Spend 2012 on the Right Side of the Haimish Line

After a break for the holidays and the birth of my beautiful daughter Eva Grace Tanner, I’m returning to my weekly blog with a renewed vigor for 2012.

I’ve been reading a lot lately and one of the more interesting pieces was a Mark Suster blog titled “Spend 2012 on the Right Side of the Haimish Line" in which he references this NYT article by David Brooks.

Brooks defines haimish as “a Yiddish word that suggests warmth, domesticity and unpretentious conviviality.”  The concept is that you risk crossing the haimish line into a less happy existence if you blockade yourself from normal folks.  Examples of doing this would include staying at super-private hotels, working solely from behind a desk, etc.  As I read these articles, I took the concept a step further by thinking about the professional consequences that would arise from boxing in one's experiences.  i.e. If you play golf exclusively at private and luxurious clubs, yes, you'll miss out on the congeniality of playing with weekend warriors who are making friends, drinking beers and playing for the love of the game.  However, if this same person is then responsible for addressing the challenges faced by these weekend warriors, they probably wouldn't do a very good job.  They'd be too far removed.  The challenges themselves would fall outside the false sense of reality that their experiences had created.  And thus, professionally, they'd be operating from the wrong side of the haimish line.  

As I went through this intellectual exercise, I thought a lot about the golf industry.  And I’ve thought a lot about this concept of the haimish line since as several interesting headlines and observations appeared in the first few weeks of 2012.

First, at the PGA Tour’s season opening tournament in Kapalua, Commissioner Tim Finchem announced the Tour’s commitment to raise $100 million for The First Tee this year.  Since 1997, The First Tee has been the sole junior golf organization supported by the golf industry and it operates on a $13 million annual budget.  And yet, despite The First Tee’s claim that they’ve had 4.7 million participants, there are less kids playing golf in the U.S. today than there were the day it was founded.  (2.8 million in 1995 vs. 2.5 million in 2010 - National Golf Foundation data.)  Instead of opening their doors and offering support/resources to other youth programs, industry leaders are doubling down on their single all-in bet.  That, to me, is a decision made from the wrong side of the haimish line.

Then, earlier this week, Finchem proposed a change to the Q School format. One of the great things about professional golf is that anyone can pursue their dream of making it on Tour. You don’t need to get drafted, you don’t need an agent, you don't need to be a certain age … you just need to pass through Q School, which is open to any good player. The new format would be a 3-tournament series that is only available to select Nationwide and PGA Tour players, thus eliminating the opportunity for college golfers, club pros and anyone else who’s been working meticulously on their game to bypass the mini Tours and go straight to the big leagues. The new format benefits existing tour players, adds three new tournaments and their corresponding revenue, and undoubtedly builds more prestige in the Nationwide Tour (which, perhaps coincidentally, is in need of a new title sponsor after this year). But nevertheless, it's a closed format. Derived from closed-minded thinking that, to me, comes from the wrong side of the haimish line.

On the flipside, Golf 2.0 has done a great job of identifying golf’s many challenges and it has the industry’s undivided attention.  Its presence is everywhere at the PGA Merchandise Show in Orlando this week.  The much harder and more important part is to now identify viable solutions and execute on them.  Nevertheless, I applaud the PGA for hiring Boston Consulting Group to provide them with a sobering analysis.  I also applaud them for recruiting the perfect person to lead Golf 2.0 in Darrell Crall.  These are all things happening from the right side of the haimish line.

Additionally, the PGA of America clearly has a new social media strategy on Twitter that is much more active and open-minded.  Historically they would only tweet well-manicured PR messages but now they’re engaged in an active dialogue with industry members, including retweeting criticisms and all.  I’m also a big fan of the hashtag they’ve been promoting - #growgolf.  These are smart, engaged decisions made from the right side of the haimish line.

All of these topics require further discussion and there are other smaller examples as well, but the point I want to get across is this concept of this haimish line.  The golf industry has been operating from the wrong side of it for too long.  And it’s understandable – industry leaders don’t pay for golf, probably haven’t experienced a six hour round in their professional careers and aren’t working shoulder-to-shoulder with the PGA Pro who’s folding shirts in the shop and struggling to get by.  It’s good to see that they’re taking steps in the right direction to understand and address the challenges being faced by golfers, industry members and the game as a whole.

With that, I have a challenge for everyone, myself included - let's make sure we spend 2012 on the right side of the haimish line.

Where Do Entrepreneurs Find Their Money?

In my experience talking to aspiring entrepreneurs on a daily basis, access to start-up capital is one of (if not the) overarching factor preventing them from pursuing their entrepreneurial aspirations.

I recently came across a video thanks to Brad Feld that was created by the Kauffman Foundation and is titled “Where Do Entrepreneurs Get their Money.”  I’ve embedded it below and it provides a great overview of your financing options as an entrepreneur.  The key points are:

1.    More than half of young companies get all their funding from founder savings and cash flow derived from the business.

2.    Credit cards are the second largest source of capital for startups after founder savings. 

3.    Friends and family are the third largest source of capital.

4.    Banks are the fourth largest source of capital.  The difficulty with banks is that they want to lend against secured assets, which most young companies don’t have.

5.    Venture capital is available to high growth companies, but interestingly, less than 20% of the fastest growing companies in the U.S. received venture funding thanks to #’s 1-4.

6.    In the last few years, new sources of capital have arisen such as Angel investors (Tech Coast Angels, AngelList) and peer-to-peer crowdsourced fundraising (Kickstarter, Lending Club, etc).

Here's the video.  Until next time, have a happy holiday season and cheers to a great 2012!

The Future of U.S. Golf Course Design

The Wall Street Journal recently published an article titled: “When Building a Course Makes Sense.”  Right now the answer is, well, pretty much never.  There has been a net loss of 300+ golf courses since 2006 and the author could find only a half dozen courses scheduled to open in the next two years (compared to the ~300/year that opened during the 90’s).

While the drop off is more significant than I would’ve imagined, the trend makes sense.  Courses are often built as attachments to real estate communities or resorts, or by municipalities to serve the community.  We’re all familiar with the recent struggles of these industries / budgets.  Additionally, the number of golfers in the U.S. fell 13% from 30 to 26 million in the five short years between 2005-2010.

According to the article, most of the courses currently under construction are “destination courses” that are looking to cut costs by being built in remote areas on sand-based land while utilizing more of their natural environment in the design.

The article cites Bandon Dunes and Sand Hills as great examples of this philosophy being a good one.  I’d include Whistling Straits as well.  All three were created in this style and are widely considered the best courses built in the U.S. since 1960.

Whistling Straits, where Dustin Johnson famously
couldn't tell what was and was not a bunker

A friend in the golf industry recently gave me a book called "Planet Golf USA” and in it, the author laments the lack of quality golf courses that have been built in the U.S. since the Great Depression.  And he’s right.  If you look at Golf Digest’s ranking of “America’s 100 Greatest Golf Courses” you’ll find that 9 of the top 10 were built before1933 … along with 18 of the top 25.  I find these statistics fascinating considering the remarkable advancements in technology and equipment since then.

It’s reported that Sand Hills (#9 in the aforementioned rankings) was built for $1.5 million in 1994 compared to some resort courses with fake waterfalls, etc. that exceeded $20 million.  I know which one I’d rather play.

Sand Hills - only Top 10 U.S. course built after 1933 and
considered one of the most naturally-built courses ever

Interestingly, my favorite public course in Los Angeles – Rustic Canyon – was one of the few non-ranked courses featured in Planet Golf USA.  It is rugged, pure and a great test of golf.  The designer moved only a scant 17,000 cubic yards of soil during the construction process, bringing the project in on time and under budget.  As a result, they charge $60 greens fees in a region where the only other public option (besides municipalities that take 6 hours to play) are mediocre, fancied-up daily fee courses needing to charge $100+ to stay afloat.  And that is the problem the market is currently correcting.

Rustic Canyon's Front 9 hugs the natural landscape

The recalibration occurring in the golf industry unfortunately affects many good people.  But if there is one bright spot, I hope it’s that the necessity to build more cost-effective courses brings the game back to its roots of being played on minimalist courses designed from the natural environment.  This applies to both destination courses we can dream about like Bandon Dunes and local courses we can play regularly as weekend warriors like Rustic Canyon.

If this trend continues, who knows… perhaps one day we’ll look back on this time as a second golden age of golf course design.  And undoubtedly there are opportunities out there for entrepreneurs to capitilize on this shift. 

Create, Know & Obsess About Your KPI's

Please note that a variation of this blog catered towards franchise candidates first appeared in the Franchise Business Review.  You can read it here.

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1.    Efforts made in marketing (i.e. Are you doing the work?)

2.    Conversion Rate (i.e. How effective is your message?)

3.    Profitability

A good set of KPI’s addresses these three topics. 

If you’re running a business, your KPI’s should be central to your thoughts and actions at all times.

If you’re thinking about starting a business, figure out what your KPI’s will be in advance so you can make an honest assessment of the opportunity.

If you’re analyzing a business as a potential investor or franchise candidate, ask about KPI’s to quickly ascertain the health and key drivers of the business model.

Hopefully this outline provides some guidance on recalibrating or creating these incredibly important measurements which will serve as the lifeblood of your business.  Good luck and happy entrepreneuring.

In working every day with current and aspiring entrepreneurs I often find that metrics and data don’t receive the attention they should.  I often hear comments like – “How much money can we make?” or “How long will it take to do so and so?” but these are cursory questions that often don’t scratch the surface of a business model.

Every business, whether real or in creation, has key revenue and expense drivers.  All entrepreneurs should translate these drivers into “Key Performance Indicators” (“KPI’s”) or something similar to measure the company’s performance.

KPI’s are the heart, brain and central nervous system of a business.  Want to know if you’re investing your time and money in the right places?  Know how these investments relate to your KPI’s.  Want to know when to crack open the champagne or hit the panic button?  Know the ceiling and floor of each KPI and create reasonable goals/milestones.  Want to know if a key employee is the right person for the job?  Look at their impact on the KPI’s relative to what they’re costing the business.  And so forth.

I was speaking recently with Brian Destarac, a business coach and founder of Cobalt Business Solutions, and he had a great outline for looking at KPI's that I wanted to pass along.  He identified three categories:

Core Golfers & Technology

The National Golf Foundation recently released a report called “Core Golfers & Technology – Engagement with the Digital World, Including Social Media.”  I wanted to pass along some of the key findings along with my thoughts about their implications for golf entrepreneurs.

The data focuses on “Core” golfers, which accounts for 14.8 million of the 26.1 million total golfers in the United States.  “Core” golfers play 8+ rounds per year and are a critical market for most companies in the golf industry to capture. 

Here are the highlights:

Internet / App Use:	% or #
Researched Golf Equipment Online	84% (30% purchased)
Downloaded Golf Related App	2.4 million, or almost 20%
Would prefer high tech device in app form over dedicated device	4.3 million, or 29%
Regularly read blogs/reviews about golf brands, courses or travel	4.6 million, or 31%
Use Facebook, LinkedIn or Twitter	71% (compared to 56% of nt’l pop)

All numbers from this chart are increasing significantly by the year.  For example, mobile app downloads for golf-related items are double in 2011 what they were in 2010 across several categories, including apps to: receive industry news, engage with specific brands, book tee times, track scores/handicap and measure distances.

Turning now to marketing and brand engagement, core golfers had this to say about how they prefer to connect and interact with brands:

Communication Preference – Email vs. Social Media:	2010	2011
Email	94%	93%
Social Network Service	6%	7%

Likelihood to Increase Loyalty & Expenditure:	2010	2011
Email	36%	51%
Social Media Service	15%	25%

Email remains consumer’s overwhelming preference for engaging with golf brands but the gap is closing while both communication venues are increasingly important for building loyalty.

Here’s what I think it means:

The takeaways from this data will vary depending on your niche in the industry, but I think there are a couple of overarching themes for all of us:

1.    Golfers are increasingly using the Internet for golf research and purchases so you need to be there with an engaging website that includes blogs, reviews and other relevant information.

2.    A strong email marketing campaign (and thus a large and growing email database) is essential for communicating with customers.

3.    An active and relevant social media campaign is less important right now than email marketing but this gap is closing so it’s time to get on Facebook, Twitter, LinkedIn and others with a well-planned strategy.

4.    If a mobile application is relevant to your business in any way, develop and deploy it.

Good luck and happy entrepreneuring!

TGA is Now TENNIS & Golf Adventures

I’m pleased to announce that TGA has officially launched a second franchise company called TGA Premier Youth Tennis that closely replicates the model of TGA Premier Junior Golf.

The decision to enter the tennis industry has been under consideration for at least a year and it brought up a host of issues that drilled to the core of our company and its entrepreneurial spirit.  I wanted to share some of them with the hope that they’re applicable to you as you consider, pursue and/or manage your entrepreneurial endeavors.

Core Competency – What is the company really good at? 

Most people think of TGA within a golf context – that we’re really good at running golf programs on elementary school campuses.  For many years, we saw ourselves in this way too. 

But as the company evolved, we recognized that anyone can walk onto a school campus and try to teach golf.  Many have.  But no one has achieved anywhere close to our type of size and impact.  The reasons for this are twofold – 1) we created a viable business model for scaling a school-based youth sports business; 2) we focused heavily on being an “enrichment” program – i.e. building a classroom environment with instructors trained on educational concepts who deliver programs that include character development, life skills, physical activity and the integration of academic subjects such as math and science. 

Thus, our core competency is not about golf but rather the ability to deliver enrichment programs through a business model that is viable, replicable and scalable.  As such, we believe that any popular sport/activity not traditionally done on a school campus (e.g. tennis and golf) can be plugged into this model with success.

I believe that understanding a company’s core competency is probably the single most important factor to building long-term sustainable growth and I’m confident that we got it right.

Organizational Values – What does the company stand for?

Everyone involved with TGA is hugely passionate about golf.  Most people get involved with us to pursue this passion and it's one of our single most unifying values.  However, while some of these folks are also tennis enthusiasts, just as many are not and have no emotional interest in being involved with a tennis company. 

We put tremendous thought and research into whether a voyage into tennis would fracture the foundation of our organizational values.  We determined that the answer is “no.”  The reason is because we believe there is a deeper value we all share than golf, and that is a stronger passion to positively impact kids, families and the communities we serve.  We feel that tennis adds opportunities for us to do this in greater scale and effectiveness.

Additionally, franchise law forced us to offer tennis as a separate franchise from golf so people can choose which programs and passions they want to pursue – golf, tennis or both. 

I believe that having a corporate identity with clear core values is critical to building a strong organizational culture and I think tennis keeps ours intact while offering opportunities to make it stronger.

Risk vs. Opportunity – How much are we willing to gamble?

We ran pilot-programs for tennis in six markets nationwide and the early results were encouraging, albeit preliminary.  Then, various opportunities of high intrigue within the tennis industry started arising as people took note of what we were doing.  Joshua Jacobs, TGA’s CEO and my friend/partner, is an ambitious visionary who operates mostly based on experience and instinct so he wanted to move full steam ahead.  I am more of a quantitative, process-driven individual so I wanted to proceed slowly, if at all.

Ultimately, I remembered something my dad always says which is: “Things either get better or they get worse, they don’t stay the same.”  And I think that is very relevant here.  Josh was right – we have an opportunity to do something great with tennis and opportunities like this are few and far between.  So we compromised by slowing him down and speeding me up. 

Yes, there are definite risks and significant challenges with our decision.  But we’ve been diligent about our preparation and feel confident with our decision.  And that’s the key – understanding risk tolerance and making educated decisions.  For us, it’s time to take the leap and see what happens.  “Ready Fire Aim.”

Or, as we say at TGA, “Keep Swinging!”

"Owner's Discretionary Income"

Everyone wants to know the same thing when analyzing a business – what’s the profit?

Prospective business owners want to know a company’s earning potential.  If analyzing a franchise, candidates should (and often do) ask existing franchisees how much money they’re making and what the financial viability of the system is.

Business owners want to know how much value they’re deriving from the company.

Investors, board members, franchisors and other interested parties want  to know the operational efficiency of the business.

The problem is that determining “profit” isn’t as simple as looking at the bottom line of a P&L – especially when analyzing a private company like TGA Premier Junior Golf that is usually home-based with a single owner/operator.  That’s because the P&L often includes a variety of benefits to the owner that are entered as expenses, such as an owner’s salary/draw, entertainment, etc.

At a recent conference, I learned of a financial calculation from a fellow franchisor that solves this problem.  It’s called “Owner’s Discretionary Income.”  Here’s the equation:

company profit (Net Income line of the P&L)

+ owner’s salary (including draw, dividends, etc.)

+ fringe benefits (things you’d likely pay for out of your own paycheck if not a business owner)

= Owner’s Discretionary Income

This calculation tells you exactly how much value a business is delivering to its owner.  It also tells you how well the business is functioning from an operational standpoint.  That, in my opinion, makes it extremely relevant and important for business owners and prospective entrepreneurs alike.