Funding the Capital Portion of Strategic Plans
A Long-Term Capital Plan should reflect all future anticipated capital expenditures and how they will be funded over time.
In the face of changing wants and expectations of members and prospective members of Private Clubs, Clubs are undertaking Strategic Plans and, in many cases, Master Facilities Plans. These plans address the changing desires and expectations needed to maintain a vibrant membership. For purposes of this blog, we’ll refer to Strategic Plans and Master Facilities Plans collectively as Strategic Plans.
In many cases, the Strategic Plans encompass multiple projects, all of which cannot be done at once. Oftentimes one major project is identified (such as major clubhouse/dining venue renovations; upgraded pool and/or tennis facilities; golf course improvements; a fitness center, etc.) and addressed in isolation. The Private Club’s Board and Management generally put together a plan to finance the project. The project and financing plan is presented to the membership and, if approved, is completed. For many Clubs a major project can be transformative for a Private Club.
However, this narrow approach does little to advance the other projects identified in a Strategic Plan and in some cases, can make it difficult to finance those coming next or later in the plan. This is especially true if debt is employed. Done properly, a Strategic Plan encompasses input from the membership (and their families). As a result, there will be a membership expectation that major aspects on the Strategic Plan will be implemented over time.
We are strong proponents that Private Clubs should have a 5-10 year Long-Term Capital Plan. A Long-Term Capital Plan should reflect all future anticipated capital expenditures – replacements and enhancements - and how they will be funded over time. Ideally, these investments are funded through a combination of Operating Surpluses, Initiation Fees, Capital Assessments and prudent use of Debt. The Capital Projects identified in a Strategic Plan are intended to help reinvent a Private Club, improve membership satisfaction and new member recruitment, and should be an integral part of a Private Club’s Long-Term Capital Plan.
In an ideal situation, when presenting a major project identified in a Strategic Plan to the Membership, the Board should also present the Long-Term Capital Plan which reflects the timing and anticipated funding of future capital projects, including those identified in a Strategic Plan. This transparency helps build credibility as the membership. Members will know that the Club is addressing the entirety of the Strategic Plan and why, because of capital constraints or other factors, the implementation certain aspects of the Strategic Plan are deferred to future years, or in some cases, shelved. Having a funded Long-Term Capital Plan is also an important governance tool allowing for the orderly transfer of member-supported Capital Projects planning to future Boards.
Club Board Professionals is a strategic financial consulting and training firm. The Principals, Dave Duval and Joe Abely, assist their clients achieve excellence in three areas: membership satisfaction, financial sustainability, and exemplary governance. Contact us for a complimentary initial assessment of your club.
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