The Pellucid Perspective - August 2011 - (Page 2)

COST CUTTING Why cost cutting doesn’t yield long-term properity Winning recipe for profitablity is a mixture of saving and spending By Jim Koppenhaver immy, my boy, you can’t save your way to prosperity in wealth often comes from disciplined and increasing levels of savbusiness.” These were the immortal words of one Hugh ing rather than doubling down on investing (buy and accumulate Jolly, speaking to a 26 year old new marketing associate more real estate, stocks, collectables, etc.). (yours truly) in the hallowed halls of Kraft, Inc. back in 1984. The difference, he explained to me, is that in a business there The fact that I remember that conversation vividly and that in is a finite amount of expense which is inescapable and, unlike the 27 years of business experience and education since then I’ve your personal finances, you have less control over it as it relates to yet to see it be disproven, has elevated it in my mind to dogma. inflation. Hence, while Business A can make its $1.5M annual Standing at the current crossroads of the golf industry with one gross revenue golf facility more profitable by cutting expenses path named “hope” and the other “despair,” let me explain why from $750K to $700K in the first year, there’s only so much runand how Hugh’s simple maxim is critically relevant today for way between that $700K lower expense level and whatever the facility owner/operators and equipment absolute minimum spending threshold is. manufacturers in their strategic planning In most conversations In the end, you still have a $1.5M annual and tactics. gross revenue business with (best case sceand articles that I see nario) the same number of customers and Allow me to digress for a moment however and finish coloring the story of Hugh written in our industry the same average spending amount. BusiJolly and why he would be a prophet if he ness B, on the other hand, is constantly regarding the financial testing and rolling out successful revenue suddenly appeared amidst the current golf industry stakeholders and started dispens- health of golf facilities, generation programs with the objective of, ing his brand of wisdom that we often reover the course of the year, just covering the the marquee phrases expense of the marketing programs behind ferred to as “The World According to Jolly.” For starters, Hugh was a large man (more in and upfront capabilities that revenue generation. While it’s not a girth than in stature) with a perpetual redgiven that Business B will be wildly successrevolve around things ful with the revenue generation programs, dish facial hue and large jowls that shook when he was either scolding someone or like “buying efficiencies, even if they only achieve “breakeven” results belly laughing. He had 30+ years of fronton the investment (i.e. $10K spent to get process controls and line selling at Kraft. He might have been a an identifiable and quantifiable $10K in inpeer to J.L. Kraft himself to hear him tell it, experienced oversight.” cremental revenue), they end the year with and he had gained most of his business acuhigher gross revenue, more customers, a men by nose-to-nose negotiations and fighigher spend per customer (or some comuring out a way to make many more quotas bination of the two), the same dollar profit than he missed. From that background he was chosen to finish and a slightly lower % margin (because they’re making the same his career by coming to the Glenview, IL headquarters to manage profit on higher gross revenue). You can begin to see that Busithe marketing of the cheese slices portfolio. (While some may ness A in contrast is on a relatively predictable path to terminal snicker, remember that Kraft Singles alone even back then was a velocity on profit and has already reached its revenue, customers $150M gross revenue product with annual marketing spending and average spend peak. exceeding $10M). The context for the opening line Jolly-ism was In most conversations and articles that I see written in our a debate we were having in the face of declining 1st half sales as industry regarding the financial health of golf facilities, the marto whether we should recapture 10-15% of the 2nd half market- quee phrases and upfront capabilities revolve around things like ing spending to hedge against the gross revenue decline to pro- “buying efficiencies, process controls and experienced oversight,” tect the dollar profit and margin target, or stick to the spending all of which are expense management competencies. To be fair, and elevate our marketing execution to the “flawless” level. Being our legacy in people, resumes and strengths has been on the opboth naïve and inquisitive at the time, I had to inquire why one erational side (small business owners, guys with financial and could not save themselves into prosperity in business, given that hospitality backgrounds, etc.). This served us well as an induswe’ve had it beaten into our head since childhood that personal try in the period leading up to 2000 when revenue generation “J 2 The Pellucid PersPecTive AugusT 2011

Table of Contents for the Digital Edition of The Pellucid Perspective - August 2011

The Pellucid Perspective - August 2011
Contents
Why cost cutting doesn’t yield long-term prosperity
Get Golf Ready showing some traction
Danger, Will Robinson!
Golf holding up but heartland hammered by weather
U.S. golf course development dead, or just sleeping?
Whither the weather
Miami/Ft Lauderdale, FL Core Business Statistical Area (CBSA)
Comings & goings
A few changes of note in August’s dog days

The Pellucid Perspective - August 2011

The Pellucid Perspective - August 2011 - Contents (Page 1)
The Pellucid Perspective - August 2011 - Why cost cutting doesn’t yield long-term prosperity (Page 2)
The Pellucid Perspective - August 2011 - Why cost cutting doesn’t yield long-term prosperity (Page 3)
The Pellucid Perspective - August 2011 - Why cost cutting doesn’t yield long-term prosperity (Page 4)
The Pellucid Perspective - August 2011 - Get Golf Ready showing some traction (Page 5)
The Pellucid Perspective - August 2011 - Get Golf Ready showing some traction (Page 6)
The Pellucid Perspective - August 2011 - Danger, Will Robinson! (Page 7)
The Pellucid Perspective - August 2011 - Golf holding up but heartland hammered by weather (Page 8)
The Pellucid Perspective - August 2011 - Golf holding up but heartland hammered by weather (Page 9)
The Pellucid Perspective - August 2011 - Golf holding up but heartland hammered by weather (Page 10)
The Pellucid Perspective - August 2011 - U.S. golf course development dead, or just sleeping? (Page 11)
The Pellucid Perspective - August 2011 - U.S. golf course development dead, or just sleeping? (Page 12)
The Pellucid Perspective - August 2011 - Whither the weather (Page 13)
The Pellucid Perspective - August 2011 - Miami/Ft Lauderdale, FL Core Business Statistical Area (CBSA) (Page 14)
The Pellucid Perspective - August 2011 - Miami/Ft Lauderdale, FL Core Business Statistical Area (CBSA) (Page 15)
The Pellucid Perspective - August 2011 - Comings & goings (Page 16)
The Pellucid Perspective - August 2011 - A few changes of note in August’s dog days (Page 17)
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