently quantifiable and can be easily and accurately benchmarked. The proportionality of spending in clubs is highly consistent and represents the foundation of the common club business model. See the pie chart below for the proportionate distribution of gross profit (the money a club has for funding fixed operating expenses) including the portion spent on course maintenance, across all clubs. It is important to note that the proportions shown, +/- a few percentage points, are consistent across the entire industry, independent of club size (based on total operating revenue) or geographic location.The business model of clubs, as defined by data from the industry itself, defines these proportions as the benchmark. So roughly one-third of a club’s gross profit (don’t think revenue) is the affordability at the average club.

Golf Course Maintenance Spending.png

Course Maintenance + Sports/Recreation Spending = About 40 Percent of Fixed Operating Expenses
We also studied the range of club types among those with golf— from pure golf clubs to full-service country clubs with more diverse amenity sets. What we discovered is that for a diverse club, like the one on the right in the chart below, the combination of course maintenance spending and other sports/recreation spending uses about 40 percent of a club's gross profit. With no other sports amenities to fund, a club with only golf like the one on the left in the chart below, typically spends a little more on course maintenance—around 40 percent of its gross profit. That pattern has proven to be consistent across the industry.

Golf Maintenance Spending.png

Different but the Same
Going back to the range of course maintenance spending referenced at the beginning of this article (from $700K to $1.75M), would you conclude that one club is spending $1M too much or that the other spent $1M too little? Of course not. We know each course can be beautiful and a pleasure for its members. In fact, those examples are from real clubs located just a few miles from each other. They are spending 32 percent and 34 percent of their gross profit respectively on their course—nearly identical spending from the business model and affordability perspective. Any of the traditional measures, cost per hole, cost per acre, geographic location, etc., would have led to a very different, and incorrect, conclusion. The broad value of this model is further realized when one understands that it doesn’t matter whether a club has 18, 36 or more holes. The affordability, a.k.a. the proportionate spending on course maintenance, doesn’t vary based on hole count, number of acres, type of grass, etc. As supported by industry-wide data, the only driver of a club’s course maintenance budget is affordability. Clubs spend what they can afford! 

On the margin, there is naturally some variation. Golf-only clubs, with less competition for cash resources going to other amenities tend to spend a higher proportion of their gross profit (into the low 40 percent range) on their course, while very large clubs, or clubs with significant non-golf sports facilities tend to spend in the high 20 percent range. The national median is 30 percent of gross profit going to course maintenance. The split between course spending and non-golf sports spending is actually an indicator of the "golf club vs. family club" strategy of the club. Geographically, there is variation on the margin, but only a few percentage points from the national median, as per the data map below. 

Course Maintenance Map.pngConclusion
So, what does all this mean? We now know that individual data points, without the context of the bigger picture, can be misleading and are not an appropriate source of guidance and support in the decision-making process. Next time you’re in one of these discussions, remember that your club, like all clubs, is subject to the common industry business model and your budget is driven by your gross profit. Having a clear understanding of what has been revealed by the study of industry data will help you have strategic fact-based discussions about your own course maintenance budget.


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Start a serious discussion about capital investment in your clubIf just one rule could be instituted in every club boardroom with the goal of making the entire industry healthier, it would be this… Every time a Board member is tempted to bring up the subject of F&B profitability, they have to stop themselves and replace that topic with two critical questions:

Capital planning is at once the biggest challenge and the best opportunity for improvement in clubs, and yet few clubs seem to fully recognize its importance.

There are two easily calculated measures that managers and boards can use to gain keen and immediate insight into their club’s capital situation: Net Worth (owner’s equity in a for-profit club and unrestricted net assets (UNA) in a not-for-profit club) and the Net Available Capital to Operating Revenue Ratio.

Understanding the club’s Net Worth over time begins by assembling ten years of audited financial statements. Search the documents for “Owner’s Equity” if you’re a for-profit club or “Unrestricted Net Assets” (UNA) if you’re a not-for-profit club. Enter the number for each of the ten years into a spreadsheet and plot a simple line graph using that data. The resulting graph shows your club’s net worth over time and clearly illustrates whether your UNA is increasing, going sideways or declining.

The chart below shows a real-life example of UNA or Net Worth over time, plotted in this case by Carmel Country Club in North Carolina. The club’s impressive growth, from a net worth of about $12 million in 2004 to more than $30 million in 2016, is a direct result of a strong commitment to capital investment on the part of club’s Board and Management. The club’s consistent cycle of investment has, over time, produced amenities that increase the value of being a member of the club. Strengthening the club’s value proposition supports increases in initiation fees and dues and as a result, the club’s UNA is on a very healthy upward trajectory..

Plot the net worth of your club over timeThe second exercise, calculating your Net Available Capital to Operating Revenue Ratio, draws on the financial statements you gathered to study Net Worth. Using data from the financial statements, calculate your club’s earnings before income taxes, depreciation and amortization (but after covering expense of interest on debt). The result of that calculation is called Net Available Capital. It is the money remaining at the end of each year that can be used to pay down debt, make capital investment or put money in the bank.

Analysis of industry data shows that at a minimum, clubs must generate Net Available Capital equivalent to 12% to 15% of their total operating revenue every year. One quarter of clubs generate 7% or less (capital starved clubs) and at the high end of the spectrum, a quarter of all clubs generate more than 17% (capital rich clubs). Fifty percent of all clubs aren’t generating the necessary capital over time. If your club’s Net Available Capital is below 12% and especially if you are in the sub 10% range, you are very likely feeling the stress of too little capital – you may even see the evidence when you look at your physical assets.

Return on equity is measurable in private clubs

Those two quick, but critical, ratios will yield great insight. Now let’s address how to use the ratios as a catalyst for constructing a plan. There are three key points related to capital planning and aligning a Board and membership on this important issue.

  1. Industry data shows that clubs investing continuously over time have a higher rate of return on equity than clubs restricting investment. Capital investment is a momentum game, meaning the more you invest, the more money you will generate for further investment, through higher capital income. The less you invest, the less money you will generate because you won’t be attracting members willing to pay a reasonable initiation fee to join the club. During the last financial meltdown, many of the clubs that reduced or eliminated their initiation fee are now capital starved clubs.
  2. Every club should have a capital reserve study conducted by an objective, 3rd party professional with experience specific to private clubs. We believe a 20-year forward projection is necessary to ensure financial sustainability and consistency in the club's value proposition. The Capital Reserve Study serves as a running projection of your club’s capital needs over time, so you can develop a rational long-term capital investment plan and focus on determining where the resources will come from to meet the needs.
  3. Club Benchmarking data shows clubs must focus on a tangible value proposition by continuously investing to create value if they are to succeed over time. If a club is focused only on cost cutting and not the value proposition, the data shows those clubs are likely to get swept into a cycle of decay that will be difficult if not impossible to reverse.
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Finding Common Ground Through the Language of Finance
communication gap.jpgThe most successful private club executives are in a class of their own when it comes hospitality. They are experts at delivering an extraordinary club experience and managing large teams of people, but we’ve only met a handful that would be comfortable calling themselves experts in accounting or finance. While that’s not surprising since the skillsets are so different, it does present a challenge.

In the club boardroom, even strong managers can find themselves at a disadvantage when they come face-to-face with business owners, hedge fund managers, CPAs, private equity managers—people who are extremely well-versed in finance and business.  In that scenario an imbalance of power exists, due in large part to the vast difference between the way finance is discussed in the outside business world and the kind of discussions that take place inside the club boardroom.

It's a serious communication gap and it leaves many managers struggling to explain the club's results in a way that satisfies the board. The language of business is finance and it is certainly the native language of your board. Our goal is to help managers learn to speak the language of finance so they can feel more confident in the boardroom and communicate with their boards more effectively. 

Business people, like those who populate club boardrooms, understand financial modeling and they know the key performance indicators for their own businesses. They know their gross margin; they understand their fixed expenses as a proportion of revenue; they understand return on equity. Business owners explain their business using numbers every single day. For private club managers, knowing the club’s numbers, putting them into context and presenting them with confidence is the key to getting the board’s full attention and advancing their understanding of the club business.

Let’s look at just one example of how numbers and context can be used to address questions and explain an important aspect of the club business:

Explaining Club Payroll: Focus on Data and Context

  • “What are all these people doing here?”
  • “We have way too many people.”
  • “Our payroll is way too high.”

Every manager has heard those statements. They’re uttered every day in clubs across the country, in the boardroom and by members in the 19th hole. Absent data and context, those statements amount to little more than conjecture and responses like “We need all of these people” or “We have a smaller staff than XYZ Club up the road” are equally unproductive and unsatisfying. Thus, the debate continues.

The question boards and managers should be asking (and answering) is this: “Are we staffed at a level that balances the club’s financial results and our member service expectations?” The first step in answering that question and introducing numbers and context to the great payroll debate is to calculate the club’s payroll ratio (total “loaded” payroll as a percentage of total operating revenue).

The chart below shows the Payroll Ratio for clubs with golf using club industry data for fiscal year 2015. As you can see, the median Payroll Ratio for this data set is 56 percent. For half the clubs in the set (those between the 25th percentile and the 75th percentile) the Payroll Ratio ranges from 53 percent to 58 percent. It's a small spread but as you can see from the overlay of median operating profit, the impact of a few points is significant.

The blue dot in the lower quartile (payroll ratio of 49%) represents a real club – one that was, until recently, stuck in the payroll debate. A small contingent of the membership was actively working to convince others that the club had “too many people” and that those people were being paid too much. Clearly, having the number (payroll ratio) and putting it in the context of hundreds of other clubs via a comparison set is powerful. What the chart confirms is that this club has a payroll ratio lower than 88 percent of the other clubs in this data set.

Payroll Ratio FOF.png

In the example above the number was well below the median, but some clubs may find that their Payroll Ratio is at or above the median. Whatever the case, it’s important to remember that the number itself is not a conclusion but rather a starting point and foundation for a fact-based discussion about financial realities, club culture and choices. As an example, adjusting a higher-than-typical Payroll Ratio back toward the median is ultimately a matter of choices. Are members happy with current service levels? Would they be open to a reduction in staffing levels or service hours? Is the financial impact of the Payroll Ratio such that the board must make difficult decisions regardless of the members’ preferences? Without numbers and context, the payroll debate is bound to continue as a contentious guessing game. Armed with numbers and context, managers are equipped to bridge the divide and discuss the club's business with the board in their native tongue—the language of finance.


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