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August 2021

Finding Savings In The Fixed Costs Maze

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By: Steve Eubanks

Golf operators cannot be experts in everything. Despite the 10-ball juggling act that most go through on a daily basis, managing hundreds of acres of finely manicured agricultural land, forests, streams, ponds and lakes, as well as a fleet of moving vehicles, a retail store, and the thousands of nuances associated with running a restaurant, golf operators also have to pay bills they have neither the time nor the expertise to research.

For example, is your commercial trash collector giving you a good price? How about your internet provider? Does your power bill seem too high? And what are all those service fees you keep getting from your bank? If you use an industrial cleaning service to clear your parking lot while everyone is asleep, are you getting the best deal? How do you know? You can’t call your competitors. And your buddy in the golf business two states over is operating in different market conditions. Throw in the inflationary pressures businesses are experiencing across the board and it’s easy for the bills that most operators don’t think about to peck an operation to death like a growing flock of geese.

“The golf industry has always faced challenges,” said Dan Kaufman, the senior vice president of business development at a company called SIB Fixed Cost Reduction. “This (current inflationary period) is just the latest. But this is something that we haven’t experienced in quite some time since when the cost of goods has just skyrocketed in the last few months. With the private markets being what they are in the golf industry, operators are always looking for ways to counter these threats.”

Kaufman’s company does just that. SIB Fixed Cost Reduction evaluates the bills that most accountants pay without doing much research – utilities, bank fees, phone and internet, laundry, trash collection, alarms, hardware and software licensing, swimming pool services, pest control, and HVAC services. SIB then evaluates your costs based on other people getting the same services in your geographic region.

“Anyone who has cable service or internet service at home has experienced the situation where you get the bundle package from the nationally-known company that starts at $120,” Kaufman said. “The next thing you know, two years later, your cable bill is $220. That’s what happens with businesses as well. And it happens with almost every service we enter.”

Kaufman’s group takes a club’s bills and evaluates everything from the base rate to the service charges and add-on fees, comparing them, not necessarily to other golf courses, but to the hospital down the street or the fast-food restaurant a couple of miles away.

“We’re experts at this because not only do we have pricing from 132 golf courses that we work with, but because we have pricing from 15,000 restaurants, 3,000 hotels and 6,000 healthcare facilities all utilizing identical services. And our position is that the pricing should be identical, whether the internet is being provided to a healthcare facility, a hotel or a golf course. It doesn’t matter what’s going on in that building. What you do in your business doesn’t affect the cost of the service being provided.”

So you, a golf course operator, should get the same internet rate as the Bojangles down the road (one of Kaufman's clients).  

“We go to, say, a Verizon and say to them, why is this golf course paying 30% more for this same exact service from this exact same vendor than a hotel that is half a mile away?” 

There isn’t a good answer for that. The same is true with trash collection, linen and laundry services, swimming pool maintenance, electricity, gas, water, and banking services. Even governments aren’t immune from price gouging. Why, for example, should the unemployment tax at your golf course be different from what the Hilton pays in your town?

This is different from pooling buying power to achieve economies of scale (the model most management companies sell when approaching a club). Kaufman is about managing the bills you pay with a frustrated grudge because you don’t know if you’re getting a good deal or not. 

“There are plenty of firms we partner with that leverage large-scale buying power, especially for consumables, whether it’s paper towels or other staple items,” Kaufman said. “What we have found from the services perspective is that the same service can vary substantially in price based on geography. For example, a golf course in Georgia might pay less for its trash service than a course in South Dakota.”

That makes sense. The trash truck runs on gasoline, which varies wildly depending on geography. In early June a gallon of gas in Alabama was $2.80 a gallon. In California it was $4.50 a gallon. Wages for the person driving the truck are also different depending on the region.

“We focus on the fixed costs within your geographic region,” Kaufman said. “As the labor costs and the costs of materials go up substantially, we’re seeing operators looking at other areas where they can reduce expenses. So, we focus on services – things like credit card processing, payroll and HR, all of these essential services that any company needs to operate. This is where we can work to counter some of the rising prices of raw materials.”

For example, do you have any “environmental fees” associated with your trash pickup? Is your HVAC company adding a surcharge to your base rate? And are they doing the same thing to the Chick-fil-A at the corner or the office park at the edge of town?   

“These are not things that are tied to the cost of fuel,” Kaufman said. “They’re just ways for vendors to increase their margins. Those are the areas where golf clubs can find savings.” 

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