This Business Runs Itself

I hate the phrase passive income because it gets thrown around a lot.

It's about as passive as you can get. And I have some friends that have some in their own home as well. Even if they do use it every day, it's only for about an hour a day. So for 23 hours a day, it sits unused at their home. That made me start thinking about more of the membership model.

I just need these 10 friends and my costs are at least covered and I'm breaking even.

We have a software platform that we use for all the scheduling.

What does that cost you per month?

$40 a month.

And your whole business runs on that?

Yeah, not Nothing at all. It's a 24/7 door access. I love the fact that I don't have to worry about it or do anything.

This business right here is 6 months old. It was at breakeven within 3 months. It makes 50% net profit margin, and they've never lost a customer. That's the golf simulator business, and I'm terrible at golfing, clearly, but I love business. Today we're going to meet Jay Meldrum, who quit his job in corporate America, started a golf simulator business, and he is very profitable and growing. So let's dive in. Jay, thanks for having us.

Yeah.

Tell me about your business.

Well, the name of the business is SwingCave Golf. It's a single bay simulator. So we have members that will come in and practice their swings and work on their golf game. And something that I've wanted to do for a long time, personally for myself, if I'm honest, we looked at putting one in our home and just not enough room. We've got our third grandkid coming too. And so my wife, of course, is like, no, you're not getting that room. Like, no, we got plans for this. And I have some friends that have some in their own home as well. And the more I talk to them, the more I learned that yes, even if they do use it every day, it's only for about an hour a day. So for 23 hours a day, it sits unused at their home.

Yeah.

So that made me start thinking about more of the membership model of, hey, could I do this? Close enough to my house that it wouldn't be a burden on me, but also open it up to other members and have a membership model, and then everybody can enjoy it as well. So we ended up opening up just this last September, and it's been great. We've got 20, 28 members right now in the area, and it's been a lot of fun.

23 hours a day unused at your house. That's a lot of square footage to take up for hardly using at all. And I imagine it's clearly more expensive to build it out here, but is it a lot more expensive?

Well, there's a lot of different simulators out there. And if you want to put one in your home, there's a lot of economical models that you could put in. There's some like with a net that folds down so you can conserve space. So that we were looking at those kinds of things. But once I decided on the membership model, it kind of elevates it and said, hey, if we're going to do this, let's do it right.

I think I remember us talking and you said that when you were still building this out, you had spoken to some friends. And you're like, all right, they kind of verbally committed and you said, I just need these 10 friends and my costs are at least covered and I'm breaking even. How many of them actually followed through and became a paying customer versus not?

That's a great question. So there were about 5 friends that I talked to and 3 of them were right there. 2 of them were, it took them a little longer, but they are now members. Oh, wow. It just took them a little longer to, to be ready to do it.

So you got all 5 of them?

So yeah, all 5 of them are, are there. But yeah, that was kind of my model in the beginning of like, hey, if I can get enough here, to kind of, you know, at least give me a basis and give me feedback. One of them was the first one to join even before we opened, and he's like, let me give you feedback. Yeah, he's a good friend. And I was like, absolutely.

What kind of feedback did he give you?

Just different things about the data that it provides, and hey, where's this part of the data, and how can I do this, and just try to make sure that it's useful for him with what he wants to do with his golf swing. And then feedback around 'Hey, it'd be nice to get some straps over there to hold the clubs in, and it would be nice to have a place to putt in the back,' and just little things like that, that, 'Hey, have you thought about this?' And so that was invaluable to basically get that type of feedback. Yeah, there— so there were over 10 that I talked to, but 5 that really only committed, but they're all in. And the other 5 just took them a little longer, but it was— it took about 3 months to get over 15. So we were— which was break even for us.

Okay.

So 15 was break even. It took us about 3 months from the middle of September to the middle of December.

Okay.

And then currently another 3 months later, we're at about 28. Yeah. Max out is 40. It's not that big of a—

That's incredible.

Facility.

So you're almost at full capacity.

Yep. And if we can get to 40 within the next couple of months, that's the goal. Then we'll have a waiting list for others that want to sign up. And then that'll help us dictate based on location where we want to set up a second.

Now, how do you get to 40? Is it based on how often they reserve booths?

Yes. So I did a lot of research with franchisors as well as other places that have kind of this one facility model. And every one of them said that doesn't matter how many bays, it's 40 per bay.

40 per bay.

That's when you start getting feedback that, hey, I can't get a tee time. Or I can, it doesn't seem like I can get the tee time I want or on the thing that I want. So that's been the feedback. It's about 35 to 40, but. Depending on your price point.

Yeah.

I think we'll max out around 40.

And it's kind of a specific customer you want because I almost built out a private pickleball court in the shop in my backyard. On paper, it's like, I just want a bunch of people that hardly ever play. That way I can just fill it up. But if that's the person you're signing on, then you're going to have a high churn rate. Right? Because they're just— it's not worth it. But conversely, if you have someone that's there every day, then instead of having 100 max capacity, which is what I was looking at, you're going to have 50. That's not ideal either. So you probably want someone that's an enthusiast but not obsessive because then your 40 goes to 35, right?

Yeah. Yeah. So when we were looking at this, there's a lot of different pricing models out there and there's a lot of them that are just a single price. You pay this per month and it's unlimited. You know, you can't go more than once in a day, but it's unlimited days in terms of getting it. And so you're really going after the, the person that wants a place to practice every single day. And we looked at it and said, well, there's there's a lot of other types of folks that may not come in every day. Yeah, that would love to use this type of facility. So we have 3 membership models. One is for 4 tee times a month.

Okay.

One is for 8 tee times a month, and another one is unlimited.

And what are the prices for all 3?

$175 is our— for par, the par membership, and that is for 4 a month. Okay. And then $275 is for our birdie, which is 8 times a month. And then our unlimited is our eagle package. And they can come any time they want.

How much is the unlimited?

$325.

$325. Okay.

Yeah. So economically, it's more advantageous to do the unlimited. We wanted to make sure it made sense for those that really wanted to come, but we wanted to have other price points as well for those that may not come that much. And it's just a waste of time. But then more recently, about a month ago, we added some punch cards. So 5 and 10, you have to use it within 6 months. And so now we're getting a few more people that may only come once every other week.

Yeah.

But, and, but if it's raining outside, we've got a couple members of TPC Craig Ranch that they go there whenever they want and they go there to do the driving range. And, but when it's raining or when it's freezing or when there's other, it's just easier for them. They want to come here. Yeah. And practice. And so, so it gives a lot of different opportunities for people. But in terms of our customer, our customer is somebody that loves golf. And wants to get better at it and wants to work on their swing.

Okay.

And that can go from, you know, member of another country club that wants to come here whenever they want to somebody that just is barely getting into golf but really wants to get better.

Yeah.

And work on the swing. And the way we do our simulator, the data, it's the feedback you get from the data allows you to learn. Okay. How can I swing that a little bit better and hit the golf ball a little bit cleaner?

Yeah. So it's like there's 3 buckets. There's— this doesn't replace the, the 18-hole range, right? This isn't replacing golf, that's its own thing. It's not replacing Topgolf because that's entertainment, that's families, that's corporate events. This is for like the third group of people that just want to be better. They enjoy golf and they, but they want to practice.

So there's definitely that middle bucket of people that just want a place to go to practice.

Yeah.

So my wife in particular is just learning, she wants to get better at it, she really enjoys it. But she doesn't want to go to the range and have the guy next to her looking at her when she shakes a ball.

That's a real thing.

And she gets a little intimidated, and so she wants a private space like this, her own cave, that, that she can come and practice whenever she wants. And we have several members like that as well from that perspective. Now, in terms of Topgolf, you know, it's interesting, one of the reasons we went with this particular simulator are all of the games that it comes with. So you can play soccer and football, and there's different golf games too for hitting, like Battleship, where you can hit a pirate ship. So I have family members that bring their families here, and they'll play those games as well. And so it's a little bit of both of that middle, but also maybe more of the entertainment as well.

Yeah. Running a business can be like reaching into a dark box full of unexpected surprises, and you never know what you're going to get. Maybe your business floods. Maybe you get an audit, or maybe you get that dreaded letter from the government where they say, hey, you didn't file X, Y, or Z form. You got to be incorporated. You need a registered agent. You need an EIN. Well, Busy.com can handle all of that. Don't go with the other guys. Go with Busy.com. I've been using them for years. I've started over 80 businesses, and they don't even charge you to file an LLC. You got to pay the state's filing fees, but you don't have to pay Busy. They've got a nice clean user interface, no headaches, no confusion. So for any of your incorporation, registered agent, EIN, or filing needs, check out bizze.com. That's B-I-Z-Z-E-E dot com. They are one of the best companies that I have ever worked with. Is the goal/hope for this to be at max capacity and $100,000 a year in profit? Do you think that's realistic from this?

Absolutely.

Would you ever get to the point at this place where you would make the decision to add a second bay? Do you want that to always be the feature of this place, to be private?

For me, selfishly, I want this to be a single bay.

It's probably the closest that will ever be to your house.

Yeah, exactly. So this is my man cave in a way. And so I want— and honestly, when I thought about, well, who is the customer target for this? Yeah. It's me.

Yeah.

What do I want? Well, I want a private place. If I want to bring my kids and they want to watch a show while I'm hitting some balls, I don't want other people around. So for me, this is the ideal.

Yeah.

Will it always be like this? Not necessarily. Yeah. I can see us not adding any bays to this, but I can see us doing a 2 or a 3 or a 4 bay eventually.

Yeah.

Depending on the location, depending on the market, depending on what the customers want. There's several of them that do very well because there's a lot of people that are just want something like this to be able to come and swing when they want.

Okay. How, how does your price compare to your competitors?

We are right at the market. So based on pricing, we're right there.

Okay.

We're not lower than them and we're really not higher than them. I feel like we have a superior simulator compared to a lot of them out there. Yeah. Like I mentioned before, that Full Swing and Trackman are the top two. There's some large franchises that are out there that switched about a year ago from Trackman to Full Swing because it was superior indoors versus Trackman is used by a lot of PGA instructors. Right? It's portable. You can pick it up, go to an outside range, you can keep it indoors. But the one downside of the Trackman, at least for that portable model, is it's about 2 to 3 second delay.

Yeah.

From the time you hit the ball and you see it on the screen. And this one's instantaneous. Okay. Now they have another model that's indoors as well and other things, but because of that, we did slightly higher in some of the memberships for that as well.

Okay.

From a technology perspective, but for across the board, we're probably right there. I didn't want to come in lower and just generate demand.

Yeah.

I wanted to see, is this the right price point?

Yeah.

And I feel like it is. Yeah.

So what are your monthly costs? You've got rent. What about insurance, your technology, all that?

Yeah. So technology, no, we pay a software subscription for like $100 every year. That's it. You have utilities and then you've got the rent and then you've got insurance. Yeah. But it's not that much from a, from a cost perspective.

Yeah.

If we maxed out at $100K at 40 people, it's about— we have about 50 to 55% margins. Wow.

That's net, net. That's incredible.

Yeah. So we're kind of looking at, okay, 50%, it's $100K, 50, 50% is kind of the model that we're after. We haven't really done a lot of marketing. Everyone said you need to have a grand opening and you need to go, you know, get some marketing in the area, in the residential and I was very particular that I don't want to do that right now. I want to learn everything about this and I want to learn about the demand that is generated by word of mouth, by seeing it.

Yeah.

And could I have broken even quicker than 3 months? Absolutely.

Yeah.

Could I hit 40 quicker? Absolutely. So our goal for the second location is to do all of that and see how compressed the timeframe is. And then we've got 2 use cases. For the third or the fourth or the fifth one in terms of what's the right balance of marketing in terms of who our target customer is.

Yeah. And you're kind of a different situation because you were in corporate America for a while. You were entrepreneurial in college, kind of put that on the back burner for a couple of decades.

Yeah.

Retired early. And so this is like a passion project and it's fun and you're building it for a customer of one. And I feel like that's just a really strong place to be. It's almost like when you try less hard to make it work, you're, it's almost like it's more likely to work. Does that make sense?

I think anything entrepreneurial, if you're passionate about it, it's a lot easier to do and it's a lot easier to address when things don't go right.

Yeah.

If you're passionate about it. And so, yeah, I started a business in college and sold it and then went into professional services and have been there for the last almost 30 years. I saw it as very entrepreneurial in a lot of respects. And then over the last probably 10 years, I've seen that entrepreneurship in the large corporate world just deteriorate.

Yeah.

So I've been anxious to do something, not just this, but to do something more entrepreneurial. And so, yeah, so I left a large firm about a year ago and this was literally the project 2 weeks out after finishing with that. This is what we did.

Yeah.

And we want to do more of it and I'm interested in other types of businesses and different, different sectors and things like that. So this is what I feel like I've been missing for a while and this is an easy way to I don't tiptoe back into it a little bit.

Yeah. If you think I have a terrible swing, go ahead and hit subscribe. So how would you like to scale this business?

You know, I'm in no rush, but I do see the opportunity and, you know, first mover advantage everyone's aware of. And so I think in the next probably 2 to 3 months, if we can max out at 40, we will definitely be looking for a second location. We already have 3 identified.

I was just going to say, I know you're already looking.

We already have 3 identified and we have a right of first refusal on one this fall.

Okay.

But yeah, so in my mind, scaling looks like going 1 to 2 and then 2 to 5.

All at once?

Like, yeah, within, you know, within a couple of years, right? Yeah. And then once we hit 5, reset, see if there's efficiencies that we can continue to gain depending on where the locations are. We've had some even just now, our members have said, hey, if you get more than 1, 2, 3 locations, it would be nice to reciprocate membership depending on where people live that, hey, I'm in Allen today or I'm in Princeton or I'm on the other side. We've located, we've looked at a location on the other side of Allen. And so that may be interesting to think about. And so then from my perspective, you go from 5 to 10 and then you go from 10 to 20. And then at 20, you have to make a decision. Of do you want to franchise this or not?

Yeah. I mean, there's a lot of precedent of companies that have franchised after 1 or 2 locations. I mean, with varying levels of success. Yeah, right. But I think that most potential franchisees feel really comfortable even if you only have 2 or 3.

Yeah, I think there's a downside though, that if you've only got 2 or 3 and you try to franchise it out, do you really— you're dealing with different locations every time.

Yeah.

And that franchisee comes in and he can't get to 40 within 6 months. And then there's some friction, right? So I think, I don't know, maybe it's just me and maybe I'm a little more conservative than others, but I would rather own than franchise any time of the day. But I'm really interested in that second one where we compress, we do a ton of marketing, a ton of, you know, the grand opening, things like that. And just to see the opposite of if I really focused on the marketing and how quickly could we do this. And I think that, that learning there will help us really, okay, how quickly can we scale this? And what does that look like?

Yeah. I mean, I've talked to a lot of business owners that have scaled one retail location to many, and it seems like they always really surprise themselves with a second. Like, they, they're comparing the second to the first 'cause that's all they know, but then the second just blows expectations out of the water 'cause they're leveraging all those learnings. I hope that's the case for you.

I hope so too.

So if someone's watching this and they're thinking, I want, I want to open a golf simulator, like, I love this, I love golf, I want to do what Jay did, what advice would you give them?

Number one, if you really want to do it, just do it. You learn more by doing it than thinking about it. And so just do it. There is upfront cost. It's about $100K upfront to get everything situated and ready to go and for all the equipment and the finish outs and all that. But $100K upfront and $100K on your revenue per year and 50 to 55% margins.

Yeah.

2-year payback. I mean, that's really good compared to most businesses. So yeah, if it's a passion of yours, just do it. I think there's a couple things that we were able to do to mitigate a little bit of risk. Our lease arrangement, we were able to work in a clause that we didn't have to pay rent until we opened. We were ready to open within 3 weeks of me signing the lease. Yeah, we worked into a clause that we didn't have to pay until we opened up. So that really benefited us because you just don't know how quickly you can be able to open. Yeah, so that was helpful. We also— I have a good friend that's a real estate attorney, and we're able to get some good, a good amount of leasehold improvements to help mitigate the cost a bit. So those are little things that I would, you know, use your network around you to get advice, but don't wait. Just jump in. And if I look back and said, oh, maybe I should have waited until I got the permit, right? Yeah. Maybe I could have, but I learned a lot in between that time of waiting and even having a couple of members show up before and give me feedback. And it was very beneficial.

Of your 28 members, how many did you know personally versus strangers?

I would say of the 28 members, I know about 15 of them personally.

Okay.

Some of them better than others, but I knew of them and I knew of their interests.

Church and work and stuff.

Church and work and sports and kind of the neighborhood areas around here. And then, yeah, the other 13 or 14 or so, they were looking around or they had a friend that saw when they were driving by. Or I've got several that are actually in this neighborhood right behind that have seen it when I drive by all the time. And they're like, hey, what's that?

Yeah.

I'd love a place to go to to practice my swing.

So, because from what I understand, you're not marketing really, right? You've got a decent location. It's close to our homes. I drive by it a lot. But there have been other businesses in this strip mall that haven't done well. I know you wanted to optimize for being close. You're 5 minutes from home, right? What else made you choose this location?

Yeah, so it's kind of a funny story too. So I did want something within 5 miles of my house. I didn't want to have to drive into the main part of Allen or other areas. So I was looking for other areas. And, and this one actually just came up. We drive by it every day as well. And there was a vape shop here and I found out through somebody else that, that they were under investigation for selling to minors.

Good.

And so I was like, oh, and I hadn't really thought of this location yet. I'd thought about a bunch of other ones by some shopping centers and hadn't really thought of this. And I was like, that's interesting. And I'm sure that the, the, the lessor would want to have them replaced. And so anyway, I called them up and I said, hey. I will offer you a deal right now. If you give me 15% off of their current rent, I will step into their lease, whatever it is. I don't even know what it is, but I'll step into it. And he was like, yeah, okay. And then it was 2 weeks later that they call me up and say, hey, if you're interested, you're in.

Wow.

And so at that point in time, we really hadn't done anything with the business. It was an idea and we were like, hey, we got to find some space and then we can start working on this. And so At that point in time, everything shifted and we're like, this is a great space. We had to tear out a few things. We had to put a wall in and do things. But the more I'm here, the more I also understand what a great location it is, that it's not by a shopping area. When you max out at 40 people per bay, you don't need a mass, an area where there's a lot of massive people coming around and in and out. You don't need that traffic. But it helps to have the road traffic going by and seeing it.

Frontage.

And it helps it to be close to neighborhoods where people's homes are. Because if the alternative to putting something in their home, this is it. It's close. It's within walking distance for several of our members or an easy drive for most of them.

Yeah. I mean, there's 100,000 people within 5 miles of us right now, and you need 40 of them.

Yeah.

So if you ever want to start a golf simulator business, We actually made a 30-page business plan, charts, graphs, 5,000+ words about everything you'd ever need to know to start a golf simulator business. Cheap, expensive, ton of marketing ideas. It's $19 at the link below. Go check it out. Are people allowed to bring guests, friends, family members for their one membership?

Yes. So there's a lot of these out there and franchises that only, they limit you to 3 or 4 people. Yeah. Per bay when you come in and even some single ones that limit you to 3 or 4 people. We wanted a place where they were unlimited right now. No one's going to come into the space and bring 20 people. There's just not enough room. Yeah, but we have families that come in with 8 to 12 to 14 people and they, they watch a show while some people are playing on it and do a little bit of activity. But we don't— if that's your tea time and your, your space, it's your space.

Okay.

You can bring whoever you want here during that time.

And are the tea times 1 hour?

So for our members, it's up to 2 hours for each time. For our punch passes, they're up to an hour.

Okay. And do you use like a third-party scheduling software?

We have a, we have a software platform that we use for all the scheduling.

Okay. What does that cost you per month?

On a per-month basis, $40 a month.

Oh, it's nothing. Your whole business runs on that.

Yep. Nothing at all.

What do you pay in rent here for this?

We pay about $31 per square foot.

Okay.

So we're right around, right around $3,300, $3,400.

Okay. Now, 28 members, which tier is the average person on?

Right now, our average is about about $250 per member. So we're kind of right below the middle tier.

Okay.

Right? So $175, $275, $325. We're right around $250 on a weighted average.

And is that kind of like a barbell? Like half are on the most expensive, half are on the cheapest?

Yeah.

Okay. So $7,000 a month in revenue? Mm-hmm. So that's awesome. After 6 months?

Yep.

Okay. And your breakeven is about half of that?

Yes.

Okay. So you're profiting $3,000 to $4,000 a month. And at full capacity you'll be profiting $6,000 to $8,000 a month. Yeah. And it's— I mean, I hate the phrase passive income because it gets thrown around a lot. People sell a lot of courses around it and really nothing is passive. Yeah. Because if, you know, if something is passive, you have to do a lot of active work to get to that point. As far as any business goes, this is quite passive.

It's about as passive as you can get. Yeah, there is very little maintenance. It's a 24/7 door access. So you'll get an email saying what your tee time is. And then 10 minutes before that tee time, your phone will light up. You push a button. It'll automatically open the door. You're in. So from my perspective, I wrangle my 14-year-old every Saturday and we come here for about an hour and he helps clean up and take the trash out.

And you don't, like you're doing that to spend time with your kid. Like you could hire that out if you wanted.

Absolutely.

Yeah.

I could have, I have several families with memberships that they have a teenage son. That plays here too and practices. And I could easily say, hey, you know, you could help me out with this. It's just very passive. I love the fact that I don't have to worry about it or do anything. We have full video surveillance and cameras. And so there's sometimes where I'll have a new member that's coming for the first time and I'm out of town. I can't meet them and give them an orientation, but I can see when they get there and I can ping them and say, hey, let's walk through it if you want. So there's some necessities like that, but it's very, very easy.

Well, Jay, this has been amazing. Where can people find you if they want to learn more?

Yeah, you can find me on LinkedIn, Jay Meldrum, but the business, swingcavegolf.com. If you're interested in doing something like this, let me know. I'm happy to give you feedback.

All right, thank you.