Continual Capital Investment, What Bucket Are You In?

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Ray Cronin of consulting firm Club Benchmarking beats the drum on the importance of forward-looking capital plans, strong balance sheets, and the indisputable fact that private clubs compete on value, not price.

A club’s income statement is not the only meaningful measure of club health. It’s only a gauge of a club’s ability to deliver service and amenities to its members. The money flowing through a club is consumed by the members’ everyday use of the club. Most clubs aspire to break even operationally. That’s okay, but it is not the real driver of long-term success.

Capital investment and a growing, strong balance sheet are the real financial drivers of success. Cronin calls this “Net Worth Over Time (NWOT)” and states it is the true key performance indicator. Using data from over 2,000 private clubs, Cronin found that NWOT was shrinking at 25%, sideways or moderately growing at 50%, and robust at the top 25% of the surveyed clubs.

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SHUN CHANGE - STAGNANT

25% Shrinking‍

1. Too few members as a result of weak member experience
2. Narrow breadth of lackluster services and amenities
3. Weak Balance Sheet
4. Operational Governance over Strategic Governance
5. Members think like Customers, not like Owners

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EVOLVING SLOWLY

50% Sideways - Moderate Growth

1. Barely adequate to adequate number of members.
2. Lackluster to above average services and amenities.
3. Average Balance Sheet
4. Bounce between Operational and Strategic Governance
5. Mix of members who think like Customers and like Owners

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EMBRACE CHANGE - DYNAMIC

25% Growing Purposefully

1. Full Membership Roster
2. Compelling member experience with broad array of services and amenities
3. Strong Balance Sheet
4. Focus of Governance is on making the club better (can still be stuck in Operational Governance at times)
5. Most members think like Owners and take pride

Cronin emphasized, “Don’t look to simple answers like cutting price. The key is your club’s value proposition. Aim to ensure your club offers a compelling member experience. Create a forward-looking capital plan that is the root of sustainable financial success.” This includes one designed to retain and attract the most new members, not projects favored by just a few fueled by personal agendas.

We couldn’t agree more – and have been advocating for this for years. In the long run, clubs can’t cut their way to prosperity. They can trim their way to efficiency. That’s just good business. However, continually postponing investment can lead to a disastrous downward spiral: less investment results in decreased member satisfaction and thus fewer members, which results in less dues and fee revenue, triggering dues increases and assessments, leading to more attrition, and, well, you can see the train wreck coming.

‍A strategic capital plan that engages the members in the process is the way forward. Professional management and superb boards—as does Bobby Jones Links—know how to make this happen.

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