Running a Club as a Business – Part 4

Good financial planning could pave the way for a new pond

THE BUDGET

We all look forward each year to the Chancellor of the Exchequer presenting his budget to Parliament, don’t we? Well as boring as you might think it is, it is a necessary function in the running of the country; and not just the country, but every business should produce one if only to see what they have to achieve in the year to cover all of their expenses. Without the budget you are shooting in the dark and you will have no idea at any time as to whether something you want to do is affordable or not.

So where do you start? Firstly, you will almost certainly need the help of the treasurer (I’m looking at this from the secretary’s viewpoint, don’t forget) and between you, you have to analyse all of the spending for the present year (200X). Break it down into nice groupings similar to how you show the spending on your year-end balance sheet (we’ll do one in a later part, but for now we will make one up for our imaginary ‘Little Dribble Fishing Club’).

LITTLE DRIBBLE FISHING CLUB
BUDGET FORECAST FOR YEAR 200N

So there you are, it’s a small club with only the four waters (as we discussed in part 3) and we have decided to renew the fishing licences (it’s not rent as some anglers think) on all of them. We have anticipated some increases such as on stamps, telephones and printing because we are going to write to far more previous members this year to encourage more anglers to join. We have made a little saving by moving our meetings to another location, but this was done more for convenience than anything else. And before anyone writes a comment about the ACA fees – these I have made up, they are NOT real, but just join anyway, okay?

You will see, though, that between the general running expenses and the fishing licences they jointly add up to a nice round £ 10,000 (I did this for simplicity). Now you can see that if you want to stay in business, you have to find at least £ 10,000 next season and it doesn’t end there. I always recommend that you add at least another 20% on to that total to cover the costs of any ground maintenance at the venues and also equipment hire (even better if you can make that 30% or even 40%). So now you are looking at £ 12,000 and where are you going to find it from?

In our Little Dribble Club we have a strong membership of 250 and the full senior membership fee is £ 50. However, not all the members pay £ 50 as we have 25 juniors, who only pay £ 10 and 55 senior citizens and disabled anglers who only pay £ 25 (women pay the same as men in our club, equal rights and all that! – and I’m running it for now, okay?).

This shows you that we won’t even make enough to cover our basic costs of £ 10,000 never mind the additional 20% we would like on top. We can assume that we will increase our membership this year anyway because of the good catches that members reported on the Little Pond and local carp anglers are now taking a serious interest in the Big Lake for it’s carp. So let’s project an increase in the membership for next year to a reasonable 300 as follows:

We’re nearly there now. We have covered our annual running costs and almost covered the additional 20% for ground maintenance and since that 20% is a speculative figure anyway, we’ll leave it at that.

Had we have been much short of the budget then we could ask the members for another £ 2 increase in subscriptions, which isn’t a bad increase and still represents good fishing for £ 1 per week over the year for seniors. However, since we want to attract more members next year we don’t want to put them off because we’ve put our prices up. There’s also that mental barrier to overcome, ie, £ 50 is a nice round sum, but £ 52 is two quid over the mark. To you rich people with cheque books it wouldn’t make a jot of difference, but to some anglers it does.

WHAT ABOUT RESTOCKING?

We didn’t make any allowance for restocking our fisheries. This wasn’t an oversight on my part, but if I felt I needed some additional fish I would either a) increase that additional 20% and make it 40% (even that’s only another £ 2000 for fish) or b) I would spend it from the capital fund, the savings we have made over the years that’s sitting in the high interest account. That, for me, is where all the profits go from year to year and they’re not just for a rainy day or for when we don’t meet the budget. They are there to be spent on improving the quality of the fisheries, that might mean more stocks or could be a new lake or pond sometime.

If you’re taking over a club that doesn’t have any capital in the savings accounts then you might have to find another way of funding those extra fish stocks, but don’t buy fish just because someone, some member or official has asked for them. Seek the advice of your regional Fisheries Department at the Environment Agency, that’s what you pay your licence money for (in the case of our little club nearly £ 6,500 per year amongst its members). Who knows, they might even get some fish for you from a rescue or like they did on the Thames, stock some barbel as part of a planned improvement exercise. So it’s not the end of the road!

CASH FLOW ANALYSIS

This is the other part of controlling money and basically it is the job of the treasurer to do this and to keep the committee informed at EVERY meeting. How many do is another question.

Basically what you are trying to see is can you afford to pay for your fisheries licences (and other items like stamps and the printing bill) when the landowners and suppliers demand them. Again, all business do this as a matter of routine and you can plan it on a week-by-week basis or more preferably, month-by-month. It’s just a way of avoiding that embarrassing moment when your printer asks where his £ 500 is for printing your cards and you can’t lay your finger on a penny (and there’s no going to the Clear-A-Debt Finance Company for it either).

Fish stocks are what the members savings are for

Another reason for preparing a cash flow analysis is if you are planning a major investment of most of your capital funds on say digging out a new pond. Let’s say you have paid out most of your expenses and there’s little more money to come in from subscriptions. You now have in the bank £ 13,000 and the cost of digging and stocking an old pond will be £ 8,000. This will leave you starting the new season with only £ 5,000 in reserve and not enough to pay for all the rents and other fixed costs if everything goes pear-shaped. It never does, of course, but before you reach for the Prozak, do a cash flow analysis. Have a word with the other landowners to see if they’ll accept a delay in payment and if they agree you will have your new water, plus your costs will be covered, and you might get more members than you imagined because the club is an even more attractive proposition now. “Everyone’s a winner.” as Del-boy would say.

Here’s how – You will need to know:

How much money normally comes in (received) in the various months
What, of the expenses, you will need to pay out in those same months.

You also have to include all of the club’s savings here, high interest and current accounts, since you may have to rely on a temporary withdrawal from the high interest accounts to tide you over a difficult spell. Hopefully, if you got your budget right, you will recoup this in income and transfer it back to the high interest account later.

Let’s look at a neutral (we planned everything well) example. This is just over the first four critical months of the year, but we would normally extend it over all twelve.

You will have noticed when I did the budget and listed the Fishing Licences, I entered at the side of each when it was due for payment. Those payments have been reflected above in the ‘COSTS for month’ figures plus some other elements such as stamps and meeting room costs, ACA and all the rest. You will have an idea when each is expected from your records for the present and previous years.

REMEMBER

It’s a forecast, an idea, it needs to be monitored, it is not infallible, but it’s better than guesswork.

You have to start in the April column and work down, then the balance at the bottom is carried forward to May and so on. You can see from the above that at the end of July we have the same as we started with, £ 6000 in our case. In the meantime we will need to transfer some money from the high interest savings account to the current account to pay the bills as the income within the month doesn’t always cover the bills. However, by the end of July you will be able to put the money back.

What the above also tells you is how much you can expect to receive each month. If you don’t manage to collect that amount you will have some notice that things are not going as planned and may be able to take alternative action. If this happens remember the first rule of debt management – TALK IT OVER WITH YOUR SUPPLIER! Your fixed costs are known and most must be met, particularly the water rentals. The variable costs are, by their nature, more flexible, but providing you are still working within budget, you should come out okay.

Let us just look at a nightmare situation, i.e.: the club is not attracting the members it needs.

Good financial planning should keep you from this situation.

NEXT: HOW TO ATTRACT MEMBERS WITH GOOD NEWSLETTERS!