Author: Linda Dillenbeck

The sun does not shine on the same dog’s back every day.

This folksy reminder should be a point of focus in private club boardrooms because most clubs have full memberships with wait lists, giving club leaders the sense that happy days are here to stay. It was not that long ago that the majority of private clubs were scrambling to find new members while some of that majority—roughly one in five—faced economic failure.

During these good times, what should you be doing now to prepare for an economic downturn or a slowdown in membership demand?

Become the Employer of Choice
Private clubs throughout North America have steadily rebuilt their staffing levels to “full.” At the worst of the pandemic, many clubs were operating with less than 75 percent of their workforce while laboring to recruit more team members. While this objective is not an easy one, personal and personalized services, which are the backbones of the private club value proposition, require reliable and well-trained staff.

Many club leaders have been of the mind that their club simply needed to “throw money at prospective employers,” and they have been surprised to learn that those attracted to private club services seek fulfillment that comes from several important benefits:

• Being a part of a good team. Those who would be in personal services at private clubs want what club members want…belonging. The best employees know that they are capable, well-trained, and of valuable service. They want to belong to a team where their attributes have value and recognition.

• Being recognized as a reliable teammate. Recognition is important to everyone and, especially, to those who are team players.

• Being proud of their employer. Staff members know the best clubs – and employers – in town and want to join the winners. Club leaders must be alert to doing the right things right in the eyes of their staff.

Focus on Capital Reserves & Capital Planning
Many clubs aggressively spend new-found capital—from government programs and new members joining the club—on long-deferred capital maintenance projects and improvements. In many clubs, generations of club leaders dismissed the notion of making capital investments when they did not see ready access to capital through debt or capital calls on members.

Club boards should focus now on the capital maintenance projects that will update, repair, or replace existing assets on their clubs’ balance sheets. Capital reserves should begin to be built for the next round of capital needs.

Extend Your Club’s Brand Reach
In good times, club leaders think their clubs are great. In bad times, such as before the pandemic, many club leaders were afraid of their clubs’ brand because either they did not know what to do with it or because the brand pillars had been ignored for decades. There are three easy steps to improve your club’s brand reach are:

1. Improve board communications with members. Members expect the club and its board to be transparent. Improving board communications can be as simple as the board committing to a regular schedule of updates on topics of interest to members or as advanced as adopting a style guide that brings forward an editorial agenda that tells what topics the board will be communicating and when.

2. Embrace rising generations of members. Clubs are regenerating as the most tenured members age out of active use of the club while newer and younger members are settling in. The oldest members want to be remembered, respected and included. Newer members want advanced capabilities, apps, and immediate access. Check your club’s bandwidth to ensure that the club’s capabilities are up to current standards for access and content.

3. Act on the club’s core values. Ensure that your communications content is timely, inclusive, and easy to understand. If, for example, your club claims to be a “family club,” ensure that programs and programming include everyone in the family and go beyond the easiest choices.

It is called a “business cycle” because events change with high predictability. It is advisable to plan now for economic changes, slow-down, or global events.

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.