Not many cars sport bumper stickers that say, “What would Mitt Romney do?”
But the fellow did turn around several well-known companies, and saved the Salt Lake City Winter Olympics from disaster.
With Mount Sima in the news, it is an interesting thought experiment to ask what a heartless corporate turn-around artist with a love of winter sports would do with our ski hill.
The toolkit of the corporate turn-around artist includes ideas that may not work in our community. The volunteer board at Mount Sima has put heart and soul into saving the hill, and has likely thought through many of these ideas already. But let’s note those caveats and dive into what Mitt Romney might do. After losing the presidential election, he does have time on his hands.
Romney’s team would start with an unsentimental look at the balance sheet and income statement.
On the debt side, they would note the love of our governments for one-time contributions, regardless of ongoing operations and maintenance costs. A 23-year-old Romney associate would confidently pencil in some government bail-out funds.
The main focus would be on the income statement. Sima’s website says it is making a $400,000 “ask” for annual funding. Romney would ask how revenue could be raised and costs cut to get to a modest operating surplus. Or perhaps a deficit, but one small enough that when they went to governments they could show them that users were covering most of the gap.
Turnovers are much more likely to succeed if there is a significant boost in revenue. Romney’s team would look at membership fees, pricing structures and fundraising.
On membership fees, Romney’s team would look for “benchmarks.” They would find Whitehorse’s Mountainview Golf Club, where $970 gets you a season’s pass. The MBA mind would seize on the parallel: a seasonal sport with expensive fixed costs. They would note Sima’s most expensive season’s pass was $585 last year, and that membership fees brought in just $67,276 in 2012. That is the equivalent of 115 full-price season passes.
They would propose raising membership prices by several hundred dollars and marketing aggressively to the email lists and Facebook friends generated during Sima’s campaign to date.
They would also raise lift ticket prices, which brought in about $300,000 in 2012.
If it was a friendly takeover and local managers were allowed in the room, they might object that this price increase was too steep and would cost the hill users.
Romney MBAs would come down on this like an eight-pound maul. The amount of new ski gear on users demonstrates ability to pay, they would say. The Facebook friends demonstrate willingness to pay. The hill needs the money, and no one will be skiing if it closes. Mountainview has managed to convince its users that they need to pay a bigger share of the cost of their recreation. And they would claim demand for skiing is “inelastic,” which means you could raise prices without losing very many users.
An associate would model the options, which would be things like raising membership fees by 30 per cent and aggressively selling three times as many of them. This would bring in about $200,000, or half the gap.
Sponsorship would be a major priority. They would benchmark the money raised by the Yukon Hospital Foundation, which raises large sums in Whitehorse. A big annual ball might bring in $25,000. One hundred businesses or families sponsoring lift chairs for $250 each would net $25,000. Team Romney would target our two electricity companies, phone company, mining companies and sports retailers for bigger requests.
A Romney associate would pencil in $100,000 for total sponsorship based on a comprehensive, aggressive fundraising program like the hospital’s.
Then they would turn their attention to the biggest “cost buckets,” as they call them. Local blood pressure would rise as Romneyites delved into the $581,492 bill for salaries and benefits. The MBAs would push for fewer full-time staff and more volunteers, and fewer year-round employees and more seasonal.
They would cut off anyone complaining about the difficulties of attracting talent and retraining seasonal employees, and point to their benchmarks of the Cross-Country Ski Club and Mountainview Golf Club. These organizations manage on half as many full-time staff as Sima or less.
If they could save 20 per cent of the salaries and benefits through replacing paid staff with volunteers and more summer furloughs, that would add up to over $100,000. They might “dial up” the cost savings if they were less confident on the revenue options.
At this point, Romney would add it all up. The scenarios above work out to $400,000 or about the size of Sima’s “ask.”
But Romney wouldn’t stop there. He would target government. He would ignore the City of Whitehorse which, after all, has an annual budget smaller than his own net worth. He would go after the big money: YTG.
He would find a well-connected local conservative businessperson. The latter would visit the premier and politely tell him the jig was up: no more hiding behind the City of Whitehorse. YTG would object that the hill is a city resource and that they don’t cover operating costs. Romney’s talking points would argue that they had a billion-dollar budget, a surplus balance in the bank and that Tourism’s winter promotion advertising budget would look a bit silly telling people to come here as one of our main winter assets was closing.
At the end of the process, Romney and his team would be hated around town. But the hill might be open.
Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels. You can follow him on Twitter@hallidaykeith