Two Sets of Rules Are Better Than 20 Million

Hi All,

It’s been a while, but I’ve been gone for good reason.  2013 is turning into a memorable year for me and TGA.  We’re in the throes of building the TGA Sports Foundation, YTD franchise startups are double any previous year, we’re undergoing a shift in corporate structure as well as organizational culture, and it’s all given me a lot to write about.  I just need to (and will) do a better job of allocating time for it.

There are several half written blogs saved on my computer from the past four months, things I found interesting and started writing about but never finished.  One involved anchoring and bifurcation, topics that came full circle this week.

Anchoring has never felt right to me, but there’s also no evidence (even according to the USGA) that it helps.  I understand on a philosophical level why they decided to make and uphold this rule change, but from a practical level it makes little sense to me for a governing body to allow something for decades and then decide to abolish it.  Seems like they need to sleep in the bed they made as opposed to negatively altering the most important part of the game for dozens of professionals and thousands (millions?) of amateurs.  There’s a reason the USGA wrote their ruling the way they did and have been hording hundreds of millions of dollars (while simultaneously eliminating their grants program), and I wish the magnitude of the legal battle they’re preparing for served as the writing on the wall about their wisdom (or lack thereof) with this decision.

More disappointing to me is the opportunity lost for the USGA to have strongly considered adopting two sets of rules – “bifurcation” – to prevent the anchoring ban from making the game of golf even harder for many amateurs. 

I’ve heard great arguments against bifurcation, but at the end of the day my belief is this – golf doesn’t have one set of rules, it has 20 million as most amateurs create (knowingly or unknowingly) their own versions.  Therefore, it makes sense to me to have one set of simplified amateur rules that the most casual of golfers can understand and follow.  Make it three pages max.  Allow anchoring.  Play all OB, lost ball and hazard penalties like lateral hazards.  Allow winter rules year-round.   Etc.  All of these things would make the game less difficult/frustrating and speed up pace-of-play, two of golf’s most painful ailments.  And they would make the rules less confusing and create more conformity.  Seems to me that steps like these would be the ones that are really "for the good of the game."

For the professionals, keep the existing rules unchanged and make them theirs.  Every other major sport – baseball, basketball, football, etc. – has separate sets of rules for amateurs and professionals, even up to the competitive college level, so what’s the big deal about doing the same with golf?

I think it’s going to be a fascinating several months/years as this plays out with the PGA of America being angry about the decision, the PGA Tour claiming it will consider adopting its own rules, equipment companies considering lawsuits and amateurs facing the decision between worsening their game or being possibly labeled a cheater.  Not a good situation, in my opinion, for the USGA to put everyone else, and themselves, in.  For those of us in the industry and all the golf entrepreneurs out there, it’s worth following closely as the outcomes will have a big impact on what threats and opportunities exist.

Thanks for your patience with my lack of blogging, hope you’re doing well and I look forward to having a much more engaging dialogue for the rest of 2013.  Happy entrepreneuring…

Best,

Steve

2013 Will Be A Great Year For The Golf Industry

I love New Year’s Day.  It’s a day in which most of us are reflecting on the past, thinking about the future, and doing so in a purely optimistic and hopeful way.  One of my goals for 2013 is to approach every day like that.

I didn’t write a New Year’s blog in 2012.  That’s because, while being optimistic and hopeful about most things, I wasn’t for the golf industry.  I thought early on that 2012 was going to be painful, and in many ways it was. 

More industry professionals lost jobs, saw decreases in pay and were forced to look elsewhere for career pursuits.  I know because they were calling me.  Unfortunately most didn’t have the capital to start their own business with TGA as they had been living paycheck to paycheck for years as golf professionals waiting for the industry to turn around.

The USGA didn’t help matters by telling pros and amateurs alike that they’re cheating if they anchor (i.e. use) a long putter, literally causing backaches for the ever-important baby boomer generation.

The PGA Tour further hurt matters by literally wiping away the dream for journeymen professionals of making it onto Tour with a few good weeks at Q School.

But, as in all years, good things happened too.  Year over year rounds were up 7.7% through August, hopefully not the sole result of weather being more golf-friendly this year than last.  And there's new leadership at the PGA of America, with Peter Bevacqua as the newly-appointed CEO and Darrell Crall filling the newly-created COO position, both of whom come from business and development backgrounds.  These are positive steps forward.

But there was a bigger thing that happened in 2012, a bright spot that was/is very bright, that fuels my optimism and hope for 2013.  That is the early sign of a significant and critically important cultural and philosophical shift within the industry.  It’s difficult to describe this paradigm shift with concrete examples as it’s more of a feeling – little things picked up by open ears and eyes.  People being more open-minded to new ways of thinking and acting.  New ways to enjoy the game being thought of and tested.  People being less territorial and more collaborative.  I see it and hear it every day.  The number of golf entrepreneurs is growing.  The status quo is diminishing.  And I believe this is exactly what needs to happen for the industry to rebound, the game to grow and those of us within it to thrive with viable opportunities to build a career and generate wealth.

For this reason, I think 2013 is going to be a great year for golf as this feeling hopefully becomes cemented in strategies, decisions and actions – and we’re investing in that belief at TGA.  We’ve doubled our staff and increased overhead.  We’ve identified and are pursuing new revenue streams.  We are trying to execute an aggressive growth strategy.  And because I believe so much in these things, I recently increased my equity position in the company.

I hope 2013 is a year of innovation, collaboration and entrepreneurship for the golf industry and I wish you all the best in it.

Show Me the Cash!

I remember the moment well.  I had just reviewed the P&L and things were looking good.  The business was healthy.  Sales were up.  Expenses were down.  Projections were being hit.  Everything was moving in the right direction.  I smiled. 

And then, our Controller walked into my office and said: (numbers fictitious)

“We have a problem.  I have $40k of bills on my desk and payroll is due this week, and we only have $80k in the bank.”

I thought of a phrase I’d heard a thousand times, and at this moment, I finally understood it:

A quick look at the balance sheet showed a monstrous Accounts Receivable number.  Yes, sales were up and expenses were down, as the P&L showed.  But people weren’t paying us on time.  Revenue reported as sales wasn’t showing up as cash in our bank account. 

Thankfully we were at a stage with the company where we could weather the storm.   We have always been diligent about keeping the company debt-free so it’s easy enough for us to get a credit line from a bank or a short-term loan from investors if need be.

However, many early stage companies don’t have this luxury.  Cash in the bank is their life blood.  Run out and you’re done.  You can have a stack of purchase orders and a P&L that makes you feel like a rock star, but without cash you’ve got nothing.  Seems simple enough.  But, in my experience, it’s often overlooked.  And I’ve been guilty myself.

In my situation, cash flow comes from the royalties paid by our franchisees.  We establish our operating budget based on them.  If franchisees are late with their payments to us, we have a problem.  Often, it’s the result of a trickle-down effect – the franchisees’ customers are late in paying them so they’re late in paying us.  The cash flow problem runs downstream.

Which is why I encourage entrepreneurs, franchise candidates and early stage business owners to do two things:

1. Start with more cash than you think – like 2-3x
2. Establish a culture with customers of prepayment or 30 day term maximums (with a sizable down payment) from the outset and be ruthless about enforcing it

We were way too laid back in the beginning about Accounts Receivable.  Our mentality was – “we want our franchisees to know that we have their backs and if that means delaying a payment to help them out, so be it.”  The problem was that the effect was the exact opposite of our intent.  It created debt-ridden franchisees, put the company as a whole at risk, and penalized the franchisees who were paying on time as they didn’t get all the services/products they otherwise would have had we had more money to invest in projects and infrastructure.

We’ve been working for years to turn around this mentality.  But culture is hard to change.  It takes a lot of time and energy.  It’s much better to establish a good one from the outset.  My suggestion for how to do so is threefold:

1) If you’re launching a company, start with as much cash as possible.  Make sure to add a “cash flow” line to your pro forma to see how much you’ll need.  Then double it.

2) If you’re in revenue and signing up customers, get them to pay as much as possible up front and be adamant that they meet your financing terms.

3) And if you’re in the throes of running a small business, give cash flow as much (if not more) attention than sales and income.

Because at the end of the day, cash really is king.  And it’s the type of lesson you don't want to learn the hard way.