The process to create a capital plan begins with three questions:

1) Do you know how much capital your club requires to replace its existing assets?

2) Not including your ‘wish list’ of whiz-bang new assets like golf training technologies or new casual dining or state-of-the-art member services, do you know what your capital needs are?

3) And do you know how your club will source the required funds?

Like most club leaders, you may have answered these three critical questions with a cautious ‘no’. The fact is that few clubs are looking to the future with a bona fide capital asset replacement plan.

Here are three steps to take for beginning your club’s forward-looking capital planning:

1. Conduct a capital reserve analysis of existing assets.
Build an asset replacement spreadsheet with the following columns:

Asset Description | Useful Life | Remaining Useful Life | Replacement Value

This will yield a comprehensive view of current assets and provide the club and its future board members and operators with a clear-eyed understanding of the sums required over the upcoming 10- and 20-year time periods. With these steps, you have established your current capital needs on an annualized basis.

2. Itemize the assets you wish to add to your asset roster.
Contemporary design concepts that enhance member experiences are emerging, offering clubs greater relevance and engagement for members – new and old. Among the most popular new concepts are:

Sports Training Facilities like golf and tennis swing and stroke analysis technologies and the gamification of these technologies.

Al Fresco Dining Venues like porches and patios bring the indoors out and the outdoors in many clubs where COVID-era members grew comfortable with a little more personal space and sercouldle to navigate dining spaces more comfortably.

Swimming pools for all ages where club members require lap lanes for serious fitness swimmers, splash pads that are proving safer (than the old-school kiddie pool) for children, and resort-style pool areas for adult members.

Club leaders should plan boldly when considering new amenities. When the membership market cools, good fortune will favor the bold.

3. Identify the sources of funds that are needed.
This is the uncomfortable topic during which most club boards freeze up and seek to procrastinate. Many leaders are uncomfortable telling members that more money is required for the future.

Don’t sell your members short. If they were smart enough to join a fine club, they are smart enough to know – whether they like it or not – that club membership comes with extra costs. Furthermore, most members know that fiscal discipline and prudent financial planning are the primary duties of servant leaders. Three points to remember when thinking about club spending:

• Members expect you to know and tell them what is required for the club’s successful future. Ignoring this fact causes members to distrust their board members.
• Members are intolerant of board members who ignore their financial responsibilities.
• Even those criticizing dues increases know there should be a capital plan.

Use the following best practice standards in sourcing needed funds for capital requirements:

- Begin with the understanding the monthly dues should be used to pay the club’s bills. Regular dues fund all expenses on the income statement – labor costs, operational and administrative expenses.

- Joining fees paid by incoming members are used for funding capital asset replacements. If these funds are inadequate to fully address capital replacement needs, clubs turn to debt, capital calls on members (assessments), and a combination thereof.

Planning for the future financial needs of your club should be a top priority. Following these steps will set your club on the proper path.

This article was written by GGA Partner Henry DeLozier for BoardRoom Briefs.