Last week we discussed our three scenarios and we described our assumptions and the revenue that we anticipated from each. This week we’ll talk about expense. Rather than try to show multiple expense scenarios, we’ve decided to drill deeper into the one case that most of our members are concerned about—not opening the golf course. Several members expressed surprise that we said that member dues would allow us to operate close to break even, so here are some numbers to help you put that in perspective.
The Club’s fiscal year begins on November 1, so that means that all annual figures you see cover the period from November 1 to October 31. As it is now April, we’re over 5 months into the year and the expenses and revenue from those 5 months have been factored in. To date, our expenses have been approximately $739,000 and that includes finishing up the Fall golf season (greens maintenance, pro shop, food & beverage, etc.) closing down the golf course for the winter, operating the building through the winter and lots of other things. On the revenue side, we received about $65,000 in the same time frame, but if you remember, November was very poor golf weather last year, so revenues were down.
So, what expenses will we have if the golf course doesn’t open? We certainly hope it doesn’t come to that, but we’ve already made a number of tough decisions, and below are the estimates for what we think we would still need to spend in the final 7 months.
Greens – $516,000 (down from $938,000). To a large extent this reduction comes from wages. Ordinarily we have a lot of seasonal staff, but very few of those would be brought on this year. (Just enough to continue to get the course ready for an opening when/if we get the approval.) There are also maintenance activities that would be deferred to 2021 such as tree removal, drainage improvements, etc. Even without anyone playing golf, we still have a lot of equipment lease expense, fertilizers, pest control products, etc. The grass doesn’t care about Covid-19.
Food & Beverage – $50,000 (down from $1,066,000). In the absence of an operating food & beverage function, all we have left is a very small portion of wages and wage burdens.
General Administration - $340,000 (down from $495,000). This category includes staff costs, insurance, taxes and a lot of things that are difficult to reduce. The reductions we’ve found come from supplies, outside fees, support, and some staff time.
Pro Shop - $275,000 (down from $606,000). This represents a significant reduction in wages as well as other items like merchandise and supplies.
Clubhouse - $107,000 (down from $261,000). Many of the Clubhouse costs are fixed, but some savings will result from reduced usage of the building and reduced staff costs.
Summing these 5 categories and adding the $739,000 already spent, we estimate a total annual expense of just over $2M, compared to that figure we stated last week of an expected $2.2M in revenue. Pretty close.
Should we end up not being able to open and should our actual costs come in below the revenue, you can be assured that we will carefully assess what to do with the overage. A refund is one option, but other possibilities are lower fees for 2021, paying down debt, and a variety of other things.
Clearly this is not a budget, rather it’s our best forecast of the financials if we were unable to open the golf course and Clubhouse. As you start to consider the effect of partial openings, the numbers change quite quickly. Next week we’ll share some of those numbers with you too.
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