Owning A Golf Course

Owning A Golf Course

When I was a kid, I wanted to own the Minnesota Twins. When I define “kid” – I mean until the age of 50. It takes
some of us that long to grow up.

The “Peter Pan” syndrome lives in most guys – and isn’t a bad thing – up to a point. But the reality of life usually is
at direct odds with the fantasies of adolescent boys.

Owning a business sounds like fun, but it’s a lot of work… it’s not la-la-land. Even “fun” business like bars,
restaurants, and golf courses are a lot of work and a full-time commitment. And a lot of money.

Most businesses can be black holes that swallow-up an endless amount of money. The money spent has to be wisely
prioritized to generate the needed return on investment. That can be pretty tricky. The business owner needs to
accurately define the customer, the needs of the customer, and the willingness of the customer to pay for it.

It’s pretty easy to sit on the sidelines and say what the owner should do. Most people presume that the owner has
endless money and should do everything… like sign Joe Mauer.

Most business owners are not rich guys like the owners of professional sports franchises. And even the rich owners
like the Pohlads have to be smart. Do I complain and talk about how I would run the Twins, Vikings, Timberwolves,
and the Wild? Of course – that’s half the fun of being a fan.

And, the successful teams usually come from well-run, quality organizations. And, the continually bad teams are
usually representative of a poorly run organization.

So let’s get back to talking about owning a golf course. It’s not as expensive or as difficult as owning a Major
League Sports team, but it’s a lot harder than most people think it is.

Am I saying this to be self-serving? Not yet. Seriously, it is much more difficult and expensive than most people
imagine. What I’m trying to do is explain why the golf industry hasn’t thinned out as expected. With all of these
courses losing money year after year, we all figured that the market place would just naturally clean itself up and a
lot of courses would go away.

But, that hasn’t happened. And the main reason is that someone is usually willing to give it try. The problem is that
they don’t know what they’re getting into. They assume that the biggest problem is debt. Wrong. Most of these
courses couldn’t cash-flow even if they were debt free. So despite “buying the course right” they didn’t get a deal.

And usually the course has been losing money for years, so normal maintenance hasn’t been maintained. Here’s a
fun little example – a nice, new irrigation system is $1.5M. Add in a new parking lot, etc., and you can spend
millions in no time. And these are not expenditures that the customer notices… these are just basics that the customer
expects. How about new mowers and sprayers? How about a new kitchen? Or roof on the clubhouse? Or new carts?
What about the driving range?

Ironically, the new owner figures that there’s been wastefulness that he can cut. Usually, the place already cut
beyond the bone.

So, now the bigger problem is revenue. How to get golfers and get golfers willing to pay a decent green fee? Sure,
you can get a lot of golfers for $5 a round, but how does that help? Rounds of golf are inventory… inventory can not
be consistently sold at a loss if the business is to survive.

So if the course is beat up, the maintenance equipment is worn out, the carts are shot, and the clubhouse needs
work… how do you get more golfers, and how do you raise rates enough to pay the bills?

Sadly enough, these new owners become aware of these issues after they buy the golf course.

Am I trying to be depressing? No. I’m just trying to explain what’s going on in golf. A few years ago, a local golf
“expert” said that the secret to a golf course – private or public – was to have a “Sugar Daddy”. He may be right. I
think it is the secret to owning a big-time sports franchise (but it still has to be well run). And it may be the secret to
owning a successful golf course.