Building Financial Resilience: Strategies For Sustainable Success In The Club Industry

By diversifying revenue streams, embracing technology, and planning for economic downturns, clubs can build financial resilience and secure a sustainable future for their members and community.

PKF was recently invited by Clubs NSW to present at the Club Education Institute (CEI) Seminars, which were held across 14 locations in NSW over the past two months, with more than 600 attendees from over 160 clubs.

We chose to present on Financial Resilience, as this has been a hot topic in the industry given the current economic landscape. This subject is crucial for the sustained success of any Registered Club. Following the challenges from COVID-19, the industry is now facing rising interest rates and cost of living pressures, resulting in increased costs, changing member expectations, and fluctuating revenues.

The presentation discussed three key risks impacting the industry:

1. Economic and Market Uncertainty: This includes the impact of higher interest rates, supply chain pressures, and labour market challenges on the day-to-day operations of the Club, affecting financial performance with increased costs. Additionally, cost of living pressures and the impact of COVID-19 on member habits have affected revenues.
2. Regulatory Changes: The regulatory environment in the industry is ever-changing, with increased compliance and monitoring, which raises compliance costs, especially for smaller clubs.
3. Key Person Risk: Many clubs have a small management team, which can lead to an over-reliance on key staff and limited or no succession planning. Conversely, a dependence on a key member profile or demographic can result in negative impacts if there is a change in that demographic.

We then considered the challenges and provided potential responses for building financial sustainability:

1. Diversification of Revenue Streams: Relying too heavily on any single source of revenue can cause significant challenges if that source is impacted. Consider reviewing the profitability of all service offerings, expanding revenue through commercial tenants providing services from the Club, or diversifying through the development of the Club’s footprint (e.g. accommodation, childcare centre, gym). Offering a variety of activities and services can attract different segments of the community and provide additional income sources.
2. Implementation of Formal Budgeting and Financial Planning: Develop a comprehensive strategic plan and ensure that the budget and forecasts align with the plan and objectives of the Club. Review financial performance to understand the key revenue and cost drivers of operations.
3. Prioritising Cost Management: Regularly review and manage operational costs. Identify areas where operations or processes can be streamlined without compromising the quality of services offered. Efficient resource allocation or the use of outsourced solutions can significantly improve the Club's financial performance.
4. Preparing for Economic Downturns or Unexpected Events: Establish financial reserves to cushion against economic fluctuations or unexpected events impacting the Club. An emergency fund and an agile operating structure can help manage unexpected expenses or revenue shortfalls, ensuring the Club can recover from setbacks.
5. Timely and Accurate Reporting: Consider the information prepared to make strategic and operational decisions. It is critically important that the right information, of the right quality, quantity and timeliness, is available for decision-makers.
6. Leveraging Technology: Consider using financial reporting software to ensure key systems are integrated, resulting in less manual data entry, greater efficiency, accuracy, and a shift in focus to strategic planning. Additionally, through digitisation and automation of internal processes, manual reporting processes can be replaced by business intelligence tools and dashboard analysis, providing more valuable and timely information.

PKF concluded that by diversifying, embracing technology through digitisation, and monitoring emerging opportunities such as artificial intelligence, management and directors can enhance their Club’s financial stability and resilience, thereby building a foundation that will secure the Club’s future while enhancing value for its members and the community.