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Many of you know how to operate a business, but some do not. So this isn't for those of you who already know how to operate a business, it's for those who do not and have not done any research on small business operations.
The AGCP is concerned that you understand how to operate a profitable business model. We don’t want you to be a Dead Clubmaker working.
A Dead Clubmaker working is someone who struggles each month simply to keep the doors open and never has enough money to replace worn out or outdated equipment. the Dead Clubmaker working works endless hours and cannot afford to take any time off or they fall behind. The Dead Clubmaker working operates on the theory that if they charge less than anyone else they will get more business than anyone else and make up for their low prices with more volume.
Successful businessmen learn how to make more for doing less, not make less for doing more.
My point in writing this is that many of us spend countless hours learning about golf clubs but do not want to invest any time at all learning how to operate a business. Yet our survival often depends much more on how good we are at operating a business than how good we are with golf clubs or fitting. Staying in business means we have to take in more money than we spend each month. To do this we have to know exactly how much we actually spend each month. We also need to how much profit we intend to make out of our efforts so that we charge enough for our efforts to make the profit we desire. Or, in some cases the profit our spouse demands of our efforts if we take up the garage or the basement with our new business.
Regardless of where you do business, be it a 70,000 square foot super store or your basement or garage, you need to account for the expense of doing business on your tax return. You need to know exactly what it costs you do do business. If you are a for profit business, you also need to ask your customers to pay for that expense for you and add on a little to make it worth your time to do what you do. Only you can determine how much profit you want to make and what you are ultimately worth. As someone once told me about my business when I asked what I should charge, it's nobody's business what you charge or how much profit you make. But, you need to at least know how to calculate it so you actually know how much your really make.
To keep this simple: Say your mortgage or rent plus utilities including phone, electricity. etc. costs you $1,000 per month and you use 1 of the 10 rooms in your house for your shop. That would make your fixed costs 10%, or $100.00 per month.
Next, add up all the equipment, tools, supplies, and inventory you have purchased for your business and find out how many years your accountant says you can use to write that off. If its 36 months you divide the total cost of your equipment by 36 for a monthly cost. Lets say your launch monitor, net, tools etc. cost you $36,000 and you divide by 36 = $1,000 per month for equipment. Now you have $1100.00 per month in overhead.
Do you advertise at all? Do you Print fliers and leave them in the pro shop, business cards, pens with your name on them, calendars, shirts & hats with your logo, invoices, TV, newspaper, church newsletters, prizes for local charities, etc.? How much does all of that cost you per year and divide by 12. Let's say another $200 pre month for total of $1300.00 per month.
OK, how many hours a month do you work in your business? Let's day 20 hours a week. Now multiply that by 52 = 1040 and divide by 12 = 87 hours a month.
So you decide you want to make $75 per hour because the auto mechanic and the air conditioner guy charges $75 when I need them and I'm as good as they are. So we multiply the $75 per hour times your 87 hours for a total of $6525.00. Now we add that to our $1300.00 to get a total of $7825.00 per month to cover what we want to make in our business at $75 per hour.
So we have to charge our customers an average of 7825 divided by 87 or $90.00 per hour for our work, plus any materials we use on their work. So, if you re-shaft a a graphite iron and it takes you a grand total of 30 minutes work and you use a $17.00 graphite shaft and a $2.00 grip and you allow $5 for epoxy, ferrule, grip tape, tip weights, etc. you need to charge $45 + 17 + 2 + 5 to your customer, or $67.
You can work for $5 per hour if you want, and that shaft would sell for $25.50 not $67. I think I am worth more than a part time employee at McDonalds that makes $12.00 per hour and who would charge $35 for that shaft so I charge more than that. I used $75 because the last time I called an air conditioner repairman to our house I noted that his labor was charged out at $75 per hour and I figured I was at least as skilled as he was at what I do. Then I took my car in for some repairs and again there was that $75 per hour rate.
You set you own rates, and you can be a charity or a nonprofit if you want, but at least know what your real costs are for doing the work and paying yourself back. It may be worth pointing out that I did not put any costs for attending any schools, classes, or Expos into that price. If you attend schools each year you also need to factor the costs of being closed for that time period along with the travel, meals and tuition of the school you attend into your cost of doing business.
Only you know what your expense are and what you expect as a return on your efforts, but at least know what it costs you do to business and establish your prices for your business based on what it costs you to do business. You have no way of knowing how much it costs anyone else in expenses etc. so you have to pay for yours. Otherwise the boss might not be happy.
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