Core Value: Informed Leadership
Adopt the fact-based, private club business model and related financial best practices and Key Performance Indicators
A club board is more likely to achieve alignment and work together productively if everyone in the room is speaking the same language, but a disconnect often occurs when it comes to discussions about club finances. The communication gap can be bridged through understanding of the financial model of private clubs and adoption of fact-based financial best practices and key performance indicators specific to the club industry.
Financial models are a central element of understanding both industry dynamics and the performance of an individual business within a given market in terms of its financial sustainability and long-term success. Such models exist to unearth and convey the key drivers of financial success common to the competitors in a given industry. Investment bankers, financial analysts and consultants spend significant money developing financial models so they can understand how revenue, costs, margins, overhead, leverage and other financial metrics relate to profitability and growth. The quest for fact-based insight is a direct and necessary response to unyielding competition and business challenges and the club industry is not immune. High-performing clubs embrace the power of data-driven leadership and the central tenets of the demonstrated financial best practices.
The club industry is a fragmented, cottage industry that until recently did not have access to the data and insight necessary to truly understand itself. That has changed. Financial best practices and the associated Key Performance Indicators now exist to clearly illuminate the drivers of financial sustainability. The Club Leadership Alliance is committed to propagating financial best practices and associated KPIs that will benefit the industry. Visit Yahoo Finance, Google Finance or any financial website and type in any stock ticker symbol (regardless of company or industry) and you will get a very simple, common view of an income statement. This common view can be used to assess the financial outcome of a particular company. Understanding the financial model of clubs requires a similar common view of the finances. Through significant effort, a common financial framework has been identified that can, and does, apply to every single private club regardless of its size, type, location or quality. That common financial framework, developed and propagated across the industry by Club Benchmarking, provided the context necessary to discover the common financial best practices and the KPIs.
Core Concepts of the Common Financial Framework for Clubs
- Separation of operating and capital monies and accounting for separate bottom line operating and capital results is a necessity.
- The sources and uses of money on both the operating and capital ledger are the same for all clubs regardless of their geographic location, size or level of service. This “law of commonality” has been confirmed through extensive analysis of club industry data.
Tips for Adopting this Best Practice
- Review, understand and adopt the fact-based, financial best practices.
- Embrace benchmarking leveraging the common financial framework and the associated KPIs.
- Use the KPIs to assess your own club’s financial health and identify challenges and opportunities.
- Utilize fact-based insight emerging from the benchmarking exercise to make decisions that will positively impact future outcomes.