Article - Budgeting for a Renovation

Budgeting For a Renovation

"Every miniature golf course renovation decision should be made with the idea of raising prices, increasing sales, making more fun for guests and creating a greater return on investment for the owner"comments Arne Lundmark, president Adventure Golf Services.In order to establish a budget for renovation a miniature golf owner with the help of our company, must find answer to the following questions:

  • How many players attended last year?
  • What was the gross revenue of the course last year?
  • What is the market size?
  • What competition is in the market?
  • How will the revised course stack up against competing courses?
  • How many new players can the renovation generate?
  • What admission price level will the renovation support?
  • How much more return on investment can be generated?
  • How much investment in renovation can this site afford?
  • If the course is an amenity, such as in a campground, can an admission price be added?
  • If other attractions are on site, how will the new course impact sales?
  • What realistic funding amount is available to the renovation project?
  • Can the owner do the work or is it better for AGS to send a crew?
  • What is the timeline for job completion?
  • Has the owner participated in the FREE miniature golf renovation action program by Adventure Golf Services?
  • How Are Sales Likely To Improve?

    Each course is unique with its location, competition, attention to maintenance issues, and marketing efforts and the Adventure Golf renovation action program will help the owner to discover what is unique with his or her course and how to capitalize on what exists with some fix up.

    Here are three example courses in need of a renovation. Each course has more market potential and with a renovation could increase prices. In each course we have estimated the sales, average price and attendance to help owners pick which course may apply to their course.

    In each course we show how a renovation can help the owner raise the average price and increase market penetration on a low, medium and high forecast. We have had experience from low percentage improvement to courses that have doubled their sales. Participating in the Free miniature golf renovation action program will help the owner with a more detailed look at his or her own course.

    Next we show how much renovation capital investment the owner can afford based on paying of the investment in 2.5 years. In each example the return on capital invested is 40%. It would be less if we spread the payback time to 3 or more years and more if we shorten to two years.

    Course A has sales of $20,000 is most likely a small course in a campground, hotel or other recreation venue, where sales are handled by someone whose primary function is not miniature golf.

    Course B has sales of $80,000 is probably a free standing facility, or tied to a multiple attraction facility or connected to a larger campground, hotel or other entertainment facility in a small to medium size market.

    Course C has sales of $150,000 and could be in a larger city or a tourist location.

    Course A Attndnce Increase Attndnce Average Sales Operating Cash Cash Flow Return on
    Price Costs Flow Increase Capital
    Before Renovation 5714 $3.50 $20,000 $5,000 $15,000
    After Renovation
    High 45% 8286 $5.00 $41,429 $5,000 $36,429 $21,429 40.00%
    Medium 35% 7714 $5.00 $38,571 $5,000 $33,571 $18,571 40.00%
    Low 25% 7143 $5.00 $35,714 $5,000 $30,714 $15,714 40.00%
    Course A Renovation Costs Ren Costs
    High Affordable Costs $53,571
    Medium To pay off in 2.5 years $46,429
    Low 2.5 $39,286

    Course B Attndnce Increase Attndnce Average Sales Operating Cash Cash Flow Return on
    Price Costs Flow Increase Capital
    Before Renovation 20000 $4.00 $80,000 $40,000 $40,000
    After Renovation
    High 30% 26000 $5.50 $143,000 $40,000 $103,000 $63,000 40.00%
    Medium 25% 25000 $5.50 $137,500 $40,000 $97,500 $57,500 40.00%
    Low 20% 24000 $5.50 $132,000 $40,000 $92,000 $52,000 40.00%
    Course B Renovation Costs Ren Costs
    High Affordable Costs $157,500
    Medium To pay off in 2.5 years $143,750
    Low 2.5 $130,000

    Course C Attndnce Increase Attndnce Average Sales Operating Cash Cash Flow Return on
    Price Costs Flow Increase Capital
    Before Renovation 33333 $4.50 $150,000 $60,000 $90,000
    After Renovation
    High 20% 40000 $6.00 $240,000 $60,000 $180,000 $90,000 40.00%
    Medium 15% 38333 $6.00 $230,000 $60,000 $170,000 $80,000 40.00%
    Low 10% 36667 $6.00 $220,000 $60,000 $160,000 $70,000 40.00%
    Course c Renovation Costs Ren Costs
    High Affordable Costs $225,000
    Medium To pay off in 2.5 years $200,000
    Low 2.5 $175,000


    Variables
    Any business plan takes common sense so the owner must be cautious when making forecasts. For example it is easier to generate a 50% increase in attendance in a business that is not successful and has great market potential. So the high, medium and low forecasts must be reasonable, based on each market.

    In some courses a price increase is more sensitive than others but in all you have to be able to compare the cost of admission as a good perceived value for families compared to other forms of entertainment such as a movie. But one thing we know for certain, it is hard to increase market share and increase admission prices without spending a reasonable amount to renovate a miniature golf course.