Golf Pro Advisor

How Much Money Can You Make in 2017?

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In the January issue of the Golf Pro Advisor (Are You Ready for the 2017 Season?), I discussed the importance of setting both “performance” goals and overall financial goals.

A performance goal, for instance, would be the number of lessons you want to generate this year. That in turn drives your overall lesson revenue (financial goal).

In this issue, I provide an Excel model that will help you forecast your revenue with performance targets. Here is a link to the model.

To achieve your goals, you must have very specific performance targets such as “x” number of lessons per month.

How the Model Works

As an illustration, the model uses a hypothetical example –  the Fictional Golf and Country Club (FGCC) with a six month golf season. You, of course, should input the numbers that apply to your club.

FGCC has 500 member families. There are 1500 potential golfers (husbands, wives, and juniors). But there are only 500 active golfers.

The model covers four “revenue streams”:

  • Lessons
  • Clinics
  • Driving Range
  • Tournaments

Golf shop revenue is generally a big part of a head pro’s income. But that is a more complicated model. I plan to address the golf shop model in a future issue of the Golf Pro Advisor.

This model assumes that a certain percentage of Active Golfers will take lessons and clinics, spend time on the range, and play in tournaments. Key “performance drivers” are:

  • Active Golfers – Number of active golfers
  • Participation –  % of active golfers taking lessons, participating in clinics etc. (Participating members)
  • Frequency – Number of lessons, clinics etc per participating member per month
  • Fee – Average lesson fee, average clinic fee etc.

Here are FGCC’s performance drivers, based on 500 active golfers:

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The Excel model has two tabs: “Targets” and “Summary”. The “Targets” tab has grids for each of the four revenue streams (Lessons, Clinics, Tournaments, Range).

The “Summary” tab shows a summary of the performance drivers (see grid above) and a revenue summary (see “Set Your Targets” section below)

Make assumptions about your club’s performance drivers (Active golfers, Participation, Frequency, and Fee) and then set performance targets for each area.

Input that your performance drivers into the appropriate grid in the “Targets” tab and the model will generate monthly and seasonal performance goals as well as monthly and seasonal revenue.

The summary for all four revenue streams will appear in the Summary tab.

An Example

Let’s look at lesson revenue as an example. The other three revenue streams. (clinics, range, tournaments) work the same way.

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The model assumes that 25% of active golfers take an average of two lessons a month during a six-month season. That’s a total of 250 lessons a month. Here are the calculations:

  • 500 active golfers x 25% = 125 Participating Golfers
  • 125 Participating Golfers x 2 lessons/month = 250 lessons a month
  • 250 lessons/month x $100 a lesson= $25,000 a month x 6 months = $150,000

Set Your Targets

Here is an overview of the annual revenue generated for FGCC. (See “Summary” tab in the Excel Model)

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The key point is to set monthly goals for your golf operation. A lesson target of $150,000 is very vague. How are you going to achieve it?

A target of 250 lessons a month (10 lessons a day) is very specific.You can easily track it. Set monthly performance targets for each of your revenue streams.

If you have good records, you can set targets based on history. If not, make assumptions and then tweak them as you get more experience tracking activity.

Also, your targets should be ambitious but realistic.

Is it realistic to assume that on average each of your active golfers will take three lessons a season?

  • 1500 lessons divided by 500 Active Golfers = 3 lessons per golfer

Is it realistic to assume that that on average that each of your active golfers will spend $500 a season to improve his/her game?

  • $256,000 (Total Season Revenue) divided by 500 Active Golfers = $500 per golfer

Achieving Your Goals

Now comes the hard part. How do you achieve your goals?

If your goal is 250 lessons a month, does that mean:

  • 250 members each take one lesson?
  • 50 members each take five lessons?
  • 500 members take one lesson every two months?

There is a big difference.

If it’s 250 members, the challenge is to get each member to take more lessons. If it’s 50 members, the challenge is to get more members to take lessons.

In the next issue of the Golf Pro Advisor, I will explore this further.

I am happy to discuss the model at no charge. Interested golf pros should feel free to email me at paul@hermancpa.com to schedule a 30-minute consultation. 

Are You Ready for the 2017 Season?

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It’s January. You are probably busy planning for the upcoming season.

Your highest priority may be completing the items on your checklist:

  • Hiring assistant pros and shop assistants
  • Scheduling vendors to visit at the PGA show later this month.
  • Purchasing equipment and merchandise
  • Setting fees for lessons, tournaments, driving range, and bag storage
  • Developing promotional programs
  • Scheduling tournaments and other events

But have you considered the most important item of all: determining your goals for this year?

In an ideal world, your goals would drive your checklist. You’d define your goals first and then tailor your checklist accordingly.

That may not be practical this year. You’ve got too much to do. You’ve got to complete your checklist first. But you still can do some planning before the season starts.

Break down your 2017 plan into these categories:

  • Financial goals
  • Performance goals
  • Activities and programs (Your checklist)
  • Tracking member activity – Lessons, Clinics, Tournaments, Purchases

Financial Goals

You may not have closed your books for 2016 yet. But you probably have a pretty good idea of how much money you made.

How much money do you want to make in 2017? Look at revenue and expenses for 2016 and, ideally, several years before that.

Analyze the trends and then set a target for your 2017 bottom line. To get to your bottom line, you need a goal for each of your major sources of revenue:

  • Merchandise and equipment sales
  • Lessons & Clinics
  • Tournament Fees
  • Range and bag fees

Performance Goals

Your financial goals are WHERE you want to go. Your Performance Goals are HOW you’ll get there.

Some of your income, particularly your salary from the club, is already fixed. You can’t control that.

However, you can control member-generated revenue. You can set the fees and you can project the number of lessons, tournament participants necessary to meet your revenue target.

Here’s an example:

300 lessons (performance goal) x $100 a lesson (Fee – program) = $30,000 in lesson revenue (financial goal)

Your metrics will drive your revenue. Those metrics include:

  • Number of lessons
  • Number of clinic participants
  • Number of tournament participants
  • Number of members taking lessons
  • Frequency of lessons per member
  • Makeup of merchandise and equipment sales

Your Metrics Matter

Your club’s software and the golf shop point of sale system may provide some or all of the data above. At the very least, it should provide totals for the sources of revenue.

Beyond that, ideally, it should provide information on each member’s activities and enable you to perform analyses. For instance, if there were 300 lessons last year, how many members took lessons and how often?

Did 60 members take an average of 5 lessons each or did 150 members take an average of two lessons each? There is a big difference.

If the answer is 60 members, you want to develop programs to get more members to take lessons. If the answer is 150, you want to encourage members to take more lessons.

This information will drive your communications programs plus special efforts as playing rounds with members and providing free tips on the driving range.

Tracking Your Metrics

If your club’s systems don’t provide the information you need, you may have to set up a parallel system to track member activity.  For this, you’ll need CRM (Customer Relationship Management) software. There are a number of inexpensive and easy-to-use CRM software programs on the market.

You’ll want to know for each member how many lessons they took, what was discussed during the lesson, what merchandise they purchased, and the clinics and tournaments they participated in.

One of your shop assistants may be able to input most of the data. Your assistant pros or you will have to put in the information about the lessons.

Having all your members’ info in the database will allow to track individual members’ skill levels and preferences. The information about your members can also show trends that will guide your marketing, programming, and purchasing decisions.

The bottom line: To improve your bottom line you need detailed information about your members! If you don’t have an effective tracking system, make that a priority for 2017.

Prepare for Your 2017 Contract Negotiations

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It’s that time of year again – time to negotiate your contract for next year.

You want to enter into contract discussions armed with the following:

  • Financial Info – Accurate information about your earnings.
  • Performance Metrics – Stats on the golf program (number of rounds, lessons, etc.).
  • Comparables – Head pro compensation at comparable clubs in your area.
  • Goal – A strategy for what you want to achieve.

In this newsletter, I will focus on the financials.

Why Your Financials Matter
Your club’s management (Golf committee, general manager, president, treasurer) should have a clear picture of your total compensation. That includes whatever the club pays you plus income generated through your outside entity (LLC, S-Corp, etc.).

That information is essential to understanding whether you are fairly compensated both for your performance and in comparison to your peers.
Your club management may not know how much money you really make. And they may think you’re doing just fine.

Your job is to educate them with facts.  But your financials must be credible.

I can’t emphasize this enough. If your club management doesn’t believe the numbers, you will be at a severe disadvantage.

Preparing Your Financials
Your financial statement should:

  • Be complete and accurate
  • Cover multiple years
  • Clearly illustrate trends
  • Tie to your tax returns
  • Provide a sufficient but not overwhelming amount of detail

If you use bookkeeping software, such as QuickBooks, you probably already have the information you need. The challenge is to put the information into a format that your club management can understand and digest.
Work with your accountant to ensure that your financials are accurate and complete. Prepare a spreadsheet that covers four to five years (if you have that much history) and all the appropriate income and expense categories.

I would recommend a one-page spreadsheet with an appropriate amount of detail (but not an eye chart with dozens of lines).

Make it easy to read. Color code the statement to highlight totals and trends.

Be sure that you can reconcile the total taxable income in each year to each year’s tax return.

Client Illustration 
I recently worked with a golf pro preparing his financials for discussions with the golf committee. To preserve confidentiality, I will call my client Fred.

The bottom line is that Fred’s pre-tax profit dropped 8% over the four-year period. Below is a chart that illustrates the trend.

Note something interesting here. A comparison of Fred’s income from 2014 to 2015 shows an INCREASE in his pre-tax profit over the year. But the overall trend over the four-year period is DOWN.

That’s a very important distinction. Trends are key as opposed to a snapshot of a short period.

 

The golf committee at Fred’s club was impressed with the completeness and accuracy of his financials. They have not yet finalized Fred’s 2017 compensation.

But because they (a) are pleased with Fred’s performance and (b) recognize that his income has declined, they are open to changing his compensation.

Financial Statement Components
Here is an overview of the components of Fred’s spreadsheet.
There are two sources of revenue: “ABC Golf, Inc” (disguised name of his S-Corporation) and his club salary.
ABC Golf, Inc.

  • Merchandise Gross Profit – Gross profit (Revenue less cost of goods) from the golf shop.
  • Bag/Range/Other – Primarily driving range fees and bag storage fees.
  • Net Payroll – Salary payments to Fred and his assistants less lesson fee reimbursement
  • Other Expenses – Operating expenses for the golf program
  • ABC Golf, Inc. Salary – The salary Fred pays himself out of ABC’s revenue
  • Club Salary – The salary Fred receives from the Club directly

Make Your Case with Facts
Fred got a good reception from his golf committee because he made a strong argument with his financial presentation. It’s hard to dispute the facts.

As former New York Mayor Michael Bloomberg used to say “In God we trust. Everyone else brings data.”
If you would like a sample spreadsheet, please email me at paul@hermancpa.com. Also, I am happy to provide any golf pro (at no cost) a 30-minute consultation on preparing the spreadsheet. Please email me to set up an appointment.

Growing Your Junior Golf Program

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As readers of The Golf Pro Advisor know, I regularly stress the importance of increasing your value to your club. This can, in turn, increase your job security, your income, and your marketability (to other clubs).

One way to increase your value to the club is to create a vibrant, growing youth program. This offers several advantages:

  • Grooming a new generation of active golfers and potential members
  • Stimulating increased play
  • Generating income from program fees, lessons, clinics, coaching, and golf shop sales
  • Forging stronger ties with parents and increasing their loyalty to the club and to you
  • Attracting new members

If your club has, say, 300 members, there are probably at least 300 children between ages 5 and 17. Let’s say you recruit a quarter of this group into the golf program.

That could mean real money and, perhaps more importantly, a lot of parents who support the program and whom you develop a closer relationship with.

In developing a youth program, you face two potential problems: family indifference and adult golfer resistance.

You need to convince families that golf is fun, rewarding, and relatively easy to learn. You also need to establish a family friendly culture that encourages informal play on the golf course.

Here are three junior programs recently featured in PGA magazine:

1.  Golf Leagues

  • Program – Mark Keating at Reserve Vineyards and Golf Club in Aloha, Oregon created teams comprised of boys and girls organized by age group. One team was for 7-13-year-olds. Another was for 14 and 15 year olds.

Mark convinced a number of other Portland area clubs to field teams. Ultimately, there were 12 teams that played not only in the summer but also through the fall.

  • Results – 15% increase (?) in lessonrevenue from kids and additional lessons for parents. Another benefit was the cart rentals from the parents who watched their kids play in the leagues.

2. Club Fitting Day

  • Program – Hugh Matthis at Tavistock Country Club in Haddonfield, New Jerseruns an annual event to fit kids for clubs and golf clothing. The event includes games to keep the kids occupied.

Hugh also promotes Club Fitting Day via the club newsletter, email blasts, and flyers.

  • Results – Some 75 kids participated in the event last year and sales of equipment/clothing increased by 15% over the previous year.

3. Themed Competition

  • Program  Andy Miller at LedgeRock Golf Club in Reading, Pennsylvania runs a Drive, Chip & Putt Championship as part of the junior golf program. Last Fall, he divided the juniors into four teams, each with players of varying ages and skill levels.

Each team had college name – Ohio State – Red; Auburn – Orange etc. This summer he will use an Olympic theme and assign each team a country name.

  • Results – A 3% to 5% increase in overall club revenue. This is the result of not only the program fees but of additional golf shop purchases and food purchases by parents watching their kids play.

These are only three examples. There are more in the Best Practices section on the PGA Magazine site.

It’s not too late to develop fall junior programs. That may a good way to test concepts that you can roll out more formally next year.

As you develop your 2017 junior golf plan this winter, keep in mind the following:

1. Set Goals – Create revenue and participation goals for each program plus ancillary revenue from lessons and golf shop sales

2.  Measure Everything! – If you don’t measure it, you can’t manage it

3. Promote Effectively – Send targeted promotions directly to the families with kids as well as general information to the entire membership.

4. Keep Your Golf Committee Informed – Share your plans and program results with your golf committee. Make sure the committee recognizes the impact of the programs!

Are You Teaching the “Mental Game?”

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“Golf is 80% mental, 10% ability, 10% luck” – Jack Nicklaus

Mind over Body

If so much of the game is mental, as so many top touring pros contend, why do so few club pros teach the mental game? Many focus almost exclusively on the physical game: swing, stance etc.

I’ve been wondering about this for a while.

It started about five years ago when I was watching an amateur golf tournament. As the winner walked off the 18th green, he nodded to a man in the crowd. I’ll call that man Fred.

I was curious why the golfer had done this and asked Fred about it. It turns out that Fred was the winner’s “golf psychologist”. Fred said he helped the golfer with his mental game.

I wasn’t familiar with the term golf psychologist. But since then, I’ve done a lot of research and become convinced about the importance of the “mental game”.

I now spend a lot of time on my mental game. I think I’ve lowered my handicap as a result.

According to Douglas Juola, author of “GolfNosis: Tee Time for Your Mind” “ … it has been proven that concentrating on the mental side of the game can help golfers by improving their focus, concentration, consistency, and by removing distractions and negative self talk “…

He adds that almost every top professional golfer on the tour uses a golf psychologist or hypnotist.

The Opportunity

Of course, a typical club golfer will probably not hire rock star golf psychologists such as Bob Rotella or Gio Valiante (both PhD’s). But that golfer could hire his or her club pro.

In an era of declining play and diminishing lesson revenue, teaching the mental game could be a win-win-win for your members, your club, and you.

It could help your members improve their games and increase their loyalty to the club. It could also mean more revenue for you.

Getting Started

Your members might be initially reluctant to hire you as their golf psychologist. They might not even know what one is.

They may understand the importance of mental fitness. But you’ll need to educate them about the mental game and how it can improve their overall performance on the course.

You might start by offering a series of one hour workshops.  Topics could include:

  • Maintaining a positive attitude
  • Improving your concentration
  • Visualizing your swing
  • Playing under pressure
  • Monitoring your performance

You might limit attendance in any one workshop to, say, 10 members. Also, you could charge by the workshop or for the entire program.

Use your clinic fees as a benchmark. Perhaps, a single workshop would cost $50 and the entire five workshop series would cost $200.

This may, initially, not be a huge money maker for you. But it could be an effective way to introduce your members to the concept.

The Club Pro as Golf Psychologist

If a member finds the workshops useful, he or she may hire you as his/her golf psychologist.  That is the Holy Grail.

You are no longer waiting around for members to schedule a lesson. You are now a “Coach,” not just a teacher.

As I pointed out in the January and February issues of The Golf Pro Advisor, there are many advantages to being a coach. These include: higher fees and an ongoing relationship with a member.

When you launch your “mental game” program,” you’ll need to promote both the workshops and the coaching program.

Mental Game Teaching Qualifications

If you’ve never taught the mental game, you may wonder whether you’re qualified to do so. You probably are.

You know the mental game even if you’ve never taught it. Otherwise, you wouldn’t be a successful golf pro.

But in order to teach the mental game, you need a formal program. You need to “preach what you practice.” That means putting it on paper.

There are a variety of ways to develop your program. One is to get certified to teach the mental game.

To find out more about certification, ask your fellow head pros for recommendations. Otherwise, you can do a Google search for certification programs.

There is also plenty to read on the subject. Amazon lists 526 titles under the term “mental game of golf.”

In addition, there are articles and resources galore on the Internet. A Google search under the term “Mental Game of Golf” yields 32 million results.

By combining what you already know with some research, you can develop the raw material for your program.

Then, you’re on your way to creating a new line of business. It’s also a new way to maximize your income and value to your club.

Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.