Is a driving range a good investment?

Opening a driving range can be a profitable business venture, but like any investment it requires careful planning and consideration. There are many factors to weigh when deciding if a driving range is a wise investment for you.

Table of Contents

The Initial Investment

The first thing to consider is the startup costs. Building and setting up a driving range requires a significant upfront investment. Here are some of the main costs involved:

Land – This will likely be your biggest expense. You’ll need at least 25-35 acres of land depending on the number of tee boxes and length of holes.

Construction – Leveling the land, installing tee boxes and greens, paving any roads/paths, putting up fencing and netting. This can easily cost over $1 million.
Equipment – Mowers, ball collectors, lawnmowers. Plan to spend at least $100,000.
Golf balls – You’ll need thousands of balls to get started, so expect another $50,000+ investment just in golf balls.

Buildings – A clubhouse, restrooms, and maintenance shed will be needed. These will cost around $500,000 to construct.
Fees/permits – There will be various fees and permits required to legally build and open the business.
Insurance – Necessary to cover any incidents or property damage. Expect to spend $10,000+ per year.

Altogether you can expect to spend $2-3 million or more just getting a driving range facility constructed and stocked with equipment and supplies. This is not a small amount of capital needed upfront.

Financing Options

Coming up with $2 million+ in cash is difficult, so most new driving range businesses will need to finance a portion of the startup costs. Some financing options include:

Business loans – Banks and commercial lenders may provide loans or lines of credit. Rates and terms will vary.

USDA rural development loans – For properties in rural locations, USDA programs can guarantee up to 60% of loan amounts.
SBA loans – The Small Business Administration also helps facilitate financing for new businesses.
Private investors – Find private investors to fund part of the capital and become part owners.

Crowdfunding – Platforms like Kickstarter and GoFundMe can collect smaller investments from many backers.

Having a solid business plan and detailed cost breakdown will help when approaching any potential lender or investor. Expect financing costs to add significantly to your total startup budget.

Ongoing Operational Costs

In addition to the large initial investment, running a driving range comes with considerable ongoing expenses. Some typical costs are:

Labor – You’ll need staff for operations, maintenance, concessions, etc. Expect an annual payroll of $200,000+.
Utilities – Power, water, gas bills can run $2,000+ per month.
Maintenance – Keeping the facility and equipment in shape will require regular upkeep and repairs.

Golf balls – With regular loss and damage, plan to buy 50,000+ new balls annually.
Insurance – Yearly premiums to keep property and liability coverage.
Marketing – Radio, print, and online ads to promote the business.

Property taxes – Annual taxes on the land and buildings.

These ongoing expenses can easily total over $500,000 per year. Be sure to accurately estimate costs when creating revenue projections.

Revenue Streams

Driving range revenues will mainly come from a few areas:

Ball rental – Charging customers for buckets of balls to hit at the range. This will likely make up 50-70% of revenues.
Memberships/plans – Offer monthly or annual range membership plans for committed golfers.
Food and beverage – Many facilities operate a snack bar, grill, or restaurant on-site.

Pro shop – Sell golf gear like clubs, balls, gloves to drive additional profits.
Instruction – Hire golf pros to provide private or group lessons.
Events – Host tournaments, corporate events, charity fundraisers, parties, etc.

The average driving range takes in $500,000-$1.5 million in total annual revenues. Per hour revenue averages around $100-$200 during peak seasons like spring and summer. Off-season revenues may drop 50% or more during winter months in colder climates.

Profit Potential

Driving range profitability can vary substantially depending on location, size, and efficiency of operations. Here are some profitability estimates:

Gross profit margins – Around 40-50% of revenues after cost of sales like range balls.

Net profit margins – May range from 10-25% after all operating expenses are deducted.
Profit per hour – Approximately $40-$100 per hour during peak hours.
Annual net profit – Could total $100,000-$400,000 for a well-run facility.

These are rough estimates only. A highly efficient and optimized range in a prime location could potentially do even better. But some ranges in competitive or off-the-beaten path spots struggle to turn a profit at all.

Factors That Affect Success

Not all driving ranges are created equal when it comes to profitability. Here are some key factors that determine success:

Location – Easy access from highways and dense population is ideal. Rural areas can limit customer base.

Demographics – Areas with more middle-aged and affluent golfers have higher participation.
Competing ranges – More competition in a region limits market share and forces lower pricing.
Amenities – Quality of facility, ball selection, food, pro shop affect customer appeal.

Management – Strong leadership optimizes operations and keeps costs in check.
Weather – Cold winters reduce prime season and overall revenues.

Studying the location thoroughly and understanding the target customer is key. Creating a premier driving range “experience” also attracts more golfers and enhances profitability.

exit strategies

While many see a driving range as a long-term business investment, it’s still smart to consider possible exit strategies down the road. Some options include:

Selling to another owner or management firm who wants to take over operations.
Transitioning to family ownership if you have children or partners interested in keeping it in the family.

Offering partnership or equity opportunities to a head golf pro or manager.
Selling assets and equipment individually if closing down completely.

Land value should also be considered when planning an exit. With 25+ prime acres in a good location, the real estate alone could be worth $1 million or more if sold to developers.

Conclusion

Building and running a profitable driving range is certainly possible, but also comes with substantial financial risk. The large upfront investment combined with ongoing expenses and fluctuating revenues make it a challenging business. Success is very dependent on location, demographics, competitive landscape, management skills, and amenities offered. For some entrepreneurs this type of project is appealing, while for others something with a smaller initial investment and more flexibility may be wiser. Conduct thorough due diligence before moving forward to determine if a driving range aligns with your overall investment goals and risk tolerance.