| Summer 2020 24 during an operational shutdown while all members continue to pay the base dues. Each club will use common sense in navigating their own decisions. Club Benchmarking’s short-term recommendations regarding decisions are: • Stay focused on the short-term impact on operational finances. Do not start reducing at the overall 2020 operating and capital budgets. Keep the decisions focused on the short-term shutdown until more information is available. • Considering the strength of the club entering the shut- down and the historical drivers of that strength or weak- ness, which is critical context for all decisions moving forward. If the club is strong, don’t depart from what has made it strong (an owner mentality willing to contribute what is necessary to properly fund the club). If the club is weak, try to change what is likely a historical hesitance to ask members to contribute the money necessary to properly fund the club. • Wait until there is more information to make long-term decisions. MEMBERSHIP ENGINE Club Benchmarking’s ongoing annual analysis of financial and operational data from across North America indicates that in terms of the ability to attract and retain members, clubs fall into one of three buckets: 1. Strong Membership Engine – Clubs that are full and have a wait list. This bucket includes 20% to 25% of the market. 2. Moderate Membership Engine – Clubs that are not full but have enough members to fund operations and capital at a level that is mostly adequate. This bucket includes 50% of the market and is filled with a combina- tion of clubs that are near capacity and clubs that are much less full but still have an acceptable number of members. 3. Weak Membership Engine – Clubs that do not have enough members to adequately fund operations or capital. These clubs have very low initiation fees and very high membership churn. As we will see, the two are related. This group represents 25% to 30% of the market. These clubs will most acutely experience both the short-term and the long-term impact from the virus crisis. Members in these clubs tend to think like custom- ers instead of owners. It is imperative clubs make decisions within the context of the strength of their membership engine. Each club must recognize that the strength or weakness of their membership engine in the present moment is the outcome of decisions made since the last recession. Since that time, certain clubs have changed the strength of their membership engine. Clubs that came out of the last recession with a moderate strength engine have entered this crisis with strong engines. Some clubs that had strong engines coming out of the last recession have sunk into moderate or weak engines. Those shifts are directly related to decisions that were made in the boardroom over the last decade. Decisions made in the coming months will have an impact on your club’s future. Use the crisis as an opportunity to change the future— simple as that. Every club should be asking, “How do we make our club stronger?” It is the following best practices that made the clubs with the strong membership engines strong. It is an unwillingness to embrace best practices that made the clubs with the weak membership engines weak. Every club can benefit from studying and embracing the following best practices. Emerging from a crisis seems like a perfect time to do so. The best practices are a failsafe roadmap for clubs with strong membership engines to remain strong and for clubs with weak or moderate member- ship engines to improve their future. The best practices that should be reaffirmed and embraced as clubs emerge from this crisis are: 1. Recognize the operating ledger as the vehicle for deliver- ing services and amenities to members. It reflects the member experience. Financially, it is consumed every year by members enjoying the club. It is not the financial driver. 2. The financial driver is the capital ledger. Capital income is the source of money a club uses to drive itself forward financially. 3. Every club, like every business and family, must increase net worth. Net worth grows as a result of adequate capital income and decreases as a result of inadequate capital income. 4. The key to sustainable financial success is a comprehen- sive, forward-looking capital plan. 5. Clubs compete on value, not on price. In 2020 and beyond, clubs must offer a compelling member experi- ence if they are to succeed. On the margin, clubs must lean toward funding the member experience and lean away from a focus on cutting expenses. Ray Cronin is founder and chief innovator at Club Benchmarking.