SETTING THE ASKING PRICE: I can safely say (at least in 2013) that most golf course sellers are dreaming about their asking prices. Too many owners still believe a golf course is worth what it was worth fifteen years ago. The fact is, most golf courses in 2013 are worth much less. But don't take my word for it. Look at these price changes since as recently as 2004:

1. Tampa Bay area 36-hole course sold for $9.2 million in 2004, again in 2010 for $3.2 million
2. Popular Orlando area 18-hole course sold for $6.5 million in 2002, less than $2 million in 2011.
3. An Asheville, North Carolina golf course sold for $1.9 million in 2011. Ten years ago, over $5 million.

The above samples are not unusual. They are a reflection of industry values since 2000.

Remember the kids selling lemonade for $100 a glass? They could never seem to sell any.

APPRAISALS HAVE ALSO DROPPED CONSIDERABLY:

1. An upper New York State golf course appraised for $4.4 million in 2007. Three years later appraised at less than $2 million. It sold at Auction for just over $800,000 last year.
2. A Wilmington, North Carolina golf course appraised for over $4 million in 2003. In 2010 the same course appraised at $1.6 million. A buyer bought it on a short sale for less than $1 million.
3. A Tampa golf course appraised at $4.6 million in 2003. Appraised at $2.7 million in 2012. The loan to value (LTV) went up to 100%, which triggered foreclosure.

As a licensed agent in Florida since the early 90'S I have participated in over 100 $ million in golf course transactions in some way. I say some way, because I have either brokered, financed, advised or consulted buyers and sellers of golf courses. In my experience, the way to get the best (fairest) price for a golf course as a seller is to price it right. You also need to be ready to answer the obvious questions. The first answer you'll need to be sure about in your own mind: Exactly why you want to sell the golf course.

BUYERS WANT TO KNOW WHY YOU WANT TO SELL. YOU NEED TO BE CONSISTENT WITH YOUR RESPONSE TO THE QUESTION

In my experience, you should have a clear and consistent response (reason) to why you are selling. I suggest that because potential interests in your golf course will become suspicious if your reason for selling changes from moment to moment.

In my experience, course sellers wish to sell for these (most common) reasons:

• I've owned it long enough and wish to try another business .
• I'm getting to old.
• I must sell due to health problems);
• I'm upside down with the bank and need to sell (this could be an individual or a member-owned club).
• We're partners and we're fighting over it in court (very common these days).

WHAT YOU DON'T HAVE TO TELL A PROSPECT

1. Deferred issues have built up so much I cannot afford to catch up (like irrigation needs a 100% replacement).
2. The golf course business in my area has been very poor recently and probably getting worse due to major demographic changes
3. A new golf course is planned in my competitive neighborhood

If you are listing the golf course with a broker, you should be quite clear with the broker about your reason to sell, or simply say it is for personal reasons, which you do not chose to reveal. Then be ready to answer the obvious questions about the business in a manner that shows you have rather precise knowledge of these items:

The first question is (most) often: "How many annual rounds played at your course?" You'll be more impressive (sincere) if you rhyme out the previous three years rounds - even a breakdown of member and daily fee rounds if the course is semi-private.

Question two will likely be, "What are your gross (annual) sales?" Your best reply will be what your gross receipts were in the last operating year. If you have it to the most recent quarter in the current year, you should provide that too. 

GROSS MULTIPLIER: Keep in mind, many golf course buyers are better informed about golf course values than even five years ago, because there have been lots of print and Internet articles about golf course sale prices. Buyers in 2013 might apply the gross multiplier method to determine in their own minds to what should be the fair price to pay. Articles in the industry have stated the average gross multiplier experienced most recently has been from 1 X, or less, to a maximum of 1.6 X gross receipts. For instance a golf course with $1 million in gross sales might attract a maximum of $1.6 million as a sale price based on a 1.6 gross multiplier. However, if the course is not earning a profit, that multiplier could drop considerably. One major golf company (I cannot name) will not pay more than 1 X gross receipts for a golf course.

MORE ON SETTING THE ASKING PRICE: As suggested above, golf course valuations in 2013 are well below what they were ten years ago. We discussed briefly above, the gross multiplier a potential buyer might apply to the value of the golf course. In the experience of this writer, a buyer will put more emphasis on value by the history of earnings - net operating income (NOI). Articles about golf course trades based on multiples of earnings indicate a spread from as low as 5 X NOI and up to 12 X NOI. This writer's experience indicated the fair trade price fell somewhere between 6 and 9 X NOI with 7.5 X NOI as what I felt was the fair price.

GOLF COURSES ARE BUSINESSES, NOT REAL ESTATE: Not 100% true, because many older golf courses are on land that still retains its original rights, whatever they are. However, since the mid 1980's, golf courses were permitted on land designated as open space, meaning the land had no higher an better use and therefore, the land 'really' had no more value that water surface in the middle of a lake. So, if the land has no real value, the only value the business has will be its personal property assets, goodwill (which you cannot spend), and an investment value based on what the business provides - like any financial instrument. Therefore, 99% of golf courses built since 1985 are worth only an amount one can evaluate by it's earnings. In the eyes of the writer, a golf course that cannot make money has no particular value to anyone. I mean here's a question you need to answer in your own mind:

How much would you be willing to pay for a business that loses money year after year?

So this writer suggests sellers need to be reasonable and informed before setting a selling price for a golf course.

FORGET WHAT IT WAS WORTH TEN YEARS AGO. YOU'LL WASTE A LOT OF PEOPLE'S TIME

SO YOU'VE DECIDED TO SELL THE COURSE. HOW SHOULD YOU PRESENT IT?

Whether you use the services of a broker, or try to sell the course yourself, you need to consider how you go about it. In the experience of this writer, most golf course sellers try to keep it a secret to employees, customers and members. I, personally, do not agree with that strategy, because I feel it is unfair - especially to employees. I also know from experience, that everyone knows the place is for sale anyway.

Employees and members see business people in suits and ties carrying briefcases and meeting almost secretly with principals. They see them riding around the property taking pictures or making notes on a clipboard. "Something is going on!" Now if I was selling my golf course I think I would do it the same way I would sell my house, or my car. Start by telling everyone you are planning to sell the golf course. Why?

Certainty is better than uncertainty. Employees, members, services and suppliers can plan their interest in the golf course based on anticipated new ownership. However, I believe it is far less cruel to employees if they know the golf courses is for sale. If they like their job and want to stay aboard under the next ownership, they should have an opportunity to put their best foot forward - sort of their application to work for the next owner.

I also believe the golf course seller must prepare the golf course to be presented the same way a house or a car will be shown to a potential buyer - clean, organized, bright, happy, etc. Just like a car seller will have the car detailed clean like a new car, the golf course needs to be detailed to show the best it can show. There are a few critical areas I believe need to be addressed before a showing:

CLUBHOUSE

1. Washrooms need to be spotless and smell clean. Consider a new paint job or wall paper.
2. The kitchen must be clean and as shiny as possible. Organize the coolers, freezers and stock rooms. Make sure there is no junk piled in an electrical room. Tidy the offices, neat desks, get rid of personal stuff laying around the office and behind the service counters.
3. Wash the windows.

If you are using a broker, follow the broker's advice so the place will show its best.

GOLF COURSE AND SURROUNDS

1. Clean up and tidy the first arrival picture - neat shrubs, trimmed landscaping, clean entry doors, clean and tidy parking lot.
2. Show greens in good color, trimmed nicely, bunkers edged and tidy. Check the tee boxes. Knock down weeds and invading grasses.
3. Machinery clean. Paint some of the older machines like old, but reliable tractors. Tidy up and organize the maintenance building and the maintenance yard. In fact, get rid of the old machinery graveyard (hire a big dumpster to haul it all away).
4. Clean up the irrigation pump house. Knock down spider webs, remove old scrap. Get the weed eater around the outside so the area shows good care. Older pump houses could use a paint job.

If a potential buyer may ask about grasses, mowing heights or green speeds, be sure you have a smart answer.

BACK TO THE FINANCIAL INFORMATION: DIALOGUE

If a potential buyer requests basic financial information (under non-disclosure) about the business, you need to be prepared to provide the most recent three years of attendance (rounds), income and expenses.

NOTE: In the experience of this writer, some sellers might try the 'wink-wink' suggestion - hinting that much of the revenue the business takes in goes unreported and therefore, cannot be recorded in the financial statements. I strongly recommend that you never make such a statement to anyone. In fact, the value of your business is 100% tied to the earnings it can verify.

  THIS ARTICLE IS INCOMPLETE. IF YOU NEED ADVICE IN A HURRY, CALL ME: 941-739-3990. YOUR FIRST CONSULTATION IS COMPLIMENTARY. OR SEND ME AN EMAIL MESSAGE WITH A BRIEF OUTLINE: mike@golfmak.com. I ALWAYS REPLY.