3 REASONS WHY YOU SHOULD RE-EXAMINE YOUR GOLF COURSE MARKETPLACE

By Michael A Kahn, Golfmak, Inc. Golf Course Business Consultant, Member of GCBC.

If your golf course or country club is doing better than it was five years ago you don’t need to read any further. For most of you, I believe a market update is the most important exercise you will undertake for the future of your golf course or country club. Make no mistake: The market you served ten years ago has changed. Have you adjusted to it? Nope!

I call it, “Asleep at the wheel!”   

So what has changed?

1.      Participation in golf in general has flattened – I say, “Declined!” in the past dozen years (read an article I published on my web site in 2000: http://www.golfmak.com/ball.htm – particularly the last paragraph in the article). For instance, in Sarasota, Florida over 90-holes of golf closed for good in a matter of a couple of years. But rounds at the remaining courses did not increase. Whoa! In 2012 we lost 154 golf courses nationwide. Remember, they were adding over 300 courses a year in the 90’s.

2.      The club’s grill room looks like a senior citizens lunch room. Twenty years ago the average member’s age was 55, now it’s 75. Are you ready for when they’re 85? I recently dealt with a private club that became suddenly financially desperate. They realized too late that the average age of the membership was over 70. No future! Every time they had to assess the membership to pay for capital emergencies more would simply resign (the ‘green banana’ syndrome).

3.      One private country club suddenly found out their 99.9% all white neighborhood had become over 30% non-white. The new local population had a much lower golf participation rate – less than one percent (national average hovers around 10% - National Golf Foundation, Jupiter, Florida). Mathematically, the reduction in participation by the new demographic more or less matched the drop in membership at the club. I call it, “Asleep at the wheel!” 

  

If the three reasons above don’t drive your decision to re-examine your marketplace, I predict your golf course is doomed.

I understand and appreciate the power of marketing. However, I learned over 50-years ago not to waste time and money chasing a customer who has no interest in my product (golf).

   

So, what should you try to learn, and what do you do with it?

You need to know your current loyal customers. They tell you they like to play your golf course for one reason or another. Look for commonalities like ages, skill levels, busiest tee time hours of the day, favorite grill room items, etc. When you have a profile of your main customer base you either need to change the profile – especially if they are all over 70, or if they are younger, go to the market to find more people like the ones you already have. That’s why you need an updated market analysis. Then you can decide on your next move.

I have colleagues who specialize in a golf course market analysis. The cost is not much more than a weekend ad campaign, but it can be a map to a gold mine for your golf course.

Want to discuss this article? Call me: 941-739-3990, or write: mike@golfmak.com. It’s a free consultation.   

April 3, 2013. While walking the dogs this morning...

I met my golf buddy-neighbor on the sidewalk while walking the dogs this morning. He was telling me how he was frustrated trying to stop a leak after he installed a new water heater himself. It was a brass coupling that he could not tighten enough to stop a small drip. No matter how tight he made it the leak still persisted. I can hear the expletives - like missing a 3-footer.

A one-hour job lasted all afternoon - not to mention two trips to Lowes, missing a golf game, and rising blood pressure.

Next day at the golf course he mentioned his dilemma to another golf buddy who happened to be a master plumber. Of course, the expert (plumber) said he knew exactly what the problem was and further, it would be a 2-minute fix! It was the way the seal was placed - backward.

Fixed!

The moral of this story is that the expert, in this case the plumber, understood the problem immediately. He drew from many years of experience as a professional plumber. That's the kind of experience I use as a consultant in my (golf) industry.

With the golf course business in a correction spiral (I'm being nice), I see golf operations operating like my neighbor and his water heater. I'm the plumber.

When I take on a golf course analysis assignment endless things jump out at me like Jack-in-the-boxes. Every one of these Jacks is throwing money into the wind - dollar bills, ten dollar bills, hundred dollar bills - even $1,000 dollar bills! Money gone for good! The sum of all those Jacks adds up to thousands and thousands of $ dollars every day week, month and year.

Really! I once walked into a golf course and found over $110,000.00 (that's one hundred and ten thousand dollars) in less than three minutes. At an evaluation of 10 X earnings, which was the norm at the time, that $110 thousand computed to $1.1 million in value to that particular golf course. My modest fee made that owner over $1 million dollars in a heartbeat!

I believe many failing golf courses can come back. I can find out very quickly. Sure, many are also doomed. I call them 'boats that won't float'. I'm not a patronizer. I mean, why try crossing an ocean in a boat sure to sink? If your ship is doomed I'll tell you.

But, if I see a way to survive I am 100% confident in my analysis and advice. Not only that, but my approach is not all that hard to follow. Not rocket science. I use very simple and basic principles. I mean, if you can tie your own shoes we can accomplish success.

If you are a board member of a troubled golf club give me a call. You'll be amazed at how your situation is so prevalent - everywhere. In a short, in a free consultation I can enlighten you. If nothing else, you'll feel better knowing you've got lots (and lots) of company.

I am an expert with over 50-years experience in the golf business world.

Mike

  

I love this...

A good friend and a real classy country club manager, Allan Irwin, just announced his new position at Niagara Falls Country Club/Youngstown Yacht Club. What a perfect match.

Allan and I go back to about 1990 when we were contemplating which direction we would go in the golf business. He came up on a vastly different track than I did. Allan has the polish and skill to manage high-end country cubs, while I came up from the down-and-dirty daily fee golf world. However, it was amazing that we had then, and still have the same fundamental approach to golf as a business today, which says, "At the end of the day the balance sheet rules - period!"

Allan stuck to his country club route with a long stint with Toll Brothers, Inc. as Vice President of Country Club Operations.

Congratulations to Allan Irwin and good fortune for Niagara Falls Country Club.

Mike

I'm gonna brag a bit here...

I just received a real nice testimonial from Brian Crawford, PGA Professional and an owner of a golf club in Missouri:

"I have known Mike Kahn for years and his experience and wisdom of the entire golf industry is legendary. I am the head golf pro and an owner of a golf course and country club in Mo. I have been in the industry for many years and know enough to always seek good advice. It's crucial in any business to have people you trust and respect. To this day I still pick his brain for advice and ideas. Before you make a move in this ever changing world of golf I strongly suggest you contact Mike. Reach out and spend just a little time with Mike and it can save you big in the future. "

I love to answer inquiries from anyone, anywhere in the golf world. I hear from students, golf course owners, appraisers, persons aspiring to own a golf course, brokers and even attorneys. I always reply with my advice or comments.

Try me anytime: 941-739-3990, email: mike@golfmak.com, Skype: GOLFMAK. 

Mike

April 1, 2013: Application for a Golf Course Bank Loan

Last week, as consultant for a golf course buyer, I attended a loan application meeting with the bank loan officer, the bank branch manager, the golf course buyer and borrower and an attorney. The golf course buyer was under a purchase and sale contract to buy the golf course and was seeking bank financing for a portion of the purchase. Earlier, I visited and reviewed the subject golf course, its marketplace, and reviewed three years of financial statements.

There was one very impressive aspect of the golf course property that I knew would impress the banker: It is a 'some-day' valuable piece of land.

However, in the world of banking the same holds true today as it has for 100-years: The banker looks at the ability to repay the loan, which must be clearly demonstrated in the recent financial history of the course. Unfortunately, the financial history was not impressive enough to qualify for a head-office-approved loan - for which I was not surprised.

It was an interesting meeting, because the loan officer and the branch manager knew the property and really wanted to approve the loan. That's because the land under the golf course still retained most of its property rights. That fact is typical of a golf course built forty or more years ago. Therefore, future value of the land could be anywhere from $10 to $20 million, more than adequate to support a $1 million dollar mortgage. Nonetheless, the ability of the borrower to make loan payments today could not be demonstrated, so the borrower was advised the bank could not process the loan request.

So, how can one finance a golf course with a bank?

Conventionally, the business must show the banker it can meet debt service based on the most recent financial history - usually the trailing 36-months of income less expenses.

But wait! Some loan officers can make loans of under $1 million without going to head office for approval. However, it will likely be a loan of 50% or less loan to value (LTV). If a convincing business plan can show the loan officer the true potential and performance of the business will meet debt service, a 50% loan might be approved. So, we continued...

Applying my expertise, plus exceptional field work by the borrower a presentation in power point was created. I believe the assumptions and forecasts are very attainable and could get a positive response from the bank. The presentation is in the final edit stages.

Stay posted. It will be an experience to achieve the first golf course bank loan I have seen in at least 8 years.

Mike

  
    

Monday, April 1, 2013

I am looking for a golf course for an investor in Maryland. He will look anywhere in the USA - preferring the eastern side. He has a down payment and will need seller financing.

The ideal golf course for this person will be 18-holes, clubhouse, but not a monster. Public or semi-private, making at least some money - enough to cover the seller's mortgage and make a reasonable profit. This person will be an n site owner-operator.

Send me an email (mike@golfmak.com) if you have a golf course available that might fit. I am his consultant and buyer-broker.

Mike

Hi...

Well... I just joined the Golf Course Business Consultants (GCBC) a group of highly specialized experts in the golf industry. I am in the company of well established gurus like Jack Brennan. Paladin Golf Marketing, Ron Garl, leading golf course architect, and John Johnson of J2 Marketing. Check out the GCBC site at: http://gcbcinc.com/.

Man! We're watching so many sinking ships out there. In desperation I see what were once high end private country clubs with tee times on all the re-seller sites. Some have hired management companies to market tee times competing with traditional daily fee golf courses. I'm seeing $100.00 rounds going for $39.00 in the Sarasota - Bradenton (Florida) market. One course is advertising $19.00 rounds that were $65.000 ten years ago.

Where are we going from here? I mean, expenses have not really gone down - except cutting corners.

More later.