Last week one morning, during my normal daily exercise, I heard a commentator on TV talking about the current trend of government budget cuts make the assertion to “cut smart, not stupid”. It made sense. As I listened further, not only did I realize this could apply to clubs and golf courses, but it also applies to spending. Spend smart, not stupid. The analogy used by the commentator was that if someone sought to lose 30 pounds, cutting off their leg might do the job quickly, but the person would bleed to death. It dawned on me that clubs (and other businesses) often cut too much and too quickly or spend too aggressively.

One example of “cutting stupid” was a now defunct club that managed their finances so poorly they opted not to purchase bunker sand and instead removed sand from fairway bunkers and replaced it in greenside bunkers. That same club, once widely known for quality dining also opted to purchase cheaper cuts of meat while maintaining the same price to members. Then, the people who made that decision couldn’t figure out why members stopped dining at the club. Any wonder the site of the former club is now a mixed use development with several hundred homes?

I’ve often mentioned the “space race” that seems to occur at clubs which often results in overspending on improvements, leading to heavy debt loads that may not be sustainable. Certainly, today’s environment, with many clubs experiencing full membership, is favorable for clubs to reinvest in facilities and address maintenance issues that have been deferred for too long. However, this needs to be done intelligently and with an eye toward the future when market cycles will invariably dictate different conditions that may not be so favorable. If a club spends smart, they’re likely to be able to cut smart when the time comes and not have to eliminate some of the fundamentals that make the club attractive. Remember, the deferred maintenance needs to be addressed first, even if it’s not “sexy”. Separate the wish list into “required and desired”.

Let me share some examples. I know of one club that several years ago decided not to replace a general manager who had moved on. Accordingly, there was no point “where the buck stopped” and nobody to push back on club leadership. While still generating substantial revenues, among the things that occurred was that the food & beverage (F & B) operations began losing substantial amounts of money, approximately one third of revenues. 7 figure losses became common. Was the lack of a GM the cause? Were there other mitigating factors?

I was once involved in the development of a golf course facility where one of the partners, seeking to cut costs by not installing a pipeline to a stream for access to water suggested “let’s hope it rains”. That’s akin to the pilot who doesn’t get 3 green lights and lands anyhow “hoping the wheels are down.”

Return on investment (ROI) is always important. However, for private clubs, especially those that are member owned that return may or may not be financial and can depend largely on the culture of the club. How much are members willing to pay in dues, and new members willing to pay to join the club, especially if dues have increased dramatically. If there is limited objection to the cost of improvements, and membership remains stable, even if there is no economic ROI, then the ROI is solidifying stable membership. However, when the cost of membership exceeds the value of membership – at any level – stability will suffer.

How can a club best make informed decisions?

  • First, it’s critical to know your market and understand your competition. Do an independent market analysis.
  • Simultaneously, analyze the culture of the club and understand the current and future membership. This sometimes involves membership surveys or focus groups.
  • Next is knowing your facilities, how they’re used and their physical condition. Do a facilities analysis.
  • Once these analyses are done, a club is ready to consider the improvements and enhancements that are necessary and the impact on club finances.

After this four step process, then planning and implementing a capital spending project can be done using the information developed to both financially and physically conceive the project and measure the ROI.