According to NSW Liquor and Gaming data, 20 Clubs in NSW shut their doors between February 2018 and February 2019. This is not a new story – the number of Clubs peaked at around 1,800 in the 90’s. Now the number stands at 1,080. What are the signs, and more importantly, what are the common mistakes Boards and Management make to end up being another statistic? Here are the 7 most common mistakes by leaders of failing Clubs.
1. They relied too heavily on a formula for success – what works in Cabra Vale won’t necessarily work in Cowra. Copying another venue’s format without considering the context of the demographic area will only solve.
2. They fell victim to a mania – like point (1), copying another Club’s offering out of context is fraught with danger. High end food, Motels and other non-core pursuits succeed in Clubs who undertook a feasibility study and found local demand. ‘Build it and they will come’ is just a line from a Kevin Costner film, not a business edict.
3. They were physically or emotionally removed from the Clubs operations – walking the floor, speaking to staff and engaging Members and customers is the best method of taking the temperature of your Club’s ‘stakeholders’. If things are on the wane, you will pick it up through ad hoc conversations long before its written in a Management report.
4. They misread or alienated their customers. They forced their personal preferences on customers – is the TAB area reflective of the business it generates? Do you solicit feedback from Members for changes in menu? How do you determine the beer and wine offerings? Look at the gender and age breakdown of your membership versus the wider region (ABS data has dramatically improved over the years) and see if your offerings are aligned.
5. They learned only from the recent past – George Santayana once said ‘Those who cannot remember the past are condemned to repeat it’. Our industry is littered with many a failed venture, and while these are not documented, there are plenty of Managers who know these potholes to avoid. Seek out experience.
6. They failed to adopt to tectonic shifts in their industries – increased quality expectation for quality coffee and food, credit conversion convenience (CRTs, Cashless, TITO), changing food outlets and communication technology are but some of the big changes in our industry. Adapt and change or perish – the equation is simple.
7. Inability to use data – reports with no use or action items have grown in lock step with the amount of data available. Reports should not be generated because they are ‘nice to have’, they should be something that can be used to direct change.
Internally, what are the signs or ‘Canary in the mine’ indicators that this is your Club? Below are some red flags to look for.
· Revenue deceleration – when revenues start to plateau, you have to ensure it doesn’t then become a decline. Has reinvestment slipped? Has your food offering become stale? Your business is a sum of different parts, and they all must be considered.
· Flat revenue, higher average spend – this is the definition of sheering the sheep close to the skin. If the 80/20 rule is morphing into the 90/10 rule, Houston, you have a problem.
· Declining margins – one of the hardest things to do is raise prices. If sales are going well at low margins, then a downturn in volume will expose this frailty. 60% GP in the bar must be the minimum goal, provide the customer service and offering that justifies that.
· A long excuse list to justify deteriorating fundamentals – customer service, property reinvestment, staff engagement, Member amenities and food quality are but a small number of areas where you need to be in tune with customer feedback. Using external forces for their deterioration is often ignoring the core issue.
As we become a diversified industry evolving into sectors like building, aged care, retail, commercial and entertainment, we improve our skill set and qualifications. This sets our industry up for the future, but not without some growing pains. With that said, remember what got us here and to keep track of the Clubs vital signs.
Terry O’Halloran MBA, B.Ec can be contacted at terry.ohalloran@russellcorporate .com.au