Club boards are typically made up of people who have been successful in some sector of business. Unfortunately, that acumen is often “lost in translation” on its way to the boardroom due in large part to a disconnect between the language of finance commonly used in the business world and the way finance has traditionally been discussed in the club world.
Introducing high-level key performance indicators, particularly those that draw on familiar business concepts like gross profit and gross margin, is a logical way to begin bridging the communication gap. A club board is much more likely to achieve alignment and work together productively if everyone is speaking the same language.
Be careful to select KPIs that are appropriate for the business you’re running—in this case a club. The club industry has its own unique business model, which is different than the business model for manufacturing, technology, etc. As an example, a measure like “inventory turns” might be a valid KPI in another industry, but it isn’t a “key” measurement for the club business.
The saying “measure what matters” applies here, and that process begins by asking questions that will help you understand the factors driving your club’s financial and operational health. Through extensive analysis of data from more than 1,000 clubs, Club Benchmarking has identified a set of 15 KPIs that correlate directly to financial health and sustainability in a club. Listed below are strategic KPIs—appropriate for the boardroom.
Membership Dues to Revenue Ratio
- Gross Profit
- Gross Margin
- Fixed Expense to Revenue Ratio
- Net Operating Result
- Total Capital Income
- Net Available Capital
- Net Available Capital to Revenue Ratio
- Payroll to Revenue Ratio
- Net F&B Income to Gross Profit Ratio
- Number of Full Member Equivalents
- Full Member Dues
- Full Member Turnover Percentage
- Debt to Revenue Ratio
- Debt per Full Member Equivalent
For more detail, including a sample of the Executive Dashboard report with KPI definitions, visit clubbenchmarking.com/ executive-dashboard.
Ray Cronin co-founded Club Benchmarking in 2009 with his business partner Russ Conde, and has presented the concept of strategic benchmarking and the “Financial Insight Model” to club boards and committees across the country. He is currently serving his third term as president of Thorny Lea Golf Club in Brockton, Mass. He can be reached at [email protected].