Private club boards have a legal responsibility to protect the interests and assets of the club they serve, but most clubs and boards live one year at a time and never get around to addressing the club’s long-term capital needs.
On average, property, plant and equipment (PP&E) make up 80 percent of a club’s total assets. The condition of the club’s physical plant is directly correlated to long-term success, so capital planning is an absolute necessity. Unfortunately, with immediate concerns such as operational finances and declining membership on the table, many boards adopt a reactive approach to capital planning—”When something breaks, we’ll figure out how to fix it.”
Our research shows that failure to address capital planning has been a major contributing factor in the financial difficulty experienced by so many clubs since the Great Recession. The data shows the clubs that have invested are now succeeding more than those that did not.
It’s a “chicken and egg” issue that is pervasive in the club industry, so in keeping with our ongoing commitment to help clubs succeed, we have launched a benchmark study of capital assets in clubs as a natural extension of our capital investment research.
A capital reserve study is the logical first step toward understanding the scope, condition and life expectancy of the club’s physical assets, but we estimate that currently less than 10 percent of clubs have an accurate capital reserve study in hand. An accurate capital study requires a third party, a professional eye and a 20-year horizon of the club’s capital needs. Read more about capital investment and capital planning in private clubs at clubbenchmarking.com/blog/subject-change.
Ray Cronin, Club Benchmarking Founder and Chief Innovator, launched the company in 2009 with his business partner Russ Conde. Ray has presented the concept of strategic benchmarking and the “Financial Insight Model” to hundreds of club boards and committees across the country. He recently completed his third term as president of Thorny Lea Golf Club in Brockton, Mass. He can be reached at [email protected].