Smart Money

A camp comes into some money. They don’t have a long-range plan based on operating goals, so the director goes to the staff and asks, “What do we need?”

If the staff has been working hard to fill the camp and programs to capacity through their long, long hours in difficult working conditions, you could certainly entertain a suggestion to “improve working conditions” by adding facilities that primarily make the lives of the staff easier.

Things like new or expanded offices, welcome centers, new staff housing, new dining rooms and new maintenance facilities… Each staff person has their own personal priority. All of these things are important and will add to staff satisfaction, retention and performance.

But in what’s more often the case, the camp has not made a substantial dent in its deficit because there are still lots of empty beds. The guests still aren’t satisfied enough to recommend the camp to their friends because the customer service and basic facility needs are not yet being met. The camp isn’t breaking even, let alone generating a contribution to overhead.

That’s when the decisions on how and where to spend capital money may actually have life or death consequences to the camp.

So how can getting a donation hurt the bottom line?

Identification

Almost every capital expansion (investment in new facilities, property, or major equipment) creates a corresponding yearly operating expense.

Let’s look at some common examples, the new annual expenses they generate, and a range of dollar values those expenses can take:

New High Ropes Course or Climbing Tower

-Ropes, harnesses & helmet replacement, annual training, annual inspection and certification

-$2,000 to $5,000 per year (annual inspections, rope replacement, yearly staff training)

New Swimming Pool

-Pool maintenance, electricity, chemicals

-$8,000 to $35,000 or more per year. (chemicals, electricity, staff)

New Dining Hall

-Heat, light, cooling, floor maintenance & cleaning

-$12,000 to $60,000 per year. (heat, lights, supplies, custodial)

New Office

-Heat, light, cooling,cleaning, furnishings, staff efficiency in travel from the new site to the main camp area

-2,000 to $12,000 per year (heat, lights, supplies, custodial)

In each example, the new facility looks great. But does it bring in even one additional dollar of revenue? In most cases, no. No additional bed was filled, no new bed was added. What was added was unexpected overhead this first year and every year from now on.

So when the camp is already struggling with income that doesn’t cover expenses, new expenses are added on (almost always greater than anticipated) and no income is brought in to cover it.

Instead of things being better, like the staff and volunteers anticipated, the budget for the next year shows even greater losses. And too often no one can figure out how it happened.

Of course it doesn’t have to be this way. If the camp were a for-profit business going to a bank to take out a loan for the construction, the director would be required to submit a business plan. The plan would have to include a detailed estimate of not only all the costs of construction, but also every conceivable ongoing expense it might generate.

Then the plan would include marketing, staffing, start-up costs and timing, and a realistic month-by-month schedule of every anticipated expense and how new revenue would be generated to begin paying back the loan.

That’s not always the case with camps. We often low-ball the construction expenses, and forget the design costs, permits and costs of meetings. We forget increased staffing to handle more square footage. If we couldn’t keep our place clean before, how will we keep it clean when there’s even more of it?

Utilities, insurance… And if we had to interrupt existing customers to build our addition, we forget that they might not be so forgiving if our disruption hurt their experience this year.

We assume the new facility will begin generating income immediately, but don’t have a plan in place of how that will happen.

If you were building a restaurant you’d have the theme and menu designed before you ever broke ground. You’d build anticipation with advanced marketing; you’d begin hiring staff well in advance so you’d be ready to go on opening day. But you’d realize that it might take months (or years) for the business to break even as you build up positive word-of-mouth from satisfied customers.

Page 1 of 2 | Next page

Related posts:

  1. Avoid the Big Mistakes
  2. Beyond Tradition
  3. Offsides
  4. The Right Site
  5. Incremental Improvement, Part 1
  • Columns & Features
  • Departments
  • Writers