Business Plan

June 2009

COMPANY CONFIDENTIAL

Prepared by: Kurt Therrien Erich Spikereit Nicole Bisnett William Chronister Union Graduate College

Table of Contents
Executive Summary 1.0 Business Overview 1.1 The Company 1.1.1 Contact Information 1.1.2 The Business 1.1.3 Product Differentiation 1.2 Business Goals 2.0 Marketing Plan 2.1 Target Market 2.2 Market Trends 2.3 Competitive Analysis 2.3.1 Strengths 2.3.2 Weaknesses 2.3.3 Opportunities 2.3.4 Threats 2.4 Marketing Strategy 2.4.1 Price 2.4.2 Promotion 3.0 Operations Plan 3.1 Organizational Overview 3.1.1 Golf Commission 3.1.2 Committees 3.1.3 Superintendant & Maintenance 3.1.4 Golf Pro & Concessions 3.2 Organizational Reporting Structure 3.3 Personnel 3.3.1 Qualifications 3.3.2 Documentation and Training 3.3.3 Metrics 3.4 Capacity Planning & Utilization 3.4.1 Point of Sales System 3.4.2 Metrics 3.5 Value Added Processes 3.5.1 Maintenance and Upkeep 3.5.2 Metrics 3.5.3 Surveys 3.5.4 Speed of Play 3.5.5 Capacity Planning 3.6 Scalability 3.7 Golf Professional Services 3.7.1 Cart Management 1 4 4 4 4 5 6 7 7 8 9 10 11 11 12 12 12 15 19 19 19 19 20 21 21 23 23 25 25 27 27 28 29 29 31 31 31 32 32 33 34

4.0 Financial Plan 4.1 Revenue Model 4.1.1 Revenue Generation 4.1.2 Time Horizon 4.2 Estimating Revenues and Costs 4.3 Cash Flow Statement 4.3.1 Net Present Value & Internal Rate of Return 4.4 Balance Sheet 4.5 Financing Strategy 4.6 Risk Analysis 4.6.1 Financial Risks 4.6.2 Strategic Risks 4.6.3 Operational Risks 4.6.4 Risks Outside of AMGC’s Control 4.7 Timeline 5.0 Conclusion

36 36 36 37 38 38 39 40 41 41 41 42 43 43 44 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 Standard Family Junior Senior Senior Family Senior Limited Table 1: $625 $1,035 $140 $600 $985 $560

Fees/Storage Green Fees (before 3pm) Green Fees (after 3pm) Locker Rental (per year) Gas Cart Storage (per year) Elect. Cart Storage (per year) 1-day course rental $25 $17 $30 $335 $365 $1,500

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,
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/
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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 Canajoharie Pioneer Hills Fox Run Briar Creek Hales Mills AMGC Weekday $25 $20 $33* $23 $27 $25 Weekend $30 $25 $36* $26 $27 $25 Membership $750 $1,050 $695 N/a N/a $625 Length 5,837 5,700 6,400 5,667 5,995 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 5

http://www.ngf.org/ 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 7075% 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 Standard $350 Senior $325 Senior limited $300 Family $600 Senior Family $560 Junior $85 Table 3: Membership Pricing Greens Fee $15 $13 $13 $15 $13 $7

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

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

The AMGC currently charges $10 per league member to reserve the league teetimes 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.
Member NonMember

$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 Weekday Resident NonResident Weekend Resident NonResident $25 $25 $25 $25 $625 New $24 $28 $26 $31 $350 +$15 per round $15 Std Greens Fee $45 $49 7% of Greens Fee Revenue Impact

Greens Fee

Membership Member Leagues

19-32% 14% + After 49 Participants

Non-Member $25 Outings Resident $1,500 NonResident $1,500 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

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

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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: Their facility web page on the Play Golf America national website to promote adult player development programs to the general public and/or membership Access to program templates, guidelines and best practices for a variety of player development programs Downloadable promotional materials and forms designed to market these programs 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 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-today 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. Knowledge of PGA rules and regulations

Golf Commission 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 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

Superintendant

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 http://www.ngcoa.org/pageview.asp?doc=1595 11 http://golfbusiness.com
10

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 Mow tees(3x wk) 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 Change cups(every other day) 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 Areation Fall and Spring Chemical applications As necessary Watering x x x x x x x x x x x x x Table 10: Typical example of daily schedule x x x x x x x x x x

x

x x x x

x x x x

x

x x

x

x

x

x

x

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 $756,000 $810,000 90% $672,000 $720,000 80% 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 nonmembers. 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 40000 28000

Percentage w/Cart 80% 50%

Revenue from Rentals $280,000 $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 $366,181 Pricing Changes $28,000 Golf Fee $210,000 Golf Cart Rental Table 13: Revenue impact changes Beginning CY2010 CY2010 FY2012-2013

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 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Rounds 35,000 35,500 36,000 36,500 37,000

Revenue $603,173 $944,710 $962,538 $1,091,056 $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.
Revenues Expenses Net Income FY10 $622,855 $663,879 ($41,024) FY11 $986,876 $710,511 $276,366 FY12 $1,005,809 $717,609 $288,200 FY13 $1,139,868 $919,778 $220,090 FY14 $1,166,634 $998,969 $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 5year 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 decisionmaking, 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.

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