Golfmak, Inc. Michael A Kahn: Golf Course Management Companies

The Golf Course Business Consultant. Email: mike@golfmak.com Call: 941-739-3990

"A golf course is like a newborn baby. It needs 24/7 care by someone who is never more than a few steps away. The same goes for golf courses. You cannot manage a golf course from 1000 miles away."

GOLF COURSE MANAGEMENT COMPANIES.

I view management companies as "The HMO's of the Golf Course Business!"

There are a few good ones, but I ask, "How can you justify paying for an extra layer of infrastructure 1000 miles away to look after your golf course? Would you ask a neighbor to watch your house while you're away, because you left the baby there alone?"

"In My Opinion Many Golf Courses are Throwing Money Away on Management Companies!"

I'm hearing from the golf industry about bad experiences with golf course management companies. The company's glossy brochure, the jargon and fancy titles convince the owner that the company is more than competent to operate a golf course. Later, the owner finds a golf course in worse shape and doing less business than before he hired them. 

Can golf course management companies justify their fees?

In my opinion, many golf course management companies cannot justify the added layer of expense they add to a golf course operation. I see companies taking from $100,000 to $150,000 a year right off the top without the slightest impact on business. You're somewhere feeling confident your golf course is in professional hands, while a kid fresh out of college is the one making day-to-day decisions. Meanwhile, Management Company 'brass' (the ones with all the knowledge) may not set foot on the property more than a couple of times a year. 

"If a golf course management company has more than a couple of courses under contract, your course likely gets less attention than than it did before you hired them. If the management company CEO is not the person who physically visits your property frequently, in my opinion your property will suffer. If the management company's offices are more than a few hour's drive from your golf course, you're probably going to suffer." 

Let me make one important point about golf course management fees. Management fees should be earned.

"Lets do the math: The golf course takes in, say, $2 million a year, with net earnings (NOI) of $400,000. You hire a management company at $120,000 a year (about the going rate). Already your NOI is down to $280,000 before the company improves the situation by one dime! Another way to look at it - the NOI of $400K is equal to 20% of gross. Therefore, the management company needs to increase revenues by $600K, or 30% to $2.6 million just to pay their way -- and even then you are really no better off until they increase revenues above $2.6 million." Mike Kahn 

 

"I don't see too many neighborhood golf economies capable of an overnight 30% increase in revenues no matter who runs the place."

You'll hear word phrases like buying power, economy of scale, and equipment sharing indicating operational savings to offset management fees. In my experience, I've found that sharp golf course operators can tap into the same 'economies' with a little shopping. Companies like John Deere and Toro are hurting right now and most will match 'corporate' prices to get your business. Case in point:

"Management company's 'economy-of-scale' savings means it shares a 300 gallon Smithco Fairway Sprayer among a group of courses. Golf course #1 has a dollar spot problem on areas of its bent grass fairways due to humid weather. The super needs to treat immediately before the disease gets out of control. Course #5, a hundred miles away has the sprayer, but it's locked in maintenance and the super is away fishing for the weekend. The host superintendent calls the management company bean counter to get permission to outsource the treatment, but the response is, 'not in budget!' Meanwhile, we know that some fungus diseases cannot wait for treatment. In three days an entire fairway can be wiped out. Poor fairways mean golfers stay away! Repair costs, now more extensive also not in budget! So much for economy of scale!" 

"I'm not making this up. I saw it happen." Mike Kahn 

 

So why pay a golf course management company all those fees? I believe in most cases the best way to manage a golf course properly is to operate it with your own management. I mean a well paid general manager who can be trained to run the golf course they way you want it run. The key is to give your trusted key personnel a reasonable future in the property based on performance. You do that by developing and implementing your own business plan and operational guidelines that your key people can follow. However, a manager needs a certain amount of authority to make daily decisions without continually asking for guidance. They need incentives for accomplishments and achieved benchmarks. You also need to be sensitive and sensible when things don't go according to plan. Look for honesty and effort from a general manager and be sure to pay his/her bonuses when they are due.

Spend the right money on a true golf course management software system - not on most of the stuff out there. I found one I can truly endorse. Take a look at my review - click here: BEST GOLF COURSE MANAGEMENT SOFTWARE 

"Too many desk managers blame the GM for poor financial reports - even if it just rained for five days!" 

 

Too many times I hear about general managers in 'trouble' for missing budgets for no fault of their own. Again, the 'bean-counter' in California blames the Florida GM, because of numbers on an Excel spreadsheet. 

"I recently walked a golf course in a Florida city operated by a national management company. The course had weeds in the bunkers, broken ball washers, leaky toilets, bald tires on the golf cars - and a frustrated GM who can't get the funds he needs to present the property properly. I could tell by the expression on the GM's face that he was under great stress and frustrated. Play was down, income down, and mole crickets were feasting on the fairways. Unfortunately, they never seem to fire the real problem - the CEO in his office 1,000 miles away. Meanwhile the property is headed for the banker's 'special asset department' and GM is the fall guy!" Mike Kahn.

 

Back to Golf Management Companies: In my opinion, except for a few good ones out there, golf course management companies simply add what I believe is an unjustified layer of expense to most golf courses. I certainly don't believe in adding a layer of management from 1,000 miles away. If you're an absentee owner, you're already doing that.

I also question the loyalty of golf course management companies who own their own properties and manage yours. I worry about the 'blood child' thing. I've even heard of them borrowing clients equipment to work on their own golf courses.

I truly believe golf course owners can manage their own golf courses better themselves. They can do it with their own personnel operating under a properly constructed business plan. A reporting system with the right information can keep an owner up-to-date at all times with a momentary glance either weekly or even daily.

"I compare the simplicity and speed of reading a properly prepared daily report to looking at a design of 20 yellow squares. The red square stands out clearly - meaning 'investigation recommended!' 

That's what a proper reporting system is designed to do." Mike Kahn

Our business is to help absentee golf courses owners to assess the need for a golf course management company. By reviewing the property and learning the goals of the ownership, we can help in the management decision. If a management company is still the best option, we help our client obtain a company that appears to be best suited to the subject golf course.

If you're ready to stop throwing money away, write mike@golfmak.com, or give us a call (941) 739-3990.

Michael A. Kahn