I have played in about eight of those fundraising golf tournaments and personally ran two more. I found them to be very low in the return on the investment. Furthermore, the risk associated with weather hampers the real bottom line. Overall, I don’t endorse this type of fundraising for your charity. Allow me to walk through the math. I have pulled the data from over 22 events to calculate the average revenue, expenses, and the bottom line to the charity. Finally I’ll finish with some humorous stories about what really happens at these events.
Throughout my accounting career I have served on several boards for charity, I’ve reported to several more and I have had the privilege of helping as a volunteer. I have played in many of these tournaments as a paying player and as a guest. The best result from any of the tournaments I have seen is a net profit of $18,966. Everything went perfectly, great weather, all the teams showed up and we started on time. The staff sold out tickets for mulligans (extra chances at shots) and the raffles. When it was all said and done, here were the financial results:
Total $ from teams (36 teams, the maximum allowed on the course) $14,400
Tournament Sponsorship (Dinner/Beer Carts) 5,000
Hole Sponsorships (Signs on the hole from the Sponsor) 5,400
Value of Door Prizes Received 7,500
Sale of Mulligans 1,008
TV Raffle 250
50/50 Raffle 300
Total Financial Receipts and Prizes $33,858
Door Prizes Given Away $7,500
Course Fee (5 Hours of Course Play) 3,600
50/50 Raffle (Winner Donated Back $25) 125
Dinner/Lunch/Beer Concessions 2,592
Auto/Hole IN One Insurance Policy 675
Total Direct Costs 14,892
NET PROFIT from the event $18,966
All in all, not a bad afternoon and evening for raising money playing golf. The issue came down to the resources allocated. Over 200 man hours were invested; about 40 of those man hours were from the charity’s paid staff. If you figure that the charity paid out around $15 hour per man hour to cover compensation, benefits and taxes, the actual final value derived by the charity is closer to $18,366.
In one of my accountings, a golf tournament lost $6,200. That is right, lost that money! The reason is that the initial sales for teams were closer to 6 and not 36. It poured rain right when the tournament started, but it was intermittent, the teams all left. They still had to pay for the course and the dinner/concessions to the course management group. It was a hard lesson for the charity to accept. There were a lot of hard feelings attached to this particular under-performing event.
Now let us review the more common outcome: (Data gathered from over 20 events)
Net Profit $4,380
This data comes from tournaments that actually were completed. It doesn’t include those affected by weather. You can imagine given the risk of weather, the final average outcome is likely much lower.
I was able to do a few surveys from the players to find out what they thought. Most were upset at how long it takes to play. Typically these tournaments play in a Captain’s Choice format which allows for faster play. The key is that the tournament is filled with poor players mixed in with really great golfers. This affects the speed of play and thus the complaint from most of the golfers. I found it humorous that one of the guys complained about the speed of play, he was in the group in front of me and he spent most of the time looking for his ball in the woods. He couldn’t get it that he was part of the problem.
Other complaints included the usual not enough beer or poor door prizes and not so good food. As one man put it to me, succinctly, I paid $100 for a round of golf and food, I expected more. Well, he has a point. Typically a round of golf with a cart costs around $45 to $60 depending on the course. When you are finished, you can eat and drink well for the balance. Why couldn’t the charity make money from this. The key is that course management makes out by having every hole filled with paying patrons at the rate of $3600 divided by 144 players or $25 each. But every hole is filled with maximum allowed golfers. Without the charity event there, what is the likelihood of the golf course selling completely out, i.e. 100% utility? They are the ones that make out in these types of events due to the business concept of absolute dollars. For the charity, unless every one of the 36 teams is sold, it will become difficult to generate a positive balance at the end of the event.
One of the best outcomes derived from events like this is the opportunity to convey the mission of the charity. Not all is lost, sometimes some funny stuff happens. At one event a golfer would buy a number on a piece of paper, they would set the paper on the 18th green, so the green was littered with paper with a bunch of numbers. Some guy jumps from an airplane and parachutes and lands on a number on the green. A prize is award to the winning number. He landed in the sand trap!
At another, I learned to bring extra cash. When the door prizes are handed out, the guy that wins the grill or the bag of clubs, offer him half value for the item in cash, and you’ll be surprised when he sells it to you. One of my friends learned to buy his vacation package this way. He said it’s surprising what you can buy for $400.
I’ve heard stories of golf carts being turned over from too much drinking to one guy getting lost looking for his golf ball. He was calling on the cell phone trying to figure out where he was located on the course. There is never a dull moment at these functions.
This is tough event to pull off. It takes coordination and execution to create a wonderful event for the golfers. However the risk is great due to weather and the impetus on selling out the teams. It is much more difficult to execute than one thinks. Before your board approves of this type of event, weigh the outcome against the resources needed to pull it off. There are other options out there and I will have more and better types of fundraising events that raise much more money for the same resources written in future posts. Act on Knowledge.
Do you want to learn how to get returns like this?
Then learn about Value Investing. Value investing in the simplest of terms means to buy low and sell high. Value investing is defined as a systematic process of buying high quality stock at an undervalued market price quantified by intrinsic value and justified via financial analysis; then selling the stock in a timely manner upon market price recovery.
There are four key principles used with value investing. Each is required. They are:
- Risk Reduction – Buy only high quality stocks;
- Intrinsic Value – The underlying assets and operations are of good quality and performance;
- Financial Analysis – Use core financial information, business ratios and key performance indicators to create a high level of confidence that recovery is just a matter of time;
- Patience – Allow time to work for the investor.
If you are interested in learning more, go to the Membership Program page under Value Investing section in the header above.
Join the value investing club and learn about value investing and how you can easily acquire similar results with your investment fund. Upon joining, you’ll receive the book Value Investing with Business Ratios, a reference guide used with all the decision models you build. Each member goes through three distinct phases:
- Education – Introduction to value investing along with terminology used are explained. Key principles of value investing are covered via a series of lessons and tutorials.
- Development – Members are taught how pools of investments are developed by first learning about financial metrics and how to read financial statements. The member then uses existing models to grasp the core understanding of developing buy/sell triggers for high quality stocks.
- Sophistication – Most members reach this phase of understanding after about six months. Many members create their own pools of investments and share with others their knowledge. Members are introduced to more sophisticated types of investments and how to use them to reduce risk and improve, via leverage, overall returns for their value investment pools.
Each week, you receive an e-mail with a full update on the pools. Follow along as the Investment Fund grows. Start investing with confidence from what you learn. Create your own fund and over time, accumulate wealth. Joining entitles you to the following:
- Lessons about value investing and the principles involved;
- Free webinars from the author following up the lessons;
- Charts, graphs, tutorials, templates and resources to use when you create your own pool;
- Access to existing pools and their respective data models along with buy/sell triggers;
- Follow along with the investment fund and its weekly updates;
- White papers addressing financial principles and proper interpretation methods; AND
- Some simple good advice.