Problem
The Tamaracks Golf Course
Case Study
Your grandfather, Steven Hawkins, has died and in his will left you the golf course that he designed and ran as a family business for over 30 years. The Tamaracks Golf Course is a challenging 18 holes, par 71, 5900 yards combining woods and water, located between the cities of Harrison and Houghton Lake (mid-Michigan, 1 hour north of Mt. Pleasant). In addition to the golf course, The Tamaracks includes a clubhouse and a kitchen open 7 days a week featuring dinner, short order, daily specials, and a Friday Night Fish Fry. Patios, tents and grills are available for group events and special occasions. The Tamaracks has golf leagues and tournaments and sells golf course lots to build your dream or vacation home. Revenue comes from daily greens fees ($18-$34), yearly memberships ($600-$800), golf cart rentals, golf shop sales, food & beverage, private events & golf outings, and real estate sales (golf course lots). Michigan is known for passionate golfers having both the most golf courses and # of golfers per golf course; yet also challenged by a short golf season (May-Oct). You've already received calls from sales reps at several golf management companies (Troon, KemperSports, Billy Casper) who expressed interest in running your golf course business. These companies typically charge a fee of between $100k-$500k to manage golf operations. Most have been in business a long time, manage hundreds of courses (all sizes, public, resort, and private), and have developed "systems" to track and optimize the different profit centers that make up a golf operation (golf, merchandise, food & beverage, weddings and events, lessons, range, corporate outings). The golf industry grew significantly from the 1950's through early 2000's fueled by growth in golf courses, rounds per golfer, equipment technology, television, and superstars like Palmer, Nicklaus, and Woods. Beginning with the recession in 2007, the golf industry found itself with too many courses, fewer golfers, fewer rounds per golfer, and fewer new golfers coming into the game.
Currently many courses heavily discount tee times to attract business. Within a 45 minute drive of The Tamaracks, there are at least 10 public golf courses with a wide range of price, experience, course conditions, facilities, design, and service levels.
You are trying to think through a range of options. Your not sure what The Tamaracks would sell for if you wanted to sell the business you just inherited. Michigan's economy was hit much harder in the recession and there are plenty of used golf courses going unsold. The real estate business in Michigan has been dead for years. You don't know anything about running a golf course and aren't interested in mo-zing to mid-Michigan. Your instincts tell you that a golf management company v.ill run the golf operations, but probably take up all your profit in fees. You are considering hiring an experienced Director of Golf Operations and putting together a profit percentage deal, but really have no experience whatsoever as a golfer, no less a golf course owner.
You initially think that this business has been on autopilot for years and has lots of upside opportunity for financial growth (for example, a larger clubhouse could add revenue with more events and weddings). The original business model of building a golf course to sell real estate (golf course lots) hasn't been realized. You have long wanted to become an entrepreneur, but aren't sure if this is an opportunity or a burden. Busy daily fee golf courses generate a ton of cash flow and offer multiple profit centers, yet it's also a business vrith expensive labor, upkeep, and equipment costs.
Before you make a final decision, you will complete a comprehensive audit and analysis of operations, equipment, facilities, financials, marketing, personnel, competition, market, trends, and customers.
Identify 5 questions you need answered before you can make a smart decision.