NET WORTH is a measure commonly used as a statement of how much an entity or individual is worth. Net worth can be calculated for a private club just as it can for any other business. This is a critical measure and something on which all club boards should be focused.
Whether you’re referring to a person, a business or a club, consistent increase in net worth would be considered an indicator of positive financial health. The opposite could be said of a consistent decline in net worth. A club’s net worth over time can be used to calculate its growth rate and benchmark that rate against other clubs in the industry. The measure of growth over time is called the Compounded Annual Growth Rate (CAGR).
Based on data from a study group of 90 clubs, the median growth rate in private clubs is 2.2 percent. About a quarter of all clubs are growing at a rate of 4.8 percent or higher. On the opposite side of the spectrum, a quarter of clubs have essentially flat or declining growth. The top club in the study group has a compounded annual growth rate of nearly 12 percent over a 10-year period. In the case of that specific club and others like it, the difference comes down to what is being discussed in the boardroom. Achieving strong growth requires the board to be solidly committed to and focused on capital investment.
While data gathering and analysis is ongoing, the sample set for this study is representative of the industry in terms of annual operating revenue, location, club type, etc. The findings of the study on net worth and growth over time run parallel to what is known about the private club industry from prior investigation of capital income. About 25 percent of clubs could be called capital starved, 25 percent are capital rich and the rest are essentially standing still—neither growing or declining.
To participate in the study and receive a calculation of your club’s compounded annual growth rate, visit clubbenchmarking.com/net-worth.