Low Hanging Fruit

Low Hanging Fruit – Are taxes included?

When we work with new clients we routinely take the time to look at their processes and procedures to make sure they are doing things in the most cost effective and efficient way possible. We usually uncover some low hanging fruit by doing this. We’ve saved thousands of dollars, or hours per week, by knowing what to ask to push our client courses outside their comfort zone. 

When we are doing a deep dive on a few of these topics, the response we usually get from these questions is “I’m not sure why we do it that way, but that’s how we’ve been doing it for years.” When we hear those words, we know it’s time to start peeling back the layers to find out why they do things that way. 

A question we love to ask is about green fee and cart fee pricing.

Are one or both taxable?  If they’re not taxable, then we move on. But if they are, we start to ask about how their prices are set and if they have control over those prices. 

If the course is a municipality, they might not have control over the price. Sometimes a committee and your firstborn are required to change those prices. But if you do have control over the prices, and they’re taxable, then you have some options.

If the fee is an even dollar amount (including tax), then we start asking the “why’s”… 

We want to know if it’s possible to stop adding tax into the rate.

Many golf courses (you might be one of them) bake the tax rate into green fees to keep the transaction simple. Golf courses “think” that it’s important to have an even dollar amount for golfers paying cash.

For example, if the advertised green fee is $45, many courses take a hit on the taxes. At a tax rate of 5.75%, the taxes are $2.45 and the course gets $42.55 in revenue.

What we recommend is that the course charge the full $45 for the green fee, then charge tax for a total bill of $47.59. (The golfer typically pays for this with a credit card anyway, so round numbers don’t matter.)

Will there be any backlash?

We wondered if a change like this would cause a backlash from golfers. But a few of our client courses tried it. The result? A few golfers brought it up at each course, but it wasn’t the issue we thought it would be. Customers no longer expect round dollar amounts (except maybe $3 beers).

To “drive” the point home…

You could potentially save 5-9% of your total fees for the year. Stop baking the taxes into your rate. It’s less of an issue than you think. And you could save $15-$30K per year based on $300K in fees.

Hopefully that’s enough incentive to take a second look at your fee structure. Want to learn more? Give us a call.