The Future of the Club (based on an actual situation)

Assignment

You have been hired as a consultant by the Board of Directors of LNS to assess and provide your recommendation on both their operations and capital structure. In preparation for your oral presentation to the leadership, you are asked to first provide written responses based on below.

Background

LNS was formed over 100 years ago as a social/ethnic(not-profit-profit), member-based organization by current members ancestors. While there is much pride, history, legacy, and family memories associated with the Club, the organization is now at a pivotal position in its history. It will be important for the Board of Directors to make objective decisions in order to sustain its existence into the future.

Further Facts

Membership

-average of member age has increased from 60 to 70 yrs old over the last 10 years

-# of members has decreased from 400 to 250 over the last 10 years(consistent annual decline)

-$35 annual membership dues

-members and leadership lack business acumen

-members and leadership emotions/subjectivity have historically trumped objective reality

-long-term sustainability of organization is important to members

Operations-

-extreme lack of automation/communication(eg. No invoice issued for annual membership dues)

-website/marketing is very weak

-financial reporting/controls and overall business acumen is very weak

-inferior(wrong skillsets) hired personnel in key roles

-lost their legal not-for-profit status(now need to pay taxes, including capital gains)

-leasing out excess physical space to 3^rd party tenants(led to above status change)

-leasing space was a result of their hospitality/catering business fading due to lack of

business acumen

-operating losses have avg(and getting gradually worse) $100,000(before depreciation) per year over

the last 5 years

-avg annual capital expenditures $10,000 per year over the last 5 years

Capital Structure-

-Fair market value of 6 acre, waterfront property is $3 million+-

-Very saleable real estate that could be sub-divided plus multi-use zoned

-Minimally $50,000 deferred maintenance on property

-Liquidity(cash and unrestricted investments) has decreased from $600,000 to $300,000 over the last 3

years

From an operating standpoint, please list below all of your recommendations and more importantly why for changes to help better position the Club.

From a longer-term sustainability, capital structure standpoint, please list below your potential ideas/recommendations and more importantly why.