Will we have enough capital for the next 20 years?

The Problem No One Wants to Name

Most private clubs are not underfunded because their boards are negligent. They are underfunded because their boards are human. Every sitting board knows that raising assessments is unpopular. Every sitting board also knows that the next board will inherit whatever they leave behind. The path of least resistance is to do what the last board did — fund reserves at roughly the same level, approve the capital projects that have the most member enthusiasm, and defer the hard conversations.

The board that avoids the hard conversation today is not protecting its members. It is passing the cost to the members who come next — with interest. 

This is not a criticism of any individual board. It is a description of a structural problem. Without a clear picture of the club’s capital position, every board is flying blind, making consequential financial decisions based on precedent, intuition, and avoiding member friction rather than data and analysis.

Three Questions Every Board Must Be Able to Answer

1. Do we have a Capital Strategy, and if so, who can explain it to a new member?

2. What are our top five capital obligations in the next 10 years, and are they funded?

3. When was our reserve study last updated, and does it reflect what we realistically expect to spend?

Most boards cannot answer all three. The Assessment changes that. At the end of Phase I, the board will have a shared understanding of the current capital position and a basic forecast— showing how much it needs, when, and what the gap looks like based on current trajectory. That understanding is the foundation for everything that follows.

The Reserve Study—what does it really tell us?

Faced with uncertainty and in search of clarity, many boards commission a reserve study. Reserve studies are valuable— they provide a systematic inventory of the club’s physical assets and an estimate of their replacement cost and timing. Reserve Studies are also widely misunderstood.

The fully funded target in a reserve study is not a capital strategy. It is a data point. And in most cases, it understates the club’s actual capital requirement by a meaningful margin.

Reserve studies were developed for homeowners’ associations, built using a standard approach designed to satisfy lenders and calculate depreciation, not to serve as a strategic planning tool for a complex hospitality operation. The studies do not account for the real cost of projects at a private 

club, the strategic priorities of the membership, or the items the board already knows are coming.  They also do not make allowance for the unexpected.

Most boards, confronted with a reserve study they do not fully understand, act reasonably given the information available: they identify the ‘fully funded’ contribution number from the study, set that as a target, and try to meet it. Some do. Many fall short. Almost none ask whether that number is really sufficient.

Separating Signal from Noise 

The first step in the Assessment is separating the results of the reserve study into what matters and what does not.  A typical reserve study for a mid-size club contains several hundred items. Most are part of the noise; usually only 5-10 are meaningful enough to be considered part of the ‘signal’.

The Assessment separates the 5-10 ‘signal’ items from the ‘noise’, organizes them, and puts them in front of the board as part of a complete and coherent summary.

Items that make up the signal are different— not just because of their cost or scope, but because of member experience and strategic considerations.  These items require planning, communication, and funding decisions. They cannot be managed in the aggregate. They need to be individually identified, scoped, budgeted, and placed on a timeline showing the big picture.

Adding What the Reserve Study Misses

Once the ‘signal’ items from the reserve study are identified, the Assessment overlays items the board knows are coming or that have already been deferred.  Every board has a list—the east bathrooms need renovating, the fitness equipment needs replacing; there is a desire to turn the storage room into a yoga studio. These items may not appear in the reserve study at all — or they may be placed in a year that has no relationship to the board’s actual intentions.

The Assessment captures these items at a planning level. Not in full detail — that comes later. But well enough to put them on the timeline and see their impact. The goal is a spending picture that reflects what the club is really going to face — not just what an actuarial model predicted.

Overlaying the Funding Plan

With a high-level understanding of spending requirements, the Assessment turns to the other side of the equation: funding. The club’s existing reserve balance and contribution rate, plus any planned increases are carried forward against the spending forecast— and the model shows what happens.

Most Assessments show a significant deficit at some point within the next 7 years.  Given the sensitivity to member cost increases, and the long time-horizon to complete capital projects at private clubs, boards are well served to begin planning immediately

A projected deficit is not a crisis. It is a data point—usually for the first time, the problem has been quantified and the Board has the tools to begin solving it.

Especially when expressed graphically, the results tell the story at a glance: here is where we start, here is what we plan to spend based on our analysis, here is what we expect members to contribute, and here — in a future year — is where we show a deficit.

What the Assessment Produces

The output of Phase I is the Overview — a single-page framework organized around a simple structure: starting reserve balance at the top left, projected reserve balance at the bottom right.

The Overview is designed to be easily understood; no financial background needed. It requires only a willingness to look at what it shows—a high-level forecast of the Club’s capital reserves based on data and grounded in Reality

Phase I ends with a clear forecast based on reserve study projections and current funding. Phase II is about finding out how big the problem really is — and building plan to address it.

The Overview at the end of Phase I is not the finished plan. It is built on reserve study costs and high-level estimates. It is deliberately conservative about spending and holds the funding plan constant. Its purpose is not precision — it is clarity. It exists to show the board the shape of the problem so the work of solving it can begin.

The Transition to Phase II

The deficit shown in the Overview at the end of Phase I is almost always an understatement. It is built on reserve study costs, which understate real project costs at a private club. It does not include allowances for discretionary capital enhancements the membership expects the club to make over time, or the unplanned events that every club faces.

Phase II begins from the question the Assessment makes possible: now that we can see the gap, how big is it really — and what will it take to close it?