Business Plan

June 2009

COMPANY CONFIDENTIAL

Prepared by:

Kurt Therrien
Erich Spikereit
Nicole Bisnett
William Chronister

Union Graduate College

 Table of Contents

Executive Summary 1

1.0 Business Overview 4

1.1 The Company 4
1.1.1 Contact Information 4
1.1.2 The Business 4
1.1.3 Product Differentiation 5
1.2 Business Goals 6

2.0 Marketing Plan 7

2.1 Target Market 7
2.2 Market Trends 8
2.3 Competitive Analysis 9
2.3.1 Strengths 10
2.3.2 Weaknesses 11
2.3.3 Opportunities 11
2.3.4 Threats 12
2.4 Marketing Strategy 12
2.4.1 Price 12
2.4.2 Promotion 15

3.0 Operations Plan 19

3.1 Organizational Overview 19
3.1.1 Golf Commission 19
3.1.2 Committees 19
3.1.3 Superintendant & Maintenance 20
3.1.4 Golf Pro & Concessions 21
3.2 Organizational Reporting Structure 21
3.3 Personnel 23
3.3.1 Qualifications 23
3.3.2 Documentation and Training 25
3.3.3 Metrics 25
3.4 Capacity Planning & Utilization 27
3.4.1 Point of Sales System 27
3.4.2 Metrics 28
3.5 Value Added Processes 29
3.5.1 Maintenance and Upkeep 29
3.5.2 Metrics 31
3.5.3 Surveys 31
3.5.4 Speed of Play 31
3.5.5 Capacity Planning 32
3.6 Scalability 32
3.7 Golf Professional Services 33
3.7.1 Cart Management 34
4.0 Financial Plan 36
4.1 Revenue Model 36
4.1.1 Revenue Generation 36
4.1.2 Time Horizon 37
4.2 Estimating Revenues and Costs 38
4.3 Cash Flow Statement 38
4.3.1 Net Present Value & Internal Rate of Return 39
4.4 Balance Sheet 40
4.5 Financing Strategy 41
4.6 Risk Analysis 41
4.6.1 Financial Risks 41
4.6.2 Strategic Risks 42
4.6.3 Operational Risks 43
4.6.4 Risks Outside of AMGC’s Control 43
4.7 Timeline 44

5.0 Conclusion 45

Appendices
Business Plan Appendices
Appendix A – Committees and Responsibilities
Appendix B – Superintendant Responsibilities
Appendix C – Critical Procedures
Appendix D – POS System Outline
Appendix E – Maintenance Schedule
Appendix F – People Flow
Appendix G – Income Statement
Appendix H – Revenue Model
Appendix I – Cash Flow Model
Appendix J – NPV and IRR
Appendix K – Balance Sheet
Appendix L – Timeline

Detailed Appendices
Appendix M – Overview
Appendix N – Marketing
Appendix O – Operations
Appendix P – Finance

Additional Research
Appendix Q – Pricing Research
Appendix R – Revenue Sources Research
Appendix S – Communications Research
Appendix T – Driving Range Research
 Company Confidential
1

Executive Summary

The Amsterdam Municipal Golf Course (AMGC), founded in 1938, is an 18-hole,

par 71; course approximately 6,700 yards in length designed by Robert Trent Jones Sr.

An individual or group wishing to play AMGC has a number of options; they can

purchase a year membership, greens fees for a single day, join a golf league, or rent the

entire course for a day. In addition, AMGC will offer instructional golf packages that

focus on women and youth that allow for building essential golf skill.

The course currently maintains a membership of approximately 525 members

which account for the majority of the revenues generated for the golf course. Members

play approximately 75% of the rounds played at the course annually and on average play

50 rounds per season at AMGC.

AMGC currently differentiates itself from its local competitors through course

quality, design and affordability. AMGC’s current pricing represents an exceptional

value unmatched by any of its competition. However, the course does not earn enough

profit to sustain the rigorous maintenance program, including needed capital

improvements in order to maintain the quality of the course. Furthermore, the course

continues to lose members over time, reducing its main source of revenue.

AMGC faces many challenges including loss of both members and rounds of golf

played at the course, inefficient operations, and the lack of organizational accountability.

AMGC will overcome these challenges by implementing a strategic action plan which

will (1) increase revenue generated per round to support needed capital improvements,

(2) growing women and youth segments, (3) provide the necessary data and metrics to
 Company Confidential
2

understand the courses performance, and (4) strengthen the organization through the

establishment of managerial control and accountability.

With a goal of changing the courses main differentiator from pricing to quality,

AMGC will change its pricing structure to maximize revenues. Changes will be made to

membership, greens fee, league, and outing pricing resulting in an increase in revenue of

33-46%. Additionally, a marketing campaign, consisting of newspaper ads, fliers, and

eventually television and radio advertisements aimed at the local market, will be rolled

out.

The campaign will focus on generating more league and outing play along with

promoting women and youth programs being developed by the course. The women and

youth programs will be developed to capitalize on new golfers by developing a

comfortable atmosphere in which to learn to play golf. The women and youth programs

will be a cornerstone of AMGC for long-term success. Women are the fastest growing

segment in golf and youth who take up the game spend more and play more on average

then golfers who take up the game later in life.

AMGC is currently managed by a five member Golf Commission (GC) who are

appointed by the Mayor of Amsterdam. The GC is responsible for management,

operation, and maintenance of the golf course. In addition to the GC, there are a number

of city employees responsible for course maintenance and committees who are

responsible for various course operations such as daily golfer, special events, the Pro

Shop, maintenance, etc. The GC shares the responsibility for all course operations,

management, and maintenance activities with the city employees and committee
 Company Confidential
3

members and as a result, it is difficult to determine the ownership of specific

responsibilities.

With the goal of strengthening the organization through the establishment of

managerial control and accountability AMGC will hire a Golf General Manager (GGM)

who will report directly to the Mayor of Amsterdam. All AMGC employees, including

the concessionaire and Golf Pro who are under contract with AMGC, will report to the

GGM. The GC will then act in the capacity of a Board of Directors who will also report

directly to the Mayor of Amsterdam. The GGM will focus on top-level strategy on golf

operations and drive overall operational efficiency and accountability in AMGC’s

operations.

In addition to hiring the GGM the course will also make a number of operational

changes including the implementation of a Point of Sale (POS) system, which is a

computerized system, used to conduct all of the courses transactions. The POS system

will be used to understand the operational capacity, customer buying habits, and trends at

the course. This will allow the course to increase the courses operational efficiency

through

These changes will increase revenue by approximately 85% by FY21012-2013

and allow for the execution of the necessary capital improvements to the drainage system,

cart paths, and maintenance shed. AMGC shall overcome the challenges it faces and

achieve long term success through the implementation of the actions contained within

this business plan. Additional detail on the assumptions and analysis conducted to

support the recommendations contained within the business plan can be found within the

appendices of each respective section.

 Company Confidential
4

1.0 Business Overview

1.1 The Company

1.1.1 Contact Information

The Arthur Carter Amsterdam Municipal Golf Course is located at 158 Upper

Van Dyke Avenue, Amsterdam, NY 12010 and can be contacted at the following

numbers:

• Pro Shop (518) 842-4265

• Tee Times (518) 842-6480

• Clubhouse (518) 842-9731

• http://amsterdammuni.com

1.1.2 The Business

The Amsterdam Municipal Golf Course (AMGC), founded in 1938, provides an

18-hole, par 71; course approximately 6,700 yards in length designed by Robert Trent

Jones, Sr. Robert Trent Jones, Sr. has designed or redesigned over 500 golf courses in 40

U.S. states and 35 other countries around the world, however, only one in the Capital

Region for over one hundred miles. An individual or group wishing to play AMGC has a

number of options; they can purchase a year membership, greens fees for a single day,

join a golf league, or rent the entire course for a day at the prices shown below in Table 1.

In addition, AMGC will offer instructional golf packages which focus on women and

youth to allow for building essential golf skills, both fundamental and strategic, which

create an inviting social atmosphere that welcomes instruction, builds strong values, and

life-long customers at the convenience of Amsterdam residents.

 Company Confidential
5

In addition to golf, the facility offers a pro shop, which includes golf cart rentals,

lessons, and merchandise, as well as a clubhouse, which offers food and banquet services.

Membership Fees/Storage

Standard $625 Green Fees (before 3pm) $25

Family $1,035 Green Fees (after 3pm) $17

Junior $140 Locker Rental (per year) $30

Senior $600 Gas Cart Storage (per year) $335

Senior Family $985 Elect. Cart Storage (per year) $365

Senior Limited $560 1-day course rental $1,500

Table 1: Current Pricing

1.1.3 Product Differentiation

The AMGC is able to differentiate themselves in a few different ways, including:

• Affordability: The course offers pricing for memberships and leagues, which are

an exceptional value, given the current and future increased quality and

maintenance rigors of the course.

• Course Design and Quality: The Robert Trent Jones, Sr. design is a high quality

course design, which has been largely unchanged since it was constructed in

1938. It is also unique in the Capital Region with the closest other Robert Trent

Jones, Sr. designed course located in Utica, NY. In addition, a rigorous

maintenance program which focuses on needed upkeep and improvements for the

course will be in place to fortify the differentiation with AMGC’s competition.

 Company Confidential
6

1.2 Business Goals

There are a number of business goals which drive the overall strategy for the

course, including:

• Increasing revenue per round equal to 70-75% of the standard greens fee

• Generate revenue to support needed capital improvements

• Grow women and youth segments

• Implement a financial management system to gain a thorough understanding of

the courses performance

• Strengthen the organization through the establishment of managerial control and

accountability

Achieving these goals is critical to the long-term success of the course.

 Company Confidential
7

2.0 Marketing Plan

2.1 Target Market

The course can reasonably expect to draw consistently from a 15 mile radius.

Within this market the course targets core golfers, defined as; golfers 18 years of age or

older which golf more than 8 rounds per year. Approximately 56% of all golfers are

considered to be core golfers. The course’s current membership consists mainly of core

golfers and it is likely this will continue into the future.

The total market opportunity within the region is approximately 5,000 core

golfers. The course currently serves between 10-22% of which as much as 57% (670

individuals) are daily fee golfers the remaining 43% (500) are members. The course can

potentially bring in 2,000-14,000 more rounds of golf a season for a total of $37,500-

$263,500.

A high proportion of the members are men, as shown in Chart 1, which shows

current membership data.

Membership Demographics

Unknown
3%
Female
9%

Male
88%

Chart 1: Breakdown of AMGC Members by Gender

 Company Confidential
8

However, 67% of new golfers are women. Therefore, the potential for growth in

this segment is tremendous; approximately 23% (5.5 million of 23.9 million total) of all

golfers in the United States are adult women. 1 This represents a large market for growth

at AMGC. Therefore, specific programs will be developed to ease the entry and

development of this high-potential target group.

Youth segments also represent a high potential market and taping into this market

is critical to growing life long golfers for long-term success at AMGC. Early instruction

in golf leads to a greater likelihood of long-term involvement with the game, as adults

who were exposed to golf through a structured junior program play 58% more rounds and

spend 71% on golf than adults who were only informally exposed to the game in their

childhoods. 2

A marketing strategy will be employed, which will be discussed in 2.4.2 that will

focus on attracting and retaining a net of 250 additional people playing an additional

2,000 rounds, which will generate approximately $37,500.

2.2 Market Trends

According to the National Golf Foundation, the great leap forward in the number

of golfers occurred between 1985 and 1990, when baby boomers, growing a little too old

for contact sports swelled the ranks of golfers by approximately 30 percent. Since 1990,

however, the total is up only 14 percent. 3 In 2007, golf has become stagnant in the US as

34 more golf courses closed than opened, according to the National Golf Foundation,

1
Berkley Golf Consulting. Statistics About Women and Girl Golfers.
http://www.nancyberklet.com/771810.html
2
Golf 20/20. Participation Reports: Examining Efforts to Grow Young Golfers.
http://www.golf2020.com/reports_2002YouthImpact.aspx;
3
http://www.ngf.org/
 Company Confidential
9

which speaks to the difficult economic times. However today, golf is a $60 billion

industry with 30,730 courses worldwide and 57 million golfers. 4 The latest information

indicates golf rounds in 2008 were down by 1.8 percent, although the number of rounds

in January 2009 increased by 8.5 percent over January 2008. It is forecasted in 2009 the

number of golf rounds will likely drop three to five percent due to the economy. 5

The above market trends and economic outlook on the golf industry will make it

challenging for AMGC in the near future. However, according to a survey of top

industry experts completed by the Foley Golf Industry Outlook Report, the top two

strategies for mitigating these risks are 1) increasing marketing efforts and 2) course

improvements. 6 These efforts are in line with recommendations of this business plan as

will be shown.

2.3 Competitive Analysis

AMGC has a number of competitors. The Table 2 below shows the five golf

courses either within Fulton-Montgomery Counties or within 15 miles driving distance

from Amsterdam. These courses will compete with AMGC in the target market.

Course Weekday Weekend Membership Length

Canajoharie $25 $30 $750 5,837
Pioneer Hills $20 $25 $1,050 5,700
Fox Run $33* $36* $695 6,400
Briar Creek $23 $26 N/a 5,667
Hales Mills $27 $27 N/a 5,995
AMGC $25 $25 $625 6,370
Average w/o AMGC $23 $28 $832
Table 2: Local Competition
*Carts typically range in price from $12-$16 per person for 18 holes

4
http://www.ngf.org/
5
NYTimes, “Golf clubs Feel Pinch of Economy”, Bill Pennington, March 19,2009
6
http://www.Foley.com/golf “Foley Industry Outlook Survey”
 Company Confidential
10

There are a number of other 9-hole courses in the target region. However, these

were not considered competitors to AMGC as they cater to a different target market,

focusing more on beginners than core golfers. Private courses were also excluded from

the analysis. These were not considered because they serve a target market seeking a

private club vice a golf course.

Overall, the closest competition in terms of offerings consists of Canajoharie and

Pioneer Hills. Briar Creek is of comparable quality, but the length of the course detracts

from the challenge and quality of play. Fox Run and Briar Creek are generally regarded

as not having quality matching AMGC. The clubhouses of all AMGC’s competition are

also similar to AMGC in that they are suitable gathering places, but are unlikely suitable

venues for more formal events such as a wedding.

2.3.1 Strengths

Currently, the strength of the course is its pricing strategy. AMGC’s membership

plans offer a tremendous value to core golfers, daily fees do not limit golfers to a number

of rounds, and members pay only $10 to play in a league. However, attractive pricing

does not ensure customer loyalty. Additionally, the course is not generating enough

revenue to support making the necessary capital improvements.

Adjustment to pricing strategy will be made to allow the course to become more

profitable. This profitability will in turn allow the course to investment in capital

improvements and increase the overall quality of the course with the goal of the strength

of the course becoming quality over price. Superior maintenance and investment into the
 Company Confidential
11

course will help to develop customer loyalty and ensure the long-term success of the

course.

2.3.2 Weaknesses

Pricing as identified above is also a vulnerability in terms of customer loyalty.

Pricing for league play as outlined above, is a drain on course resources (tee times) and

generates a much lower revenue per round than required to maintain profitability.

Additionally, the course only utilizes 30-50% of its total capacity for leagues.

As a municipal course, AMGC faces higher operating costs as compared to their

competition. Labor rates for city employees or contractors are higher for AMGC, as it

must pay a prevailing wage. These higher operating costs make it more difficult for the

course to plan for capital improvements.

2.3.3 Opportunities

The current pricing strategy also represents a tremendous opportunity, as the

identified changes to the current pricing strategy shall prove to be more profitable than

the existing pricing structure. This increase in profitability will increase the viability of

projects related to capital improvements. The condition of the course, which has been

noted to be a major driver of course preference, would improve greatly. Additionally, an

increase in long-term profitability will allow the course to send more money back to the

city. Communicating these improvements to members and non-member golfers in the

target region, will help justify future price increases, further increase revenue, and

contribute to the long-term success of the course.

 Company Confidential
12

2.3.4 Threats

The current state of the economy has put a pinch on consumer spending;

approximately 30-40% of golfers are playing fewer rounds of golf. This could potentially

threaten the future growth of the course.

Another threat to AMGC is the political nature of the course operations. Political

officials appoint the Golf Commission and if those political officials are voted out of

office, it could lead to turnover in the management of AMGC. Management turnover

could lead to a discontinuity in operations that could have a negative effect on the

course’s customer base.

Weather also threatens the profitability of the course and its ability to stay open

for business. While there is little it can do to mitigate the risk of poor weather, ensuring

adequate drainage can minimize downtime and improve the course conditions as a result

of poor weather. This will be a focus for capital improvements.

2.4 Marketing Strategy

The current marketing strategy caters mainly to the interests of members. This is

due to the political nature of managing a municipal golf course. Managing the course as

a business and planning for the future by investing in potential customers in addition to

desires of existing customers, is key to enhancing the future value of the course.

2.4.1 Price

AMGC’s current pricing is set such that the revenue generated from a round of

golf on average will be between $10.03 and $13.05 in 2009. In 2008, AMGC generated

$458,733 in total revenue from greens fees and membership fees or 38-50% of the
 Company Confidential
13

standard greens fee. The goal of the course is to generate revenue per round equal to 70-

75% of the standard greens fee. As a result the courses pricing structure will be changed.

Table 3 below shows the pricing structure for memberships. Members will continue to

pay a flat rate for membership however the rate will decrease and a greens fee will be

required to be paid for every round played.

Type Membership Greens Fee

Standard $350 $15
Senior $325 $13
Senior limited $300 $13
Family $600 $15
Senior Family $560 $13
Junior $85 $7
Table 3: Membership Pricing

This pricing structure will result in the people who play the course the most

paying the most, therefore, more equitably distributing the cost of operating and

maintaining the course to the members who play the course the most frequently. The

changes will result in an increase in revenue between 19-32%, from $458,733 to between

$534,666 and $591,811 depending on the number of rounds per member estimated, while

holding total membership constant.

Greens fee rates will also be changed to make the pricing structure more

consistent with its competition, including both local municipal and public courses. The

changes will also result in an increase in revenue generated by daily greens fees of 7%,

from $118,804 to $126,546, based on the same number of rounds played. Table 4 below

shows the new Greens Fee pricing:

Weekday Weekend
Resident Non-resident Resident Non-resident
AMGC $24 $28 $26 $31
Average (Municipal) $20 $25 $21 $27
Average (Public) $23 $23 $28 $28
Table 4: Recommended Greens Fee Prices
 Company Confidential
14

For group outings such as tournaments and other special events AMGC charges a

flat rate of $1,500 in place of a per person rate, which is unlike other Municipal Courses

and results in an average price per round of $21 for a 72-person outing, a 20% discount.

Most courses charge a premium for rounds golfed as part of an outing.

New outing pricing, as shown in Table 5 below, will be on a per person basis and

will begin to generate more revenue per outing starting at 49 participants.

Course Outings
Capital Hills $48 w/cart
Schenectady $41 w/cart and gift certificate
Western Turnpike $47 w/cart
Town of Colonie $41 w/cart
AMGC $45 w/cart
Average (Not including AMGC) $44
Table 5: Outing Pricing

The AMGC currently charges $10 per league member to reserve the league tee-

times for the season. Greens Fee’s for playing in a league are covered under the

membership fee and non-members pay the twilight price of $17. This is inconsistent with

AMGC’s competitors who charge everyone a per-round fee when playing in a league.

This is due to league tee times being premium time for golf courses, having league

members playing without paying severely limits the courses ability to generate revenue

from other paying customers. Table 6 shows the revised league pricing for members and

non-members.

Non-
Member Member
$15 $17
Table 6: League Rates

Table 7 below shows all of the pricing changes to be made beginning at the start of the

2010 golf season.

 Company Confidential
15

Current New Impact

Weekday
Resident $25 $24
Non-
Resident $25 $28 7% of Greens
Greens Fee
Weekend Fee Revenue
Resident $25 $26
Non-
Resident $25 $31
$350 +$15 per
Membership $625 round 19-32%
Member - $15
Leagues Std Greens 14%
Non-Member $25 Fee
Outings Resident $1,500 $45
+ After 49
Non- Participants
Resident $1,500 $49
Table 7: New Pricing Summary and Impact

2.4.2 Promotion

AMGC’s promotional activities will be designed to bring people to the course that

do not play AMGC already in order to expose them to the quality of the course. This can

be done while generating revenue from these golfers through promoting and holding

outings and leagues. The promotional activities will also target women and youth with a

goal of getting increased participation in the programs being developed specifically for

women and youth discussed in Section 2.4.2. The marketing activities are expected to

net 250 additional golfers over the course of a five-year period who will play

approximately 2,000 rounds per year.

The initial marketing campaign will focus on developing more leagues and outing

customers and will transition to more communication of the course improvements, which

will be completed over time. With a focus on changing pricing and bringing in more

league and outing revenue, the course can make current needed improvements by

generating more profit per round played. Then, once these improvements are made,
 Company Confidential
16

begin an advertising campaign that focuses on the remodeling effort the course can be

undertaken.

In addition to the marketing campaign AMGC will also hold a series of three

tournaments throughout the season, which will be organized and promoted by the course.

The goal of the tournaments would be to bring area golfers to the course in order to

display the quality of the course and provide a fun atmosphere for the golfers. Additional

details on the tournament structure are contained within Appendix M.

Using a budget of approximately $2,000 per year through 2012 and $4,000 per

year thereafter, the course will conduct a marketing campaign aimed at their target

market of core golfers who live within 15 miles of the course. The campaign will consist

of;

• Updates to the Courses Web Site

• Newspaper Advertisements

• Fliers

• TV and Radio Advertisements (beginning in 2012)

All of the above will contain information on course outings, tournaments and

leagues. In addition, the same methodology will be used to promote the women and

youth instructional programs being developed. The women and youth instructional

programs will be a focus to ensure the long-term success of AMGC. The marketing

programs developed will include:

• Make them feel welcome and comfortable at the course by offering lessons and/or

clinics. Marketing lessons for women individually or in group sessions helps

build a network of new golfers.

 Company Confidential
17

• Written handouts with basic information for new golfers.

• Post a “Looking for a partner?” sheet in the Pro Shop.

• Programs at varying times (daytime and after work).

• Invite members and other patrons to refer women golfers to the course; offer a

referral bonus for the recruiter and a discount for a new golfer, for example:

o $25 off for new members who joined on the referral of a current member,

or

o Golf 5 times this season, get your 6th round free

Development of youth programs which encourage youth to participate in sports

and extracurricular activities not only promotes good physical health, but it helps them to

develop emotionally and socially.

Youth programs will be structured around the off-peak golf times for avid golfers

to avoid frustrating the avid golfers by significantly slowing the speed of play. Since

children are not in school during the summer months, and most golfers are employed

during the weekdays, the use of the golf course can be maximized by scheduling youth

summer golf day camps, lessons and leagues from late morning to early afternoon.

Additionally, AMGC will become a host facility of Play Golf America who has a

multi-million dollar national marketing campaign which has been launched and includes

advertisements on national TV and radio during PGA, LPGA, USGA, PGA Tour and

Champions Tour events, as well as web advertising 7 . All marketing elements are

intended to drive consumers to this national Web site, www.playgolfamerica.com, which

7
PlayGolfAmerica.com. Become a Play Golf America Host Facility. Available from
http://www.playgolfamerica.com/index.cfm?action=hostfacility; accessed 25 April 2009.
 Company Confidential
18

serves as the umbrella for player development programs geared to new, former and

occasional adult golfers.

As a host facility of Play Golf America, the course will receive the following

benefits:

ƒ Their facility web page on the Play Golf America national website to promote

adult player development programs to the general public and/or membership

ƒ Access to program templates, guidelines and best practices for a variety of

player development programs

ƒ Downloadable promotional materials and forms designed to market these

programs

ƒ The ability to host and track consumer information, and measure participation

in the facility’s programs and events. Resulting information can be used

exclusively by facility management for future marketing opportunities including

direct e-mail campaigns

ƒ Access to the Play Golf America Resource Center including best practices,

program features, and online training message boards.

 Company Confidential
19

3.0 Operations Plan

3.1 Organizational Overview

3.1.1 Golf Commission

According to Chapter 28 of General Code E-Code a six-member commission, one

of whom is a non-voting Alderman, is to be created that is responsible for the

management, operation and maintenance of the golf course. 8 The other five members are

not city employees or city officials, and serve for five years in a staggered fashion, such

that every year a commission member’s term is up. The Golf Commission consists of

officers of which a Chairman, Vice Chairman, Treasurer and Secretary, serve one-year

terms not to exceed three consecutive terms. Each officer is nominated and voted on via

sealed ballot. All procedures are introduced by a member of the Golf Commission, are

voted on and passed by simple majority.

The Golf Commission shares responsibility for all course operations and

management activities with the city employees and committee members. No one

individual is responsible for course operations and performance.

3.1.2 Committees

As mentioned the Golf Commission is responsible for the operation and

maintenance of the golf course. In this capacity the commission shall create a number of

standing committees, including, Pro Shop, Clubhouse, Annual Fee Player, Greens,

Improvement, among others. Current documented responsibilities of each are highlighted

8
General Code E-Code; Chapter 28 section 1; City of Amsterdam, NY
 Company Confidential
20

in Appendix A. It is noted each Committee is headed by one member of the Golf

Commission and each are subject to the direction and control of the Golf Commission.

3.1.3 Superintendant & Maintenance

In addition to the Golf Commission and the committees noted, the golf course

also employs a golf course superintendent and six groundskeepers: a mechanic, a

foreman, three medium equipment operators, and one seasonal worker. The

superintendent and grounds keepers are all employed by the City of Amsterdam and are

responsible for the maintenance and upkeep of the course. Their benefits and salary are

supported by the golf course during operational months and is picked up by the city

during the off-season.

The superintendant manages all maintenance and grounds keeping activities

performed at the golf course. This is a critical function as the grounds are one of the

most important attributes of the golf course.

Given this, in addition to the technical nature of many of the aspects of

maintenance and grounds keeping, it is critical the job responsibilities be outlined and

adhered to. The responsibilities for the superintendant are shown in Appendix B. It is

also noted the superintendent is a member of the Golf Course Superintendents

Association of America (GCSAA). While this is not a requirement, it has been deemed

an excellent qualification and will be required in the future, given the available resources,

best practice sharing through seminars, and extreme technical nature of this role.

Two cashiers are also on staff at AMGC. In addition to tending the cash register, the role

of the cashier is to take reservations via phone or walk-on golfers.

 Company Confidential
21

3.1.4 Golf Pro & Concessions

AMGC also provides a Golf Professional who is responsible to operate and

maintain the Pro Shop and golf cart operations. The Pro also provides lessons for all

patrons as required by contract and employs an Assistant Pro, a Starter, and a Ranger to

aide in Pro Shop operations and golf course throughput. As previously noted, the Golf

Pro receives an average salary of $20,500 per year through 2013, and keeps all proceeds

from golf cart rentals, merchandise sales and lesson fees.

Concessions are also provided though contract by AMGC. Food and beverage is

supplied by the concessionaire in the clubhouse as well as through beverage cart sales,

for which the Golf course receives a lease fee of $29,500 per year until the end of 2009.

The golf course receives this added value of convenience for their customers but does not

generate revenue on proceeds from food and beverage sales.

Strong partnerships with the Concessionaire and Golf Pro is critical to ensuring a

good golf experience to all customers as they add value to overall operations and provide

necessary amenities which keep customers returning to AMGC. Given this, their

contracts will require processes and procedures be developed to ensure repeatable results

and performance metrics will be developed to validate performance is maintained at a

level acceptable to the Golf Commission.

3.2 Organizational Reporting Structure

AMGC is essentially managed by committee, such that all decisions flow through

the Golf Commission, who vote on and approve each decision. Certain items, such as

capital expenditures must flow through the comptroller and or the mayor’s office for
 Company Confidential
22

approval. A top-level organizational chart is provided in Diagram 1 complete with

addition of a Golf General Manager (GGM) and reporting structure highlighted in red.

Diagram 2: Top level Organization chart

It was difficult to determine the reporting relationship between the greens keeper

(Superintendent), Golf Pro and Golf Commission in the original organizational reporting

structure. The noted changes highlight a structure where all employees report into the

newly hired GGM, such that reporting structure is more defined. The GGM will help

guide AMGC into the future by driving overall operational efficiency and accountability

in their operations.

The GGM will focus on top-level strategy on golf operations, such as utilization,

tournaments, league play, marketing and promotion of the golf course to help generate

the additional revenues to pay for the role. The GGM will also help guide the

committees in the right direction for improvement of the course and allow for better
 Company Confidential
23

budgeting short and long term for capital improvements. The GGM will help establish a

baseline for many of the metrics with use of the recommended Point of Sale (POS)

system, such that measureable results can be verified and improved upon moving

forward. Daily, weekly, monthly and seasonal reports can be run by the GGM to help

focus resources and assignment of responsibilities as necessary. Addition, the GGM will

ensure the necessary infrastructure is in place to maintain operational and financial

efficiency.

As noted the organizational structure will change to reflect this new reporting

structure. The Golf Commission will directly report to the mayor and the Common

Council with a dotted line report into the GGM. The entire staff will report into the

GGM, with the Golf Commission having the staff be dotted line report to them, ensuring

work direction ability. The GGM and the Golf Commission are on equal ground,

however, all decisions from the GGM must be approved though the Golf Commission,

and as such will act similarly to a Board of Directors.

3.3 Personnel

3.3.1 Qualifications

Ensuring the Golf Commission and committee members obtain the necessary

qualifications to operate and maintain a golf course is critical to the operational efficiency

of the golf course. Currently, it is certain each brings professional experience, knowledge

of the City of Amsterdam, and knowledge of AMGC. Going forward the Golf

Commission will have or obtain the qualifications listed below in Table 8, which will

ultimately help guide the golf course in the future. The superintendant is a technical
 Company Confidential
24

position requiring extensive knowledge in turf management and recommended

qualifications are highlighted below.

Operating knowledge of a golf course such as short-term plans and day-to-

day activities through program supervisors including the selection, training,
appraisal, and supervision of permanent staff and seasonal workers.
Short and long term planning ability for revenue building, capital
expenditures and expansion, individual and tournament play, golf
instruction, course maintenance and improvements, and operations of a
golf shop and a snack bar.
Golf Commission Knowledge of PGA rules and regulations
Committee Heads Independent entrepreneurial business leadership skills
Extensive public contact in dealing with the public, private groups,
businesses, special interest group within Town government, golf
associations and other course directors, and the surrounding communities
in the promotion, development, and maintenance of the course, program,
and services require tact and diplomacy.
Marketing and promotional skills for development of business strategy
Expense and revenue management skills
Considerable knowledge of the principles of course design, course
management and maintenance, including course landscaping and turf
management
Extensive knowledge of equipment use in course landscaping and turf
management
Superintendant
Ability to develop and adhere to schedules and assign labor
Short and long term planning ability for capital expenditures on course
maintenance and improvements,
Knowledge of finance and ability to budget effectively
Member of the Golf Course Superintendants Association of America
Table 8: Recommended Qualifications

The skills are essential to the operation and maintenance of a golf course, and likely

difficult to obtain without considerable experience in the golf course industry. The newly

appointed GGM will develop the necessary training for the Golf Commission to learn and

fortify these essential skills, qualifications and knowledge base.

 Company Confidential
25

3.3.2 Documentation & Training

It is necessary to document all critical procedures and train employees to those

procedures to obtain superior and repeatable results. The courses current critical

procedures are included in Appendix C. All employees can be identified on this matrix in

Appendix C and may be trained on procedures according to responsibility. The GGM

can help with identifying additional critical processes as well as documenting the

appropriate protocols for each procedure.

Training procedures will be developed to ensure all employees get appropriately

trained on required processes, such that standardization of duties is achieved, and desired

and repeatable results are obtained. Once training is documented necessary performance

standards can be developed and communicated to all personnel.

3.3.3 Metrics

Measuring performance is essential to overall improvement of operations. Some

critical parameters have been identified in Table 9 below along with suggested goals

from industry standards, where available. Upon installation of the POS system discussed

in Section 3.4.1, such that data is more accurate, baselines can be taken, evaluated for

acceptability and compared to industry standards. Once these metrics are established and

variables which affect these metrics are better understood, improvement initiatives can be

developed to address deficiencies where necessary. A complete understanding of

performance will more readily be understood when comparing to industry standard. The

course will also participate in a service called Performance Track. This is a service

developed by PGA of America in cooperation with National Golf Course Owners of

 Company Confidential
26

America (NGCOA). 9 “The PGA of America’s complimentary research service to

support PGA Professionals and their employers, will team with the NGCOA’s Financial

Benchmark Program, which surveys and reports on key operational metrics by local

market.” 10 Using this free service will allow a good benchmark comparison on an

ongoing basis.

Area Benchmark 11
Yield Management
Course utilization(rounds played/rounds available)
Revenue per available tee time
Net rate per round 70-75% fee
Net rate per day per hour
Greens fee as % of gross revenue
Membership revenue as % total gross revenue
Carts revenue as % of total revenue
Expense Management
Maintenance(expense per maintainable acre) $2,500 to $12,000
Marketing expense % of gross revenue 2-5%
Admin costs as% of gross revenue
Pro & Concessions
Merchandise cost of sales Percentage 60-75%
Merchandise revenue per round
Food and beverage revenue per round
Food and beverage cost of sales Percentage 30-35%
Table 9: Recommended metrics to track

For overall profitability it is critical to focus on expense management, revenue

management, marketing management, and drive overall efficiency in operations through

use of metrics. Relating various expenses broken down by department, then relating this

information with the number of rounds played, gives a good comparison for the

contribution of each with respect to overall operations. Customer feed back can also be

9
http://www.pgalinks.com/index.cfm?ctc=1778
10
http://www.ngcoa.org/pageview.asp?doc=1595
11
http://golfbusiness.com
 Company Confidential
27

measured and compared to revenues to track overall performance though the voice of the

customer.

3.4 Capacity Planning & Utilization

3.4.1 Point of Sales System

Critical to the operational success of AMGC is an understanding of operational

capacity, customer buying habits, and trends at the course. Operational efficiency is

contingent on data accuracy and baseline metrics, which could be determined with the

use of a POS system. SPS Golf Management Solutions provides a web-based POS

system which helps to streamline tee time reservations, track buying habits and employee

activity, and obtain information regarding registered consumers.

The course currently lacks a sufficient POS system. All reservations and

transactions are tracked manually without the use of any electronic system. This allows

for discrepancies between reported activity and actual activity. This also makes it very

difficult to obtain any accurate information regarding customer buying habits or course

operations. The use of SPS’ software package will help to keep track of activity so that

these metrics may be used to establish baseline metrics and project future operational

needs.

The POS system offered by SPS, outlined in Appendix D, will be effective in

tracking the course’s operations. Part of the POS system focuses on the ability of the

customer to reserve tee times online in real time. This streamlines tee time reservations

because the customer no longer needs to speak with the cashier in order to sign up for a

tee time. Additionally, reservations can also be made outside of regular operating hours.
 Company Confidential
28

In order to use the POS system, golfers must register for its use, providing

personal information such as address and date of birth in exchange for a username and

password which is then used to reserve tee times. The system allows the course to store

the information and use it to establish a customer base demographic, which will be very

useful when determining how to cater to customer needs or market the course. In

addition to tracking customer behavior, the POS system can be used to track employee

productivity and establish controls over tee time reservations. This feature will enable

course management to ensure the cashier is productive and not giving preferential

treatment to any particular customer, ensuring the course will maintain a positive image

for both members and daily fee players alike.

3.4.2 Metrics

Metrics associating operational efficiency such as daily utilization (tee times

booked/available tee times), net rate per round, or more detailed metrics such as rounds

player per hour per day would be beneficial for performance. A typical day in the season

will allow for 280, 18-hole equivalent rounds to be played per day based on 10-minute

tee time intervals and operating hours from 6:00am to 4:30pm. After 4:30pm, it was

determined additional 9-hole rounds could be played. Therefore, ideally 280 rounds

would be sold for the day, however recognizing the deficiencies to this on a daily basis,

and over longer periods of time, would allow for selling down rounds, or offering a

discount to golfers to fill open capacity, or allow for better planning during slower times

if trends are noted for an overall improvement in yield management. This could also
 Company Confidential
29

allow for tournaments or leagues to be booked during these times, which will help keep

utilization metrics at an acceptable level.

Results of these metrics can be posted or published to help solicit additional ideas

to maximize utilization. Further, tying in financial performance can be obtained by

generating a Revenue per Round metric, or Net Rate per Round metric that would

evaluate revenues per round on a daily or longer term basis. As noted, net rate per round

metrics for well-run golf facilities are approximately 70-75% of the daily fee rate. 12

3.5 Value Added Processes

3.5.1 Maintenance and Upkeep

As noted, maintenance and upkeep of the course are critical components to the

appearance and playability of the golf course. A quality maintenance operation ensures

current members, daily fee golfers, and new customers enjoy their experience and keep

coming back to AMGC. This all starts with the customers’ first impression of the course.

Opinions are solidified during their first round of play, as such; the golf course must

ensure the customer enjoys the lush, green course as it was intended. Much of the

grounds keeping duties must be worked around golfers playing the course. This includes

mowing, aerating, watering, fertilizing and chemical application during off-peak golfing

hours so as not to interfere with a players round. Many of these activities are dependant

on the weather and are subject to change with poor weather conditions.

A detailed schedule will be used to understand all duties and when they are

performed, such that labor can be scheduled appropriately to minimally intrude on paying

12
http://golfbusiness.com/pageview.asp?doc=944&m=11&y=2003; By the Numbers, Ryan Cook
 Company Confidential
30

golfers activities. A typical example schedule is mapped out in Table 10 below, details

are provided in Appendix E. Additionally, the times of day each hole is addressed for

each duty will also be scheduled upon the completion of a time study. The time study

shall be completed on each duty for more efficient scheduling as well as labor utilization

rates for productivity and or staffing requirements. The current maintenance staff is a

unionized labor force and enforcing a schedule and or completing a time study on the

necessary tasks, may prove to be challenging, however, enforcement of the schedule

based on expected times will increase the course’s operational efficiency. If issues are

noted, it would be critical to obtain support from union leadership, citing benefits to the

community overall.

Day 1
Holes
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Duties
Mow greens(6x week) x x x x x x x x x x x x x x x x x x
Mow tees(3x wk) x x x x x x x x x x x x x x x x x x
Mow fairways(3x wk)
Mow roughs/trim(1x wk)
Rake traps(4x wk) x x x x x x x x x x x x x x x x x x
Change cups(every other day) x x x x x x x x x
Change tee boxes(every other day) x x x x x x x x x x x x x x x x x x
Areation Fall and Spring
Chemical applications As necessary
Watering x x x x x x x x x x x x x x x x x x
Table 10: Typical example of daily schedule
 Company Confidential
31

3.5.2 Metrics

Several metrics will also be used to evaluate performance for the overall

maintenance of the course and are tied in with expenditures. For example greens expense

per maintainable acre can be better understood. Baselines will be recorded at current

levels.

3.5.3 Surveys

Periodic surveys will also be executed to evaluate changes in course quality via a

rigorous maintenance and upkeep program. In addition, tying the survey into the use of

maintenance metrics will help define the value of improvements made.

3.5.4 Speed of Play

The superintendent responsible for maintenance must understand flow of golfers on the

course, such that peak times can be worked around for the maintenance schedule. It is

therefore critical for the speed of play to be understood. According to a recent study,

time to complete 18 holes at AMGC takes approximately 3 hours and 55 minutes, 2:03 on

the front 9 holes and 1:52 on the back 9 holes.

Time clocks placed every other hole on the golf course may also help drive speed

of play. Noting tee time of groups teeing off at the first hole and setting each subsequent

clock back the time it takes to golf to the next hole with a clock, such that every time you

pass a clock on a tee box it should show the time you teed off. This will help golfers

know how they are doing for speed of play according to the calculated hole times

previously discussed. The Ranger can also check tee off times recorded on receipts and
 Company Confidential
32

compare to clocks on the holes to help narrow down what group on the course is slowing

up play.

3.5.5 Capacity Planning

Critical to speed of play, is overall capacity planning and course utilization. Total

capacity at AMGC is difficult to calculate due to many variables, such as weather,

number of days open, operational hours and tee time interval. Total golf capacity will

range between 27,000 and 78,000 rounds per year, however for these purposes realistic

total capacity given this region, is roughly 48,000-50,000 rounds per year. Maximizing

the amount of golfers in a given day, while keeping speed of play to the required 4-hour

time is a balance, and the goal is to clearly maximize utilization. The average number of

rounds played at local municipal courses per 18 holes is approximately 35,000 per year

equating to 70-73% utilization. Moreover, the more utilized the course the more

maintenance practices are critical to ensure the quality of the course meets the

expectations of all customers. In order to better understand total capacity and overall

utilization data accuracy is critical. Therefore employing the use of a POS, will lay the

foundation for metric development such that capacity calculations and several other

performance metrics can be generated.

3.6.0 Scalability

Tee times are a limited commodity and as such must be maximized for

profitability. As noted, a maximum capacity of rounds that can be played are contingent

on many factors and at the above calculated capacity of 48,000 rounds. Table 11 below
 Company Confidential
33

shows possible revenue scenarios. Using the goal of net rate per round of 70-75% of

daily fee according to the National Golf Foundation, the table shows items that are likely

scenarios. This would include rounds played during the season from May 1 to September

30 and preseason rounds in April as well as post-season rounds in October and

November.

% Utilization 70% Daily Fee 75% Daily Fee

90% $756,000 $810,000
80% $672,000 $720,000
Table 11: Utilization using 48,000 round capacity with varying
net rate pre round

3.7 Golf Professional Services

There are a number of areas where the AMGC will improve operations and either

reduce costs or generate additional revenue when coupled with the use of the POS

system. These changes will be made when the current contract ends in 2012.

As discussed previously the AMGC currently employs two seasonal cashiers who

are responsible for taking tee times and selling Greens Fee passes at the course to non-

members. However, all golf cart sales are made in a different location at the Pro Shop.

See Appendix F for a more detailed description of this process. The course can

streamline this process by conducting the sales of greens fees, golf cart rentals, and

merchandise in the Pro Shop under the cognizance of the Golf Pro. This will allow the

course to eliminate the salaries of the two seasonal cashiers who make between $8.50 and

$10.50 an hour. This will save the Course approximately $40,000 annually in salary and

benefits.
 Company Confidential
34

3.7.1 Cart Management

AMGC can also generate more revenue by taking over the management of the

golf carts rentals and eliminating annual storage and use fees. Currently, AMGC

members can purchase a golf cart and store it at the course for a annual fee of $335 for a

gas-powered cart or $365 for an electric-powered cart. The revenue generated from the

yearly fees goes to the course and totaled $70,705 in 2008. AMGC also rents carts on a

daily basis at the price of $8 and $12 to members and non-members respectively. The

revenue generated from the daily golf cart rental goes to the Golf Pro.

The potential increase in revenue generated by taking over the management of the

golf course is dependent on how many rounds per year at the course and the percentage

of those rounds with golf carts. Table 12 below shows two possible scenarios. Research

indicates golfers rent carts approximately 80% of rounds played.

Total Rounds Percentage w/Cart Revenue from Rentals

40000 80% $280,000

28000 50% $126,000

Table 12: Potential Golf Cart Rental Revenue

Upon taking over the golf carts the course will also incur additional investment,

maintenance, and utility costs as well as an adjustment to the Golf Pro’s yearly salary to

make up for the loss of profits from the golf carts. After eliminating the annual storage

option, the course will attempt to purchase the number of golf carts needed from the

members who currently store golf carts on site. A used electric golf cart typically costs

from $2,500 to $5,000 depending on condition. Additional golf carts may be leased in
 Company Confidential
35

the event additional carts are needed to support golf tournaments at a cost of $36 each per

day or annually for $1,000 per cart.

An adjustment to the Golf Pro’s salary will need to be made to a total of $90,000.

This increase, approximately $70,000 from the current contract, includes the loss of

profits from the golf cart rentals and additional funding for the course starter and ranger.

AMGC can expect an increase in expenses of approximately $90,000 annually plus the

investment cost to purchase golf carts and additional revenue between $60,000 and

$210,000, using current pricing.

Until the course takes over the management of the golf carts when the current

contract runs out a nominal fee of $2 per golf cart per round will be charged. An

additional $50,000-$80,000 can be generated depending on the number of rounds of golf

played.
 Company Confidential
36

4.0 Financial Plan

4.1 Revenue Model

4.1.1 Revenue Generation

AMGC will be making a number of changes which will affect course revenue

summarized in Table 13:

Impact Beginning
Pricing Changes $366,181 CY2010
Golf Fee $28,000 CY2010
Golf Cart Rental $210,000 FY2012-2013
Table 13: Revenue impact changes

Table 14 below shows the revenue model developed based on the new pricing

structure and estimated number of members and rounds of golf played annually.

Fiscal Year Rounds Revenue

2009-2010 35,000 $603,173
2010-2011 35,500 $944,710
2011-2012 36,000 $962,538
2012-2013 36,500 $1,091,056
2013-2014 37,000 $1,109,810
Table 14: Most likely Revenue Model Scenario

The scenario shown assumes the current membership remains constant at 525

members and the number of rounds of golf played will be 35,000 for the first year, and

increase by 500 rounds annually in each subsequent year. The most likely scenario

represents 73-78% of the total capacity of the golf course.

Costs associated with operating the golf course are expected to grow at

approximately 3% per year, based on inflation with the exception of adding the Golf

General Manager in early 2010. It should be noted that the change in pricing structure
 Company Confidential
37

would not occur until the 2010 golf season. Therefore, the revenue estimates for fiscal

year 2009-2010 reflect the current pricing structure for the 1st and 2nd quarter, and the

new pricing structure for the 3rd and 4th quarter. A summary of the income statement is

shown in Appendix G.

4.1.2 Time Horizon

The current time horizon for the financial statements is 5 years, beginning in

fiscal year 2009-2010 and ending in 2013-2014. During this timeframe, the financial

statements effectively show growth in revenues based on pricing structure changes. The

additional revenue will be kept in the Golf General Fund and will be used for following

three capital improvements:

• Drainage on back of course

• Milling and paving all Cart paths

• Maintenance building renovation.

All three capital improvement projects were planned for fiscal year 2009-2010.

However, due to the lack of funding available in the Golf General Fund, the projects will

be postponed to fiscal years 2011-12, 2012-13, and 2013-14, respectively.

Based on the projected revenue for each year beginning in fiscal year 2009-10, the

Course will only need to borrow $100,000 each for the first two projects, and nothing for

the final project. The course will borrow from the City of Amsterdam via Bond

Anticipation Note (BAN), with repayment over 4 years, to be paid once annually and at

an interest rate of 12% consistent with previous BAN’s issued to the Course.
 Company Confidential
38

4.2 Estimating Revenues and Costs

Appendix G (Income Statement) and H (Revenue Model) highlight in detail the

projections for the increased revenue to be generated based on the change in pricing

structure. The Most Likely scenario was used to populate the operating revenue line in

the income statement summary. Increased revenues will be generated from annual

membership dues, greens fees for members and non-members, weekly greens fees for

leagues, hosting 8-12 tournaments or outings per golf season, golf cart storage fees for

cart owners, and golf cart rental fees beginning in fiscal year 2012-13.

Based on the projected revenues and costs, Table 15 highlights the bottom line profit

(loss) for each fiscal year over the 5-year time horizon.

FY10 FY11 FY12 FY13 FY14

Revenues $622,855 $986,876 $1,005,809 $1,139,868 $1,166,634
Expenses $663,879 $710,511 $717,609 $919,778 $998,969
Net Income ($41,024) $276,366 $288,200 $220,090 $167,665

Table 15: Net Income

4.3.0 Cash Flow Statement

The AMGC Cash Flow Statement Summary is provided in Appendix I, which

also shows the actual cash flow statements from fiscal year 2004 through 2008. Fiscal

years 2010 through 2014 include receipt estimates based on projected revenues reflecting

pricing structure changes. Disbursement estimates are based on projected maintenance

costs provided by the City of Amsterdam escalated by 3% per year, and include the

addition of the Golf General Manager to payroll.

Additionally, the projected Bond Anticipation Notes for the cart path, drainage

and maintenance building renovation are built into projected disbursements for capital
 Company Confidential
39

debt and assets in fiscal years 2012-14. The cash flow statement is organized in the

direct manner, which demonstrates the total receipts less total disbursements resulting in

the cash flow for the current year. Current year cash flow is then added to the beginning

year cash which totals to the ending year cash. The receipts section is broken down into

three parts: 1) charges to customers, 2) other revenues, and 3) interest earnings. The

disbursements are broken down into five sections, which differentiate operating costs

(employee pay and benefits & supplier and vendor payments) from investment

(acquisition of capital assets) and financing costs (interest & principal on capital debt).

Fiscal year 2009-10 demonstrates the change in pricing structure midway through

the year, which coupled with the additional payroll and benefits from the Golf General

Manager, is the reason that the ending year cash is so nominal. Fiscal year 2010-11

shows a tremendous jump in ending year cash, which is a result of the pricing structure

change. Significant costs of capital improvement projects and the additional revenues

from golf cart rentals explain the high fluctuation between fiscal years ending 2012-2014.

4.3.1 Net Present Value & Internal Rate of Return

The Net Present Value (NPV) is used to analyze the profitability of an investment,

based on the projects cash inflows and outflows, as well as inflation rates and the

required rate of return. Due to the nature of the municipal golf course in that the capital

improvements planned for the 5-year time horizon are required to maintain the quality of

the course. Since the cart path, drainage and maintenance facility projects are unlikely to

draw additional golfers, a NPV analysis was calculated based on the total cash inflows

and outflows of the golf course from 2010-14. While this analysis strategy does not take
 Company Confidential
40

into consideration the NPV for each capital improvement individually, it does assess

whether the costs are too high to keep the golf course from operating profitably. Based

on a required rate of return of 10% and an annual inflation rate of 3%, the net present

value of the capital improvements is $325,710.09. Since this number is significantly

greater than zero, it is recommended that the golf course proceed with the improvements.

The Internal Rate of Return (IRR) is used to determine the rate of growth a

project is expected to generate. The same strategy as NPV was used in calculating IRR

for the cart paths, drainage and maintenance facility projects. Despite the fact that the

free cash flow of the golf course is negative for the first year, the total IRR across the 5-

year time horizon from 2010-14 is 134.8%. Again, since this number is significantly

greater than 0%, it is desirable to undertake this project. However, should the golf course

decide not to go forth with some of the recommendations, it is prudent to recalculate the

NPV and IRR based on any changes in the projected revenues and expenses. Appendix J

shows the full calculation of the Net Present Value and Internal Rate of Return for the

capital improvement projects planned in fiscal years 2012-14.

4.4 Balance Sheet

The AMGC Balance Sheet Summary is provided in Appendix K, which also

shows the actual balance sheets from fiscal year 2004 through 2008 as provided by the

City of Amsterdam Comptroller. See Section 4.3.0 Cash Flow Statement for an

explanation of change for fiscal years 2010 through 2014.

 Company Confidential
41

4.5 Financing Strategy

Based on the projected earnings beginning in fiscal year 2009-10, the cost of the

capital improvements that are planned at AMGC will be offset by increased earnings

each year. As a result, instead of needing to take out Bond Anticipation Notes from the

City of Amsterdam totaling $440,000, the golf course will only need to finance $200,000;

$100,000 each for the course drainage project and cart path improvements. As a result,

the golf course will save approximately $28,800 in interest and $240,000 in cash flow

over 4 fiscal years.

4.6 Risk Analysis

4.6.1 Financial Risks

The most significant financial risk related to AMGC is the reaction of golfers to

the change in pricing structure. The Most Likely scenario of revenue generation assumes

that golfers accept the new pricing structure and continue to golf at their usual rate. Even

though the pricing structure aligns with the competing public and municipal courses in

the Capital Region, the golfers who have been playing at AMGC for years may react

negatively. Some people may decide to golf at a different course, but they will be paying

more elsewhere than they would at AMGC for an equivalent amount of golf. Should a

significant number of golfers decide to take their business elsewhere, AMGC can change

their golfing mix to draw more greens fee golfers. Golf instruction and improved

operations are strategies aimed at keeping members coming to AMGC because of the

camaraderie of the local community and the convenient location, despite the change in

pricing structure. An expansion to the driving range was evaluated and deemed a viable
 Company Confidential
42

opportunity, however, it will be outside of the time horizon of this business plan due to

the more critical recommendations in line with current value added processes. For more

information on the driving range see Appendix S.

Additionally, the Course will develop a communication plan which will be

designed to gain buy in from the current membership base to avoid losing as many

members as possible. The communication plan will highlight the need for pricing

structure changes in order to fund the necessary course maintenance. Further, as course

improvements are made they will be further communicated back to the members.

4.6.2 Strategic Risks

The loss of members is a significant risk to AMGC. The majority of the revenue

is generated by the course and the rounds played. AMGC has consistently lost members

over the past decade dropping from approximately 700 members in the late 1990’s to 525

members in 2008. The loss of members can be caused by a number of things such as:

• The current downward turn of the economy resulting in current members having

less disposable income to spend on golf.

• Members moving out of the area

• As a result of age, health, or injuries

The old pricing structure did little to mitigate this risk. However, the new pricing

structure in addition to the utilization efforts will mitigate the risks of losing members.

This will be done by (1) generating more revenue per round and (2) fully utilizing the

courses resources and tee times to maximize revenue generated.

 Company Confidential
43

4.6.3 Operational Risks

Operational efficiency is critical to success for AMGC to increase their revenues.

Lack of efficiency in expense management, revenue management, and yield management

will not allow the AMGC to operate efficiently which is necessary to increase revenues

for the needed capital expenditures. One factor that will help mitigate the risk is the

hiring of a GGM. This will establish a visible line of responsibility to all operation

matters and further coordinate all functions that are essential to running the golf course,

such as maintenance, and improvement initiatives. The reporting structure will be such

that all employees will report to the GGM, as this role will have the necessary

qualifications to operate and maintain the golf course. The GGM will take advisement

from the Golf Commission who will act as the board of directors for top-level decision-

making, but the GGM will assign and enforce the roles and responsibilities necessary for

proper accountability and efficiency.

Hiring a GGM also has some risks, it is critical the GGM have sufficient

experience and a proven track record to ensure the appropriate qualifications. One way

to ensure this experience is to require PGA Class A certification as GGM. Certification

would ensure proper educational experience to operate and maintain a golf course. A

sufficient background check will need to be done to check references and experience in

running a golf course as well.

4.6.4 Risks Outside of AMGC’s Control

As an outdoor recreational activity, the course requires good weather in order to

operate at capacity. The impact of normal weather patterns and the current drainage
 Company Confidential
44

abilities are taken into account in the projected financial statements. However, changing

weather patterns and not repairing the current drainage system may adversely affect the

projected results. While changing weather patterns, including the increased frequency

and severity of storms, are beyond the control of course management, repairs to the

drainage system should be made as soon as fiscally possible in order to maintain the

quality of play for the course and mitigate this risk. Failure to mitigate this risk will

result in a loss of membership and a decrease in daily fee play.

4.7 Timeline

Appendix L is the timeline of major events for each of the marketing, operations

and financial plans for the Course. Events are broken down into 7 categories, as follows:

personnel, documentation, metrics, capital improvements, maintenance scheduling, golf

professional services, and pricing. Expected revenues and costs are also highlighted for

each activity and are subtotaled for each category.

 Company Confidential
45

5. 0 Conclusion

AMGC will overcome the challenges it faces going forward through the achievement of

its strategic goals to increase revenue generated per round to support needed capital

improvements; growing Women and Youth segments; gain a thorough understanding of

the courses performance; and strengthen the organization through the establishment of

managerial control and accountability. Success in these areas will result in the long-term

sustainability of AMGC and will allow it to increase the value it provides to the

community as a whole.