golf professionals

Golf Pro Advisor: Who Are Your Best Customers?

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You’ve probably heard of the 80/20 rule. That’s where 80% of a business’ revenue comes from 20% of its customers.

That 20% is a customer segment. And those customers need special attention.

Golf operations have customer segments, too. Most head golf professionals have a mix of customers (members). Some spend a lot of money on lessons and equipment. Others spend little or no money.

It’s important to break your membership into customer segments. You want to tailor programs and communications for each segment. You also want to give each segment the appropriate attention.

Your “Customer Segments”

I’ve created a model based upon a hypothetical club: The Fictional Golf and Country Club (FGCC) with 500 golfing members. I divided the golfers into five segments:

  1. Heavy Hitters –Play at least three times a week, take numerous lessons, and spend a lot in the golf shop.
  2. Enthusiasts – Play at least once a week, take some lessons and clinics, and spend a bit in the pro shop.
  3. Occasionals – Play at least twice a month, take a couple of clinics a season, and spend a small amount in the pro shop.
  4. Low Spenders – Some may play a lot but this group spends relatively little money on lessons/clinics and in the golf shop.
  5. Juniors – Play a lot during the season and take lessons and clinics. Parents are willing to fund improving their children’s golf games

Don’t take this too literally. The segments and numbers are for illustration purposes only. You can create your own assumptions.

What does matter is the logic behind the assumptions. I’ve created an Excel sheet (click here) you can use to build your own segmentation model.

Who Are Your Best Customers?

Here is a snapshot of FGCC’s customer segments.

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For instance, the Heavy Hitters represent 10% (50 golfers) of the golfing membership. Yet, they represent 28% of the golf operations’ revenue.

On the other hand, Low Spenders represent 30% of the golfers but only 13% of the revenue.

Why is this chart important? First, it tells you who your best customers are. Second, it tells you where your risks and opportunities are.

The risk is that you’ll lose Heavy Hitters. The opportunity is that you can move golfers up the food chain. Enthusiasts become Heavy Hitters, Occasionals become Enthusiasts etc.

The other point is that you couldn’t even compile this chart if you didn’t have detailed data about each member: Number of lessons and clinics taken and amount spent in the golf shop. That requires a tracking system.

If you used QuickBooks for your invoicing, you’d already have the necessary data for a segmentation model.

What Differentiates Your Customers?

What differentiates a Heavy Hitter from an Enthusiast? Heavy Hitters are willing to invest more money in their games.

Here is the data per golfer for each segment. For instance, a typical Heavy Hitter during a six month season will take 12 lessons, visit the range 24 times, and spend $1,500 in the golf shop.

unnamed (1)

Now, let’s look at the revenue each segment generates (see next chart). Here’s how the math works for Heavy Hitter lessons, as an example.

Golf –  Total – $66,000

  • 50 Golfers x 12 lessons each = 600 lessons
  • 600 Lessons x $100 Lesson Fee = $60,000
  • 50 Golfers x 24 range visits each = 1,200 visits
  • 1,200 Visitis x $5.00/Visit = $6,000
  • Shop – 50 Golfers x $1,500 each = $75,000

What Are Your Customers Worth?

The two charts below show the relative worth of each segment. In total dollars, Enthusiasts are the most valuable segment. They spend $195,000 (vs $141,000 for Heavy Hitters)

However, on a per golfer basis, a Heavy Hitter is worth almost twice an Enthusiast ($2,820 vs $1,560)

unnamed (2)

unnamed (3)

The Next Step

Once you’ve built your segmentation model, it’s time to take action. You need to build programs for each segment

That’s the subject of the next Golf Pro Advisor.

I am happy to review the segmentation model for up to 30 minutes on the phone with any golf professional at no charge. If you’re interested, please email me at paul@hermancpa.com.  

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:

unnamed

 

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.

unnamed (1)

 

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)

unnamed (2)

 

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!

Mike Heisterkamp Cracks the Code

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I recently had the pleasure of speaking with PGA Pro Michael Heisterkamp. Mike has been the head golf pro at Chagrin Valley Country Club in Chagrin Falls, OH for the past 22 years. He seems to have cracked the member retention code.

Mike Heisterkamp’s job is to run a golf program. But his mission is to attract and retain members for his club.

Mike started with his own belief system as to what is important in doing his job well. He then looked to other pros around the country and found that the most successful pros interacted regularly with their members.

Through some study and analysis, Mike discovered that every member who has done at least one of the following three things in the past few years has stayed at the club:

  • Played a round with the pro
  • Taken at least three lessons in a year
  • Gone on a golf trip with the pro

Mike’s System

Like all good head pros, Mike interacts with members and guests regularly: playing, meeting and greeting. But behind his casual and friendly demeanor is a system.

He tracks member activity methodically. For each member he knows: number and dates of lessons, golf shop purchases,  and number of tournaments and golf trips.

He also stays in touch with the club membership office to learn which members have resigned and who has joined the club. Then he matches that info to his activity tracking system.

Playing with the Pro

Mike runs a season-long “play-with-the-pro” tournament. He plays with many members during the course of the tournament and plays with some members multiple times.

He keeps a large scoreboard in the locker room to encourage participation and maintain enthusiasm. At the end of the season, he runs a shoot-out for the top three teams.

Lessons

Mike finds that if a member takes three or more lessons a year, that member stays with the club. He tracks the lessons that each member takes and, without being pushy, encourages certain members to take more lessons.

At the same time, Mike and his assistants regularly are on the driving range giving members free tips. This shows members that the pros care. It also encourages members to take more lessons.

Golf Trips

Mike runs a golf trip each year for about 15 members. On the even years, the trip is in the US and runs for four or five days. In the odd years, it’s a 10-day international trip.

Through his network of golf professionals, Mike gets his members on some of the top courses in the US and Europe.  Sign me up!

Mike sends out an email invitation to the entire membership for each trip a year in advance. The trips are so popular that they are usually filled within a week of Mike’s email.

Mike tries to avoid having the same members on the trip year after year. He aims to mix up the group by having no more than half of the previous trip’s group on the next trip.

Attracting Members

Mike goes out of his way to make non-members feel welcome at the club. When a member brings a guest to play, Mike makes it his business to know when the guest is coming and his or her name so that he can greet and welcome the guest by name.

He also regularly plays with prospective members. He says that in the past few years 11 out of 12 candidates for membership who played with him subsequently joined the club.

That’s a .917 batting average. Awesome!

Membership is Job One

Mike recognizes that maintaining the Club’s membership is not just the Membership Committee’s job. It’s his job, too.

The head golf pro plays an important role in providing a great member experience. That’s why members join and stay.

But Mike wouldn’t be as effective as he is without a system. He has devised one that works.

It allows him to contribute in a meaningful way to his club’s well-being, increase his value to the club and hopefully increase his compensation.

I am sure it also increases his attractiveness to other clubs looking to hire a new pro.  Mike’s systemized approach is something all head pros should consider.

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