Gaming machine revenue has long been the financial backbone of most clubs. But especially in smaller clubs, this income stream is declining, putting substantial pressures on profitability and, in some cases, long term survival.
So, what’s the difference between those who’ll survive and those who won’t? We call it eagle thinking vs ostrich thinking. Clubs that think like an eagle are constantly on the lookout for opportunity. Their board and management team work together to build a healthy bottom line my maximising existing revenue streams and seeking out new ones.
On the other hand, ostrich clubs hang on to old habits, avoid change and hope that things will somehow magically return to the ‘good old days’.
Clearly, the eagle is going to be the winner in the long run. So, here’s how to develop an eagle mentality.
Firstly, you must know and understand your financial landscape. That means having in place adequate financial reporting that provides trends and ratios that help you gauge the revenue performance of trading areas. Declining revenue sources should be a major focus for both the board and management. Clubs that have not seriously critiqued these areas are setting themselves up for cash flow concerns and other financial pressures.
Next, you must identify your competitors. Eagle clubs understand the demographics of surrounding areas, then work to differentiate their club so that they are perceived by members and prospective members as ‘the place to be’. They achieve this through the right balance of quality food and beverage, up-to-date facilities, entertainment, social outings, customer-focussed staff and by meeting the specific needs of their community.
Finally, you need to keep a constant eye on the key benchmark number that tells you how you’re flying – your EBITDA.
Eagle clubs know they need to be achieving at least10% EBITDA of revenue as a minimum. They understand that any number south of this figure is a sign they’re flying into severe financial turbulence which will put pressure on the long-term viability of the club.
A clear indicator of an ostrich club is an EBITDA which is consistently below the 10% magic number. Sadly, these are the clubs that are almost guaranteed to crash and burn.
So, if you want your club to fly like an eagle, start thinking like one. Develop a strong corporate culture where everyone from the front desk to the boardroom thinks strategically, challenges the way things have ‘always’ been done and is constantly on the lookout for future revenue opportunities.
As always, if you would like discuss this article further, our team would be happy to help.