Golf Case
Company and Business Overview
The new business venture we selected is a golf course. In recent years traditional golf courses has been known to have difficulty. The main issues contributing to these difficulties based on studies of the business is that most golf courses do not actively invest in developing casual players into avid players, they do not invest in the service needed to make the experience less intimidating, most courses exist in "overbuilt" areas where the golf hole to population ration is undesirable or the course was simply built to increase home selling cost, and finally most courses follow a simple plan of limiting services or cost to reduce overall operational cost. All of these issues contribute to the main reasons golf …show more content…
courses fail, high turnover or low retention rates. The average membership for most courses each year is 1.5 – 3 million new players. Unfortunately the average membership also decreases by the same amount. According to the National Golf Foundation, 2012 started with 15,753 courses in the U.S, this is a decrease of 299 from 2005. NGF estimates that 25.7 million Americans were considered golfers last year; a decrease of 4.3 million from 2005. NGF says 463 million rounds were played last year and that is a decrease from 500 million in 2005 and 518 million in 2000. Even with those statistics the possibilities of the golf business are high based on the overall popularity and expected trends. Total golf course revenues were up 0.86% in 2010 and 1.10% in 2011 reaching to value of USD. The figures suggest a positive growth in golf demand. By 2016, the US golf course revenues are expected to grow at 3.75% led by positive growth in golf facilities and operations.
We plan to take advantage of the expected trends, address the issues existing golf courses face, and differentiate our course and future courses as a brand to seek for the sport of golf. We will begin with one golf course proof of concept of a slightly different type of course. Depending on the success of the proof of concept we will venture to more course(s) of this type or more traditional courses. We will select areas that are not overbuilt and has the most playable months. Our main differentiating factor will be the size of the course. We plan to reduce operational cost by reducing the size of the course. Golf can still be entertaining and challenging for everyday players on smaller, shorter courses. Shaving, 1,000 yards in length of a course should suffice for most amateur golfers. It would also save a course builder acres in land needed to build resulting in a savings of both initial expenses of construction for new courses or long-term maintenance for new courses or purchased courses. A shorter course would also keep players interest and desire to develop their skills and reduces the intimidation factors which contribute to high turnover rates. It also will afford players time to play as most find it a major challenge to dedicate the 4.5 hours minimal to playing a round of golf. All of those issues are at the heart of why existing courses struggle. Reducing the size of the course will also reduce our fixed cost. Those savings can be reinvested into developing the golfers by offering clinics and other developmental programs to keep them vested in increasing their skill but most importantly maintaining the base of players while going after new ones.
Cost to build and Revenues
Depending on the site, the permitting and regulatory environment, water availability and the owner’s objectives, a complete project can cost as little as $2-$3 million. A more practical budget, however, should be between $6 and $8 million (exclusive of land), as outlined below.
Pre-Construction and Design $ 500,000
Construction Soft Costs $ 500,000
Golf Course Construction $3,500,000
Clubhouse/Maintenance Building/Infrastructure $1,500,000
Furniture, Fixtures and Equipment $ 500,000
Pre-Opening and Grow-in Costs $ 500,000
Total: $7,000,000
Personnel Plan Year 1 Year 2 Year 3
Manager $54,000 $59,000 $64,000
Assistant Manager $42,000 $47,000 $52,000
Pro Shop Manager/Head Teaching Pro $60,000 $70,000 $80,000
Greens/Landscape Superintendent $48,000 $53,000 $58,000
Course Staff $156,000 $163,000 $168,000
Snack Shop Staff $54,000 $57,000 $61,000
Pro Shop Staff $54,000 $58,000 $62,000
Greens Maintenance Staff $48,000 $52,000 $56,000
Golf Cart Maintenance Staff $72,000 $76,000 $79,000
Other $0 $0 $0
Total People 24 24 24
Total Payroll $588,000 $635,000 $680,000
In most markets, public golf courses produce a net cash flow of $0.75-$1.25 million at operational stabilization, on gross revenues of $1.5-$2.5 million.
In areas which enjoy a 12 month season and support high fees, some facilities can generate $2 million or more in net cash flow.
Funding/Financing for Golf Courses Without necessary funding and the proper investment, there are likely to be significant challenges to completing a new golf course development. Financing is needed for three core components: land acquisition, consultant and permitting work, and construction. Some of the most popular methods follow. Merchant banks or financial institutions that provide capital to companies in the form of share ownership instead of loans are one source of funding. The types of instruments offered to fund golf course projects by merchant bankers are debt-equity, debenture and common stock. Loans, equity loans, locally or nationally obtained mortgages, mortgages through insurance companies, bond sales, offer memorandums, offer institutions are …show more content…
others. Municipalities: There is financing available through municipalities via bonds.
Financing a municipal golf course is generally done through a combination of recreational revenue bonds and general obligation bonds. In many states, the financing of municipal or government facilities is done through revenue bonds, whereas the debt service and operating overhead is covered directly by the fees generated by golfers. Under this type of financing, interest on the bonds is tax free and the taxpayer doesn't have to pay for the construction. General obligation type bonds may or may not require a public referendum. For these types of municipal bonds, a Market and Financial Feasibility study is performed to determine the financial success of the proposed
operation. Installment Purchase Contracts: Another avenue for financing is the Installment Purchase Contract. The municipality enters into an agreement with a contractor or developer who will build the course and all facilities. For example, a municipality agrees to pay a contractor $3.8 million over 20 years. The contractor then assigns the contract to a bank. The interest is tax exempt. Enterprise Funds: Many communities that already have a course, but would like to build a new one, set up an Enterprise Fund. Under this arrangement, profits from the existing course go into a special fund to help finance a new course. Another way for a community with an existing course to finance a new one is to levy a surcharge on greens fees. Instead of raising the greens fees, the course adds a 50-cent or $1 surcharge to each round. This surcharge goes back into the golf course instead of the general fund. This money is then used for the development of a new golf course. Community golfers, in effect, are financing their own facilities. Lease Mechanism Agreement: Some communities enter into a Lease Mechanism Agreement with a private developer to build and operate the golf course for a set number of years. At the end of the agreement, the course clubhouse and all other facilities on this property go back to the city. During the time of this agreement, the city is profiting from the lease and its residents have the use of a public course. Real Estate Development Agreements: In some cases, real estate developers have donated land for a golf course in exchange for higher-than-normal density housing on the remainder of the land. This provides their customers, as well as the community, with both a golf course and an attractive green belt. It is clear according to the National Golf Foundation (NGF) that membership as well as the amount of courses in the US is decreasing. However, golf courses can still be profitable and have less turnover rates if they modify the traditional golf course plan. This helps speed the game along and allows the members to play on a course that is suited for amateurs. Next, having a smaller course means that financing the course should be easier and less expensive. Reducing the size of the course will also reduce our fixed cost. Those savings can be reinvested into developing the golfers by offering clinics and other developmental programs to keep them vested in increasing their skill but most importantly maintaining the base of players while going after new ones. Also, in regard to financing the golf course, there are several options. However, not all courses are the same; some are public while others are private and some are more elaborate than others. At the end of the day though all courses have the same basic principle in common; without the necessary funding and the proper investment, there are likely to be significant challenges to completing a new golf course development.
Sources:
http://www.golfprofitbuilders.com/trends.html http://www.ocregister.com/articles/golf-349198-says-courses.html The Orange County Register Published: April 13, 2012, Golf Courses Hit Rough Economics http://www.marketresearch.com/AM-Mindpower-Solutions-v3771/Global-Golf-Participation-Growth-Forecast-6769044/ Global Golf Industry, Participation and Growth Forecast; AM Mindpower Solutions, January 2012 http://www.hotelprojectfinancing.com/Golf-course.html?gclid=CNHEs4Tu8a8CFQrf4AodfRLHWA – Giles Herard Jr; Merchant Banker http://mcmahongroup.blogspot.com/2009/05/protecting-golf-course-funding-its.html http://www.usga.org/about_usga/philanthropy/grants/Good-of-the-Game-Grants/ http://www.asgca.org/financing http://www.amickgca.com/building.htm - How much to build a golf course http://www.portfolio.com/culture-lifestyle/culture-inc/sports/2007/03/25/How-to-Buy-a-Golf-Course#ixzz1uKH7StbH – How much to buy a golf course and maintenance cost http://www.bplans.com/golf_course_business_plan/company_summary_fc.php grants@accessgolf.org Grant section of the Alliance Web site at www.accessgolf.org
http://voices.yahoo.com/top-5-resources-disabled-golfers-8151332.html
The new business venture we selected is a golf course. In recent years traditional golf courses has been known to have difficulty. The main issues contributing to these difficulties based on studies of the business is that most golf courses do not actively invest in developing casual players into avid players, they do not invest in the service needed to make the experience less intimidating, most courses exist in "overbuilt" areas where the golf hole to population ration is undesirable or the course was simply built to increase home selling cost, and finally most courses follow a simple plan of limiting services or cost to reduce overall operational cost. All of these issues contribute to the main reasons golf …show more content…
courses fail, high turnover or low retention rates. The average membership for most courses each year is 1.5 – 3 million new players. Unfortunately the average membership also decreases by the same amount. According to the National Golf Foundation, 2012 started with 15,753 courses in the U.S, this is a decrease of 299 from 2005. NGF estimates that 25.7 million Americans were considered golfers last year; a decrease of 4.3 million from 2005. NGF says 463 million rounds were played last year and that is a decrease from 500 million in 2005 and 518 million in 2000. Even with those statistics the possibilities of the golf business are high based on the overall popularity and expected trends. Total golf course revenues were up 0.86% in 2010 and 1.10% in 2011 reaching to value of USD. The figures suggest a positive growth in golf demand. By 2016, the US golf course revenues are expected to grow at 3.75% led by positive growth in golf facilities and operations.
We plan to take advantage of the expected trends, address the issues existing golf courses face, and differentiate our course and future courses as a brand to seek for the sport of golf. We will begin with one golf course proof of concept of a slightly different type of course. Depending on the success of the proof of concept we will venture to more course(s) of this type or more traditional courses. We will select areas that are not overbuilt and has the most playable months. Our main differentiating factor will be the size of the course. We plan to reduce operational cost by reducing the size of the course. Golf can still be entertaining and challenging for everyday players on smaller, shorter courses. Shaving, 1,000 yards in length of a course should suffice for most amateur golfers. It would also save a course builder acres in land needed to build resulting in a savings of both initial expenses of construction for new courses or long-term maintenance for new courses or purchased courses. A shorter course would also keep players interest and desire to develop their skills and reduces the intimidation factors which contribute to high turnover rates. It also will afford players time to play as most find it a major challenge to dedicate the 4.5 hours minimal to playing a round of golf. All of those issues are at the heart of why existing courses struggle. Reducing the size of the course will also reduce our fixed cost. Those savings can be reinvested into developing the golfers by offering clinics and other developmental programs to keep them vested in increasing their skill but most importantly maintaining the base of players while going after new ones.
Cost to build and Revenues
Depending on the site, the permitting and regulatory environment, water availability and the owner’s objectives, a complete project can cost as little as $2-$3 million. A more practical budget, however, should be between $6 and $8 million (exclusive of land), as outlined below.
Pre-Construction and Design $ 500,000
Construction Soft Costs $ 500,000
Golf Course Construction $3,500,000
Clubhouse/Maintenance Building/Infrastructure $1,500,000
Furniture, Fixtures and Equipment $ 500,000
Pre-Opening and Grow-in Costs $ 500,000
Total: $7,000,000
Personnel Plan Year 1 Year 2 Year 3
Manager $54,000 $59,000 $64,000
Assistant Manager $42,000 $47,000 $52,000
Pro Shop Manager/Head Teaching Pro $60,000 $70,000 $80,000
Greens/Landscape Superintendent $48,000 $53,000 $58,000
Course Staff $156,000 $163,000 $168,000
Snack Shop Staff $54,000 $57,000 $61,000
Pro Shop Staff $54,000 $58,000 $62,000
Greens Maintenance Staff $48,000 $52,000 $56,000
Golf Cart Maintenance Staff $72,000 $76,000 $79,000
Other $0 $0 $0
Total People 24 24 24
Total Payroll $588,000 $635,000 $680,000
In most markets, public golf courses produce a net cash flow of $0.75-$1.25 million at operational stabilization, on gross revenues of $1.5-$2.5 million.
In areas which enjoy a 12 month season and support high fees, some facilities can generate $2 million or more in net cash flow.
Funding/Financing for Golf Courses Without necessary funding and the proper investment, there are likely to be significant challenges to completing a new golf course development. Financing is needed for three core components: land acquisition, consultant and permitting work, and construction. Some of the most popular methods follow. Merchant banks or financial institutions that provide capital to companies in the form of share ownership instead of loans are one source of funding. The types of instruments offered to fund golf course projects by merchant bankers are debt-equity, debenture and common stock. Loans, equity loans, locally or nationally obtained mortgages, mortgages through insurance companies, bond sales, offer memorandums, offer institutions are …show more content…
others. Municipalities: There is financing available through municipalities via bonds.
Financing a municipal golf course is generally done through a combination of recreational revenue bonds and general obligation bonds. In many states, the financing of municipal or government facilities is done through revenue bonds, whereas the debt service and operating overhead is covered directly by the fees generated by golfers. Under this type of financing, interest on the bonds is tax free and the taxpayer doesn't have to pay for the construction. General obligation type bonds may or may not require a public referendum. For these types of municipal bonds, a Market and Financial Feasibility study is performed to determine the financial success of the proposed
operation. Installment Purchase Contracts: Another avenue for financing is the Installment Purchase Contract. The municipality enters into an agreement with a contractor or developer who will build the course and all facilities. For example, a municipality agrees to pay a contractor $3.8 million over 20 years. The contractor then assigns the contract to a bank. The interest is tax exempt. Enterprise Funds: Many communities that already have a course, but would like to build a new one, set up an Enterprise Fund. Under this arrangement, profits from the existing course go into a special fund to help finance a new course. Another way for a community with an existing course to finance a new one is to levy a surcharge on greens fees. Instead of raising the greens fees, the course adds a 50-cent or $1 surcharge to each round. This surcharge goes back into the golf course instead of the general fund. This money is then used for the development of a new golf course. Community golfers, in effect, are financing their own facilities. Lease Mechanism Agreement: Some communities enter into a Lease Mechanism Agreement with a private developer to build and operate the golf course for a set number of years. At the end of the agreement, the course clubhouse and all other facilities on this property go back to the city. During the time of this agreement, the city is profiting from the lease and its residents have the use of a public course. Real Estate Development Agreements: In some cases, real estate developers have donated land for a golf course in exchange for higher-than-normal density housing on the remainder of the land. This provides their customers, as well as the community, with both a golf course and an attractive green belt. It is clear according to the National Golf Foundation (NGF) that membership as well as the amount of courses in the US is decreasing. However, golf courses can still be profitable and have less turnover rates if they modify the traditional golf course plan. This helps speed the game along and allows the members to play on a course that is suited for amateurs. Next, having a smaller course means that financing the course should be easier and less expensive. Reducing the size of the course will also reduce our fixed cost. Those savings can be reinvested into developing the golfers by offering clinics and other developmental programs to keep them vested in increasing their skill but most importantly maintaining the base of players while going after new ones. Also, in regard to financing the golf course, there are several options. However, not all courses are the same; some are public while others are private and some are more elaborate than others. At the end of the day though all courses have the same basic principle in common; without the necessary funding and the proper investment, there are likely to be significant challenges to completing a new golf course development.
Sources:
http://www.golfprofitbuilders.com/trends.html http://www.ocregister.com/articles/golf-349198-says-courses.html The Orange County Register Published: April 13, 2012, Golf Courses Hit Rough Economics http://www.marketresearch.com/AM-Mindpower-Solutions-v3771/Global-Golf-Participation-Growth-Forecast-6769044/ Global Golf Industry, Participation and Growth Forecast; AM Mindpower Solutions, January 2012 http://www.hotelprojectfinancing.com/Golf-course.html?gclid=CNHEs4Tu8a8CFQrf4AodfRLHWA – Giles Herard Jr; Merchant Banker http://mcmahongroup.blogspot.com/2009/05/protecting-golf-course-funding-its.html http://www.usga.org/about_usga/philanthropy/grants/Good-of-the-Game-Grants/ http://www.asgca.org/financing http://www.amickgca.com/building.htm - How much to build a golf course http://www.portfolio.com/culture-lifestyle/culture-inc/sports/2007/03/25/How-to-Buy-a-Golf-Course#ixzz1uKH7StbH – How much to buy a golf course and maintenance cost http://www.bplans.com/golf_course_business_plan/company_summary_fc.php grants@accessgolf.org Grant section of the Alliance Web site at www.accessgolf.org
http://voices.yahoo.com/top-5-resources-disabled-golfers-8151332.html