Financing Facility Projects Made Easy
We keep seeing more and more hype on how to fund facility projects as if this is the end-all for club success. In reality, there are just a couple of basic ways to raise capital funds, and they all get back to asking members to pay more. The real issue is letting members decide how they want to pay. Yes, we advise fully funding club depreciation out of ongoing operations. This of course makes sense, but few clubs do this, and the results are not cataclysmic. But when it comes to funding major projects (normally done on ten-year cycles), they are generally funded with special funding programs that members want to approve. Members do not want to be taxed for these projects with upfront monthly payments years in advance which results in millions of dollars being collected when any board can tap into them for favorite projects. Members want to control these expenditures by voting on them. Maybe they should, but most members care little about a club’s balance sheet.
Based on our experience in raising billions of dollars for private club projects, the club’s balance sheet should not be driving why projects are built. This is “the tail wagging the dog”. What is important is, projects should be built that achieve a club’s strategic objectives for gaining members, improving usage, achieving “very satisfied” members, etc. as these attributes drive club success. If we let bottom line objectives drive clubs, we will lose quality and members as a result. Please know that raising capital funds is relatively easy if the right projects are proposed. In funding major projects we find members’ preferences to be:
• 70% prefer monthly payments,
• 10% prefer up-front payments, and
• 20% prefer a combination of both.
So, let’s not overthink financial issues affecting funding facility projects. If we build the right projects which retain existing and attract new members, the financial issue takes care of itself.
About Bill McMahon
Bill is a private club planner providing strategic planning, member research analysis and facility planning services for private clubs across North America. Bill joined McMahon Group in 1999 and has worked with over 200 clubs helping to solve their strategic and facility needs.
Bill is Co-Editor of Club Trends, a quarterly report published with the National Club Association (NCA). He has written for many private club publications like The BoardRoom Magazine, Club Director and more, and has been a featured speaker at national conferences, local chapters and other associations serving the private club industry. He is also on the NCA’s Communications Committee.
Bill has been instrumental in developing and enhancing the McMahon Group online presence. He created and runs Clubtopia® (www.clubtopia.com) – an online business directory of firms and companies serving the club industry.
Bill’s club memberships have included Bellerive Country Club (St. Louis), Glen Echo Country Club (St. Louis) and the Missouri Athletic Club (St. Louis). He proudly serves on the Board of Cinema St. Louis (www.cinemastlouis.org) and is Second Vice President on the Board of the Tennessee Society of St. Louis.