Chapter 6: Entrepreneurship-Starting and Operating a Golf Business

The Nature of Entrepreneurship

If we look a little more closely at the definition of entrepreneurship, we can identify three characteristics of entrepreneurial activity: ^[1]

1. Innovation. Entrepreneurship generally means offering a new product, applying a new technique or technology, opening a new market, or developing a new form of organization for the purpose of producing or enhancing a product. In the golf and club industry there is a focus on creating new ways to provide exceptional service that enhance member and guest experience.
2. Running a business. A business, as we saw in Chapter 2 Business Foundations combines resources to produce goods or services. Entrepreneurship means setting up a business to make a profit.
3. Risk-taking. The term risk means that the outcome of the entrepreneurial venture can’t be known. Entrepreneurs, therefore, are always working under a certain degree of uncertainty, and they can’t know the outcomes of many of their decisions. Consequently, many of the steps they take are motivated mainly by their confidence in the innovation and in their understanding of the business environment in which they’re operating.

What Is Intrapreneurship?

The term intrapreneurship refers to a system that allows an employee (such as the General Manager of a golf course) to act like an entrepreneur within a company or other organization ^[2] Intrapreneurs are self-motivated, proactive, and action-oriented people who take initiative  An intrapreneur knows failure does not have a personal cost as it does for an entrepreneur since the organization absorbs losses that arise from failure. However, they typically have the best interest of the owner or members in mind when making business decisions.

A Few Things to Know About Going into Business for Yourself

When you look at some of the most successful business people in the world, who comes to mind?  Elon Musk, Jeff Bezos, Steve Jobs, Mark Zuckerberg…? If you asked them the secret to their success, what do you think they would say?  Some possible answers might be;

1. Be persistent and create opportunities
2. Be willing to take a risk
3. Surround yourself with the right people
4. Commit to ongoing learning
5. Embrace success and failure

In all of these cases, the entrepreneurs started small and built some of the most powerful and recognizable companies on the planet!

So, a few questions to consider if you want to go into business for yourself:

• How do I come up with a business idea?
• Should I build a business from scratch, buy an existing business, or invest in a franchise?
• What steps are involved in developing a business plan?
• Where could I find help in getting my business started?
• How can I increase the likelihood that I’ll succeed?

In this chapter, we’ll provide some answers to questions like these.

Why Start Your Own Business?

What sort of characteristics distinguishes those who start businesses from those who don’t? Or, more to the point, why do some people actually follow through on the desire to start up their own businesses? The most common reasons for starting a business are the following:

• To be your own boss
• To accommodate the desired lifestyle
• To achieve financial independence
• To enjoy creative freedom
• To use your skills and knowledge

How can you translate characteristics into potential success? Experts suggest that you assess your strengths and weaknesses by asking yourself a few relevant questions: ^[3]

• Am I a self-starter? You’ll need to develop and follow through on your ideas.
• How well do I get along with different personalities? Strong working relationships with a variety of people are crucial.
• How good am I at making decisions? Especially under pressure…..
• Do I have the physical and emotional stamina? Expect six or seven workdays of about twelve hours every week.
• How well do I plan and organize? Poor planning is the culprit in most business failures.
• How will my business affect my family? Family members need to know what to expect: long hours and, at least initially, a more modest standard of living.

Before we discuss why businesses fail we should consider why a huge number of business ideas never even make it to the grand opening. One business analyst cites four reservations (or fears) that prevent people from starting businesses: ^[4]

• Money. Without cash, you can’t get very far. What to do: line up initial financing early or at least have done enough research to have a plan to raise money.
• Security. A lot of people don’t want to sacrifice the steady income that comes with the nine-to-five job. What to do: don’t give up your day job. Run the business part-time or connect with someone to help run your business – a “co-founder”.
• Competition. A lot of people don’t know how to distinguish their business ideas from similar ideas. What to do: figure out how to do something cheaper, faster, or better.
• Lack of ideas. Some people simply don’t know what sort of business they want to get into. What to do: find out what trends are successful. Turn a hobby into a business. Think about a franchise. Find a solution to something that annoys you – entrepreneurs call this a “pain point” – and try to turn it into a business.

If you’re still interested in going into business for yourself, try to regard such drawbacks as mere obstacles to be overcome by a combination of planning and creative thinking.

Sources of Early-Stage Financing

As noted above, many businesses fail, or never get started, due to a lack of funds. But where can an entrepreneur raise money to start a business? Many first-time entrepreneurs are financed by friends and family, at least in the very early stages. Others may borrow through their personal credit cards, though quite often, high-interest rates make this approach unattractive or too expensive for the new business to afford.

An entrepreneur with a great idea may win funding through a pitch competition; local municipalities and government agencies understand that economic growth depends on successful new businesses, and so they will often conduct such competitions in the hopes of attracting them.

Crowdfunding has become more common as a means of raising capital. An entrepreneur using this approach would typically utilize a crowdfunding platform like Kickstarter or GoFundMe to attract investors. The entrepreneur might offer tokens of appreciation in exchange for funds, or perhaps might offer an ownership stake for a substantial enough investment. Take a few moments to peruse Kickstarter or another site and see what types of businesses are proposed in your area or which are trending globally.

Some entrepreneurs receive funding from angel investors, affluent investors who provide capital to start-ups in exchange for an ownership position in the company. Many angels are successful entrepreneurs themselves and invest not only to make money but also to help other aspiring business owners to succeed.

Venture capital firms also invest in start-up companies, although usually at a somewhat later stage and in larger dollar amounts than would be typical of angel investors. Like angels, venture firms also take an ownership position in the company. They tend to have a higher expectation of making a return on their money than do angel investors.
Check out this Dragon’s Den episode: Cygnet Better Golf System where participants are pitching a new version on golf. 

Distinguishing Entrepreneurs from Small Business Owners

Though most entrepreneurial ventures begin as small businesses, not all small business owners are entrepreneurs. Entrepreneurs are innovators who start companies to create new or improved products. They strive to meet a need that’s not being met, and their goal is to grow the business and eventually expand into other markets.

In contrast, many people either start or buy small businesses for the sole purpose of providing an income for themselves and their families. They do not intend to be particularly innovative, nor do they plan to expand significantly. This desire to operate is what’s sometimes called a “lifestyle business” ^[5]

The Importance of Small Business to the Canadian Economy

The millions of individuals who have started small businesses have helped shape the business world as we know it today. Small businesses are the “back-bone” of the Canadian economy! Aside from contributions to our general economic well-being, founders of small businesses also contribute to growth and vitality in specific areas of economic and socio-economic development. In particular, small businesses do the following:

• Create jobs
• Spark innovation
• Provide opportunities for many people, including women and minorities, to achieve financial success and independence

In addition, they complement the economic activity of large organizations by providing them with components, services, and distribution of their products. Let’s take a closer look at each of these contributions.

Job Creation

The majority of Canadian workers first entered the business world by working for small businesses. Although the split between those working in small companies and those working in big companies is about even, small firms hire more frequently and fire more frequently than do big companies. ^[6] Why is this true? At any given point in time, lots of small companies are started and some expand. These small companies need workers and so hiring takes place. But the survival and expansion rates for small firms are poor, and so, again at any given point in time, many small businesses close or contract and workers lose their jobs. Fortunately, over time more jobs are added by small firms than are taken away, which results in a net increase in the number of workers.

The size of the net increase in the number of workers for any given year depends on a number of factors, with the economy being at the top of the list. A strong economy encourages individuals to start small businesses and expand existing small companies, which adds to the workforce. A weak economy does just the opposite: discourages start-ups and expansions, which decreases the workforce through layoffs.  In chapter 3 the data shows that the Canadian golf industry directly employed nearly 150,000 full-time, full-year equivalent positions, representing many more individuals who are employed in the sector. This number grows to approximately 249,000 when accounting for direct, indirect, and induced employment. The golf industry is a significant job provider for youth with 48% of its workforce identified as students.

Innovation

Over the years there has been considerable growth in innovation at golf clubs.  At the forefront of the technological evolution was the introduction of online tee-time reservations.  In the early 2000’s, clubs began to see the intrinsic value of moving their tee-sheets online.  This provided clubs the ability to have tee-time access for their members and guests 24 hours per day, 7 days per week. This revolutionized the old telephone method of reservations and over time became a preferred process. Companies like London-based software company Tee-on Golf Systems paved the way for convenient ways for clubs to streamline their booking procedures. As the industry evolves, there will be an emergence of self-check in and beacon technology to help make transactions more convenient and provide an improved level of service for members and guests.

Opportunities for Women

Small business is the portal through which many people enter the economic mainstream. Business ownership allows individuals to achieve financial success, as well as pride in their accomplishments. While the majority of small businesses are still owned by males, the past two decades have seen a substantial increase in the number of businesses owned by women. Generally speaking, females have been under-represented in the golf and club industry, specifically on the golf operations side.
“One of the big questions that I get from our industry partners when seeking employees is – Do you have any females in your college golf program who are seeking a career in golf operations or as a golf professional? The answer is yes, but in very limited numbers. There is a tendency for females to gravitate to Food, Beverage and Events management rather than working in the pro shop. This is a big void that our industry needs to figure out! One of the ways is to get more females to take up the game of golf at an earlier age, so they can see the value of making their love of the sport into a career.” Rob Foster

What Industries Are Small Businesses In?

If you want to start a new business, you probably should avoid certain types of businesses. You’d have a hard time, for example, constructing a brand new golf course, because you’d have to make tremendous investments in property, and equipment, and raise an enormous amount of capital to pay your workforce. These large, up-front investments present barriers to entry.

Fortunately, plenty of opportunities are still available. Many types of businesses require reasonable initial investments, and not surprisingly, these are the ones that usually present attractive small business opportunities. Rather than building a golf course from scratch, perhaps look at the feasibility of an existing golf course that is “turn-key” with a proven track record.

Industries by Sector

Let’s define an industry as a group of companies that compete with one another to sell similar products. We’ll focus on the relationship between a small business and the industry in which it operates, dividing businesses into two broad types of industries, or sectors: the goods-producing sector and the service-producing sector.

• The goods-producing sector includes all businesses that produce tangible goods. Generally speaking, companies in this sector are involved in manufacturing, construction, and agriculture.
• The service-producing sector includes all businesses that provide services but don’t make tangible goods. They may be involved in retail and wholesale trade, transportation, finance, entertainment, recreation, accommodations, food service, and any number of other ventures.

As of 2017, services accounted for 70.5 percent of Canadian GDP.^[7]  This bodes well for the golf and club industry that represents the aforementioned entertainment, accommodations, recreation, and food service industries.

Goods-Producing Sector

The largest areas of the goods-producing sector are construction and manufacturing. Construction businesses are often started by skilled workers, such as electricians, painters, plumbers, and home builders, and they generally work on local projects. Though manufacturing is primarily the domain of large businesses, there are exceptions.

Service-Producing Sector

Many small businesses in this sector are retailers—they buy goods from other firms and sell them to consumers, in stores or online. In fact, entrepreneurs are turning increasingly to the Internet as a venue for start-up ventures. Other small business owners in this sector are wholesalers—they sell products to businesses that buy them for resale or for company use. A pro shop, for example, will buy products such as golf gloves, tees, and balls from a wholesale supplier, then mark up the price (known as the retail price) in order to make a profit.

Advantages and Disadvantages of Business Ownership

Do you want to be a business owner someday? Before deciding, you might want to consider the following advantages and disadvantages of business ownership. ^[9]

Advantages of Small Business Ownership

Being a business owner can be extremely rewarding. Having the courage to take a risk and start a venture is part of the Canadian dream. Success brings with it many advantages:

Disadvantages of Small Business Ownership

As the little boy said when he got off his first roller-coaster ride, “I like the ups but not the downs!” Here are some of the risks you run if you want to start a small business:

Starting a Business

Starting a business takes talent, determination, hard work, and persistence. It also requires a lot of research and planning. Before starting your business, you should appraise your strengths and weaknesses and assess your personal goals to determine whether business ownership is for you. ^[10]

Questions to Ask Before You Start a Business

If you’re interested in starting a business, you need to make decisions even before you bring your talent, determination, hard work, and persistence to bear on your project.

Here are the basic questions you’ll need to address:

• What, exactly, is my business idea? Is it feasible?
• What industry do I want to enter?
• What will be my competitive advantage?
• Do I want to start a new business, buy an existing one, or buy a franchise?
• What form of business organization do I want?

After making these decisions, you’ll be ready to take the most important step in the entire process of starting a business: you must describe your future business in the form of a business plan—a document that identifies the goals of your proposed business and explains how these goals will be achieved. Think of a business plan as a blueprint for a proposed company: it shows how you intend to build the company and how you intend to make sure that it’s sturdy. You must also take a second crucial step before you actually start up your business: You need to get financing—the money that you’ll need to get your business off the ground.

The Business Idea

For some people, coming up with a great business idea is a gratifying adventure. For most, however, it’s a daunting task. The key to coming up with a business idea is identifying something that customers want—or, perhaps, more importantly, filling an unmet need. Your business will probably survive only if its purpose is to satisfy its customers—the ultimate users of its goods or services. In coming up with a business idea, don’t ask, “What do we want to sell?” but rather, “What does the customer want to buy?” ^[11]

When planning the items to sell at your club (i.e.. memberships, golf products, food and beverage etc.), it is a good idea to consider the demographics of your membership and guests.  What is their age and gender?
In the NGCOA article Keep them Coming Back by Peter Smith [Page 36], the author explores the use of customer data to help clubs understand the needs and wants of customers and how to retain them long term.

Ownership Options

You can become a small business owner in one of three ways— by starting a new business, buying an existing one, or obtaining a franchise. Let’s look more closely at the advantages and disadvantages of each option.

Starting from Scratch

The most common—and the riskiest—option is starting from scratch. This approach lets you start with a clean slate and allows you to build the business the way you want. You select the goods or services that you’re going to offer, secure your location, and hire your employees, and then it’s up to you to develop your customer base and build your reputation.

Buying an Existing Business

If you decide to buy an existing business, some things will be easier. You’ll already have a proven product, current customers, active suppliers, a known location, and trained employees. You’ll also find it much easier to predict the business’s future success. There are, of course, a few bumps in this road to business ownership. First, it’s hard to determine how much you should pay for a business. You can easily determine how much things like land, buildings, and equipment are worth, but how much should you pay for the fact that the business already has steady customers? In addition, if you are seeking to buy a golf business, perhaps the current owners have disappointed members and customers; maybe the location isn’t as good as it used to be or there are more competitors. You might inherit employees that you wouldn’t have hired yourself. A careful study called due diligence is necessary before going down this road.

Getting a Franchise

Lastly, you can buy a franchise. A franchisor (the company that sells the franchise) grants the franchisee (the buyer—you) the right to use a brand name and to sell its goods or services. Franchises market products in a variety of industries, including food, retail, hotels, travel, real estate, business services, cleaning services, and even weight-loss centres and wedding services. The table below lists the top ten franchises according to Entrepreneur magazine for 2018. Franchises apply to be on the list and are then assessed using Entrepreneur’s five pillars.^[12]

In Canada, 1 out of every 14 workers is directly or indirectly employed by the franchise industry and there are an estimated 1,300 franchise brands operating in Canada. Individual investments vary widely – from $10,000 to millions. KFC franchises, for example, require a total investment of $1.3 million to $2.5 million each. This fee includes the cost of the property, equipment, training, start-up costs, and the franchise fee—a one-time charge for the right to operate as a KFC outlet. McDonald’s is in the same price range ($1 million to $2.3 million). SUBWAY sandwich shops offer a more affordable alternative, with an expected total investment ranging from $116,000 to $263,000. Visit Canadian Franchising Opportunities ^[13] to see franchises by the level of investment required.

In addition to your initial investment, you’ll have to pay two other fees on a monthly basis—a royalty fee (typically from 3 to 12 percent of sales) for continued support from the franchisor and the right to keep using the company’s trade name, plus an advertising fee to cover your share of national and regional advertising. You’ll also be expected to buy your products from the franchisor. ^[14]

But there are disadvantages. The cost of obtaining and running a franchise can be high, and you have to play by the franchisor’s rules, even when you disagree with them. The franchisor maintains a great deal of control over its franchisees. For example, if you own a fast-food franchise, the franchise agreement will likely dictate the food and beverages you can sell; the methods used to store, prepare, and serve the food; and the prices you’ll charge. In addition, the agreement will dictate what the premises will look like and how they’ll be maintained. As with any business venture, you need to do your homework before investing in a franchise.

One of the most popular franchises related to the golf industry is TopGolf.  Topgolf is a sports entertainment complex that features an inclusive, high-tech golf game in climate-controlled hitting bays with music, and an outstanding food and beverage menu. ^[15]

Watch the video: Top golf: How much is Topgolf? Is it a franchise (2022) by Business & Franchise Opportunities By Vetted Biz [5:03] (transcript available)

Why Do Some Businesses Fail?

If you’ve paid attention to the occupancy of shopping malls over a few years, you’ve noticed that retailers come and go with surprising frequency. The same thing happens with restaurants—indeed, with all kinds of businesses. By definition, starting a business—small or large—is risky, and though many businesses succeed, a large proportion of them don’t. The most recent, official statistics for Canada, from 2013, report the following for the births and deaths of SMEs. Consult the table below or find the equivalent, text information from Industry Canada. Note: These statistics do not deal directly with entrepreneurs, but with small and medium enterprises or SMEs.

As disappointing as these statistics on business survival are, some industries are worse than others. If you want to stay in business for a long time, you might want to avoid some of these risky industries. Even though your friends think you make the best pizza in the world, this doesn’t mean you can succeed as a pizza parlour owner. Opening a restaurant or a bar is one of the riskiest ventures (and, therefore, start-up funding is hard to get).

Businesses fail for any number of reasons, but many experts agree that the vast majority of failures result from some combination of the following problems:

• Bad business idea. Like any idea, a business idea can be flawed, either in conception or in execution. If you tried selling snow blowers in Hawaii, you could count on little competition, but you’d still be doomed to failure.
• Cash problems. Too many new businesses are underfunded. The owner borrows enough money to set up the business but doesn’t have enough extra cash to operate during the start-up phase when very little money is coming in but a lot is going out.
• Managerial inexperience or incompetence. Many new business owners have no experience in running a business; many have limited management skills. Maybe an owner knows how to make or market a product but doesn’t know how to manage people. Maybe an owner can’t attract and keep talented employees. Maybe an owner has poor leadership skills and isn’t willing to plan ahead.
• Lack of customer focus. A major advantage of a small business is the ability to provide special attention to customers. But some small businesses fail to seize this advantage. Perhaps the owner doesn’t anticipate customers’ needs or keep up with changing markets or the customer-focused practices of competitors.
• Inability to handle growth. You’d think that a sales increase would be a good thing. Often it is, of course, but sometimes it can be a major problem. When a company grows, the owner’s role changes. He or she needs to delegate work to others and build a business structure that can handle the increase in volume. Some owners don’t make the transition and find themselves overwhelmed. Things don’t get done, customers become unhappy, and expansion actually damages the company.