You need an initial investment of $216,000 as fixed cost to open a small scale driving range; while the variable cost is estimated at $20,895.
A driving range is considered a big business because of the investment involved in getting the business up and running.
A driving range is referred to as an area where golfers can practice their golf swing. It can also be a recreational activity in itself for amateur golfers or something that can be used when enough time for a full game is not available.
A driving range can usually consist of a few or several teeing areas facing an open field, but some driving range facilities include elaborate entertainment centers to differentiate their services.
There are many options to consider if you want to open a new driving range, and these come with their own various cost ranges.
Opening an indoor driving range in a metropolitan area can cost you millions on the property alone, while one removed from the city can be a fraction of the cost. In this article, we will discuss some of the major factors that can influence the overall cost of opening a driving range.
What Type of Driving Range Are You Opening?
Regardless of your geographic location, simple, outdoor ranges are usually more cost efficient. High-tech, indoor golf simulators can cost six figures per simulator unit, so these types of ranges are best suited for those who have already made a large amount of money in the business already.
If you want to open a golf driving range without a heavy purse, you might be able to do that if you go low-tech with no amenities. If you get this done, the whole set up can cost you around $100,000.
Estimated Cost to Build a Driving Range?
Fixed Costs
A big expense you will encounter while starting up your driving range is obviously the land. In some areas, you could buy a 15 acre plot of land for $200,000.
Make no mistakes, this figure is on the cheap side for a good many areas. You will also need to fix your ball retrievers and this cost can come to around $5,000. Your golf ball dispensers are also part of your fixed cost and that should cost you around $5,000 too.
Your token dispenser comes next at about $3,000. You will certainly need lawn-mowers to take care of the lawns and keep them nice and neat and that should cost you $3,000. On the general side, we are looking at an initial investment of $216,000 for your fixed costs.
Variable Costs
To get an accurate figure of what it costs to set up a golf driving range, you have to consider your variable costs too. The day to day operation costs will include the salary you pay to your staff, and you can put that at around $30 per day.
Depending on your set up, you may have to pay more. You should also factor in your maintenance costs and this can range from property tax, machinery, grass seed, water, flag sticks, etc. You can estimate a yearly expense of $15,000. Property maintenance is key for an outdoor facility.
Such maintenance includes mowing the range, maintaining grass, and keeping tee areas clean. For an indoor facility there are more daily cleaning, payroll, and simulator repair/replacement issues to take into consideration. Your variable costs would generally look like this for a 20 capacity driving range;
- 20 – Driving Range Mats (5’x5′) @ $250 = $5000
- 10,000 – Driving Range Balls @ $100 per 300 balls = $3,500
- 40 – Driving Range Buckets @ $7 = $280
- 1 – Driving Range Ball Dispenser (10K Capacity) @ $5,000
- 1 – Driving Range Ball Washer (Economy) @ $1,000
- 19 – Driving Range Tee Dividers @ $160 = $3,040
- 1 – Driving Range Caged Cart @ $1,000
- 1 – 2 Section Range Ball Picker @ $1,400
- 100 – 2 3/4″ Rubber Tees @ $1 = $100
- 20 – Plastic Golf Ball Trays (Attach to mats) @ $20 = $400
- 5 – Driving Range Yardage Banners (50, 100, 150, 200, 250yd) @ $35 = $175
Total Variable Cost = $20,895
Other Expected Cost for Starting a Driving Range Business
- Business Registration Fees – $750.
- Legal expenses for obtaining licenses and permits – $7,800.
- Marketing, Branding, and Promotions – $2,000.
- Business Consultant Fee – $3,500.
- Insurance – $8,800.
- Rent/Lease – $750,000 (If you are Considering an Upscale Area)
- Other start-up expenses include commercial satellite TV subscriptions, stationery ($500), and phone and utility deposits ($1,800).
- Operational Cost (salaries of employees, payments of bills et al) – $120,000
- Store Equipment (cash register, security, ventilation, signage) – $6,350
- Equipment, Furniture, and Supplies – $550,000
- Website: $1,200
- Opening party: $5,000
- Miscellaneous: $5,000
At most driving ranges, a basket of balls will cost about $6. On a normal average, each range will see at least 20 golfers per day, which would yield a revenue of $120 a day, which equates to $3,600 a month.
In some areas in the United states, a driving range can only be open for about 6 months due to seasonal changes in weather, so the expected revenue for the year will be $21,600.
After the large investment of $200,000, the driving range business isn’t all it’s made up to be. While it is quite passive, the yearly income (after expenses) is only $6,600 before income tax. It can even take you up to 50 years to recoup your initial investment at that rate.
Revenue Streams for a Driving Range
- Bucket Sales (Balls): 12,000 buckets sold in Year 1, with a 10% annual increase in sales volume.
- Price per Bucket: $10 (Most driving ranges charge $6 per bucket)
- Membership Sales: 60 memberships sold in Year 1, with a 5% annual increase.
- Price per Membership: $1,000 annually
- Golf Lessons: 250 lessons in Year 1, with a 10% annual increase.
- Price per Lesson: $50
Yearly Financial Forecast
Year 1:
- Revenue: $192,500
- Net Profit: -$44,395
Year 2:
- Revenue: $192,500
- Net Profit: -$46,484.5
Year 3:
- Revenue: $208,750
- Net Profit: -$32,532.95
Breakeven Analysis
To breakeven in the first year, considering only buckets contribute to covering the fixed and initial variable costs, yoir driving range would need to sell approximately 23,690 buckets at $10 each.
This forecast indicates that a driving range business faces a challenge in reaching profitability within the first three years based on the initial assumptions.
Strategic planning to increase revenue, manage costs more effectively, or a combination of both would be necessary to achieve financial sustainability.