Financial Modeling for Future Club Facilities

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The Best Way to Budget Master Plan Improvements

What if we told you it was possible to develop a ten year financial forecast for your club’s long range facility needs? And what if this forecasting would allow your club to plan for its future facility funding like never before? What if a budgeting process that works with Club Benchmarking’s ten year Capital Budgeting Program could be done quickly and inexpensively? What if it could be done without creating an elaborate set of architectural drawings?  Well it can. It can be done by utilizing three different, analytical  approaches under the control of an experienced club architect who’s planning experience extends over 1,000 club projects. Who provides the expertise to accomplish this task over two months with a Financial Modeling process that works as follows:

  1. Who analyzes a club’s existing clubhouse, recreation facilities, site work conditions and current asset reserve analysis to determine the dollar amounts of deferred maintenance now applying to a club’s facilities.
  2. Who can utilize McMahon’s analysis and understanding of where the club industry is going with the new trends and how these trends will be affecting facilities and programs in the future, and
  3. Who can develop a club’s own financial model for its master plan in dollar terms, not architectural drawings. Yes, of course, it takes an architect’s keen mind and facility understanding to visualize future facility needs and  improvements, but the real value of club facility Modeling is converting conceptual facility plans into financial projections for future project funding. The goal is to have the necessary capital dollars available when the future facility projects are needed.

The Major Challenge

Determining future facility funding programs without having a sense of a club’s strategic direction is the most challenging aspect of long range planning. A club leadership must be able to crystal ball the need for the future facilities and where to get the funding sources to achieve them. This is where Facility Capital Modeling comes into the process with experienced club planners working with a club’s management team and board committees to learn what the club is all about. The planning process requires a knowledge of each club’s own strategic plan so leadership and outside planners know where they are going before they start the journey. The McMahon financial modeling process leads a club to understanding itself and we utilize visual inspections of facilities, a club’s existing asset reserve study, a club’s own strategic plan and our understanding of critical club trends that are affecting future facilities. The result is the development of an overall facility improvement financial plan that makes it possible to afford the facilities a club wants to build as it monetizes its facility projects so they can be incorporated into a long range facility budget for eventual implementation.

Financial Modeling for Insuring Club Success in Achieving Aspirational Projects

Long Range Facility Budgeting with its long range facility projections is an inexact science and it can always have new and even missing pieces affecting a club’s facility planning. Developing financial information that affects a club’s facilities allows clubs to realistically identify funding for future projects that we call aspirational in nature so these funds are there when needed. This often means establishing reserve accounts for the future aspirational projects like adding new golf practice facilities, new wellness/fitness programs and creating new recreation facilities that are in keeping with new trends, thus making clubs more year-round in their offerings, etc. The process of developing and using reserve accounts for holding funds is a standard practice in homeowner communities across the nation. Clubs can learn something from these similar organizations that will strengthen the ability to fund necessary aspirational, long range capital projects that are the lifeblood in attracting and keeping full memberships.

The Obligatory Reinvestments

But please keep in mind that these aspirational club improvements do not include what are termed the obligatory facility improvements that a club should be funding out of ongoing operations year after year. These obligatory improvements are basically maintaining a club’s existing facilities which are identified in an asset reserve study and which must be maintained to achieve acceptable club facilities. They mostly required full funding for normal depreciation of club facilities. The typical depreciating amounts a club should be reinvesting in facilities out of its operating revenues should be about $500,000 to $800,000 a year. However, the reality is we find most clubs, at best, are only spending half of these amounts annually. Thus they are typically deferring maintenance in club facilities over ten years or more that approach several million dollars in essential catch-up projects like for mechanical systems, roofs, outdated decor, worn out furnishings, etc. This lack of adequate depreciation funding for clubs has aggravated long range capital funding and caused the typical ten year cycle for making major aspirational facility investments to also include sizable deferred maintenance projects.

The Answer

The answer for maintaining a financial viable club over the years is to be sure the club has viable facilities with adequate funding provided for not only everyday facility upgrades but also for the essential long range projects that continue to attract the next generation of members. Achieving the dual financial objective of everyday fiscal management and continually reinvesting in long term facilities is what makes clubs successful year after year.

– Please reach out Alison McMahon at amcmahon@mcmahongroup.com if you are interested in McMahon Groups Financial Modeling Services – We are here to help clubs stay on the path to success!

 

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About Bill McMahon, Sr. AIA, OAA

Chairman

Bill is a strategic, financial and architectural planning consultant to clubs throughout North America. He established McMahon Group in 1983 as an affiliate of the family architectural firm his grandfather founded in 1906. Over the ensuing years, the firm has expanded its club consulting services beyond clubhouse improvement planning to a full range of services for all aspects of private club challenges. To date, the firm has assisted more than 2,000 private clubs across the United States, Canada, Asia, Europe and the Caribbean. McMahon Group provides a unique approach to developing club facility projects first establishing design and financial feasibility so membership approval is achieved. Thereafter final design and construction firms are selected to build the member approved project.

Mr. McMahon is unique among club consultants in providing an integrated strategic, financial and architectural approach to solving club problems. His personal involvement with his own clubs in St. Louis (serving in the roles of president, board member and committee member) has allowed him to bring unparalleled experience to each client. Mr. McMahon’s club memberships have included Bellerive Country Club (St. Louis), Racquet Club Ladue (St. Louis), University Club of St. Louis, Spring Lake Yacht Club (Michigan) and the Royal Yacht Club of Tasmania.

Mr. McMahon is a graduate of Washington University School of Architecture in St. Louis and holds architecture licenses in 44 U.S. states and in Ontario, Canada. He is a featured author in industry publications and a featured speaker at the annual conferences of the Club Managers Association of America, the Canadian Society of Club Managers, the National Club Association and the Hospitality, Financial and Technology Professionals. He serves as a visiting lecturer at continuing education sessions offered by regional CMAA chapters and at Michigan State University. Bill is a co-author of McMahon Club Trends®, the comprehensive research reports on strategic issues facing private clubs published with the National Club Association. He is also founder of the Excellence in Club Management Award.

Mr. McMahon is a member of the American Institute of Architects, and the National Club Association. He is a former president of the Missouri Council of Architects, AIA and has served on various charitable boards in the St. Louis area.

More articles by Bill McMahon, Sr. AIA, OAA
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