Navigating Private Club Finances: A Smarter Approach to Dues and Initiation Fees

Assessments. They seem to go hand-in-hand with private club membership. Many clubs have voted to assess members for new amenities in recent years, and many more are considering doing the same in the months ahead. Like death and taxes, clubs see assessments as a necessary evil, but are they?

In this episode we talk to Jim Butler, CEO of Club Benchmarking who shares his perspective on assessments and how club’s can plan for the future more thoughtfully. What he says, may surprise you.

Key Moments:

• Introduction to Club Assessments [00:00:13]: Ed Heil introduces the topic of club assessments and how they, along with initiation fees, are two factors that often concern prospective club members.

• Not-for-Profit Business Model [00:04:45]: Jim Butler explains the unique challenge of private clubs being not-for-profit entities, contrasting with how board members often try to apply for-profit thinking to club management.

• Capital Intensity of Clubs [00:06:51]: Butler reveals that the average club has $28 million in gross assets while making no profit, making clubs one of the most capital-intensive industries.

• Three Main Capital Sources [00:09:10]: Discussion of how clubs fund capital through three main sources: capital dues, initiation fees, and assessments, typically split equally between these sources.

• The Irrigation System Story [00:18:30]: Butler shares an illuminating story about Thorny Lea Golf Club's 50-year-old irrigation system to explain the concept of capital consumption and member responsibility.

• Net Worth Categories [00:24:02]: Description of the three categories of clubs based on net worth trajectory: decreasing (red bucket), flat (yellow bucket), and growing above inflation (25% of industry).

• Union League Success Story [00:25:32]: Discussion of how the Union League of Philadelphia's success came from understanding the business model and creating more opportunities that members were willing to pay for.

• Board Education Challenge [00:31:12]: Butler addresses the unique challenge of educating rotating board members about the club business model, with boards typically changing 3-4 members annually.

• Counter-Intuitive Club Economics [00:34:29]: Explanation of how the most financially successful clubs often have the highest food and beverage subsidies, demonstrating the unique nature of club economics.

• Industry Evolution [00:38:26]: Butler discusses the dramatic changes in the club industry from 2019 to 2023, including increased capital generation, facility investments, and unprecedented waiting lists at many clubs.