Small Businesses Have Ace in the Hole in Golf

NEW YORK ( TheStreet) -- Watching this year's U.S. Open might not be as exciting without Tiger Woods, but small businesses still have plenty piquing their interest. There's a lot to take advantage of when it comes to the golf industry.

For instance, have you ever thought of how the greens stay so green? Or who actually makes those trophies? What about golf clubs? Credit small business.

To be fair, the roughly $80 billion-a-year industry -- at least in 2005, the most recent year for which figures were available -- suffered through the recession. Consumers had less disposable income to spend on play and equipment, which meant manufacturers, retailers and golf course owners and operators took a beating.

The industry seems to be in a turnaround. Some retailers say they are experiencing more foot traffic and increased sales.

For Ronnie Musselwhite, editor-in-chief of Golf Business magazine, the trend still clouding the industry is how to attract and retain more -- and younger -- players.

"Whether it's building shorter courses, offering nontraditional rounds of three, six or nine holes, taking golf to kids in schools, supporting efforts like Flogton, or just promoting the fact that the game can and should be about having fun, owners and operators are slowly coming to realize that the game needs to evolve," Musselwhite says.

He believes the industry needs to cater to broader demographics rather than "spending all of its efforts and resources trying to squeeze more out of the same ones they always have," he says.

Here are three golf-focused businesses doing well already and poised to grow with the sport:

Adams Golf
Specialized golf club maker Adams Golf ( ADGF) has made a name for itself in sales. While the company traditionally made fairway woods, it was small and unknown next to brand names such as Callaway ( ELY) and Titleist.

The company put emphasis on research and development to offer the most innovative products.

"Even in the worst of times we still invested in research and development. There were several periods in this company where you could have easily not done that research to save money," says Scott Blevins, vice president of sales and marketing. "We go up against billion-dollar companies. The way that we can compete is making innovative products."

Another competitive edge for Adams Golf: the ability to react to market changes faster than large competitors.

"When you're smaller, obviously you can ramp up quicker," Blevins says. "If the market changes, larger companies have got a tough time turning that ship around. We're smaller and more nimble. We can get to market quicker. That is a huge advantage."

Blevins notes that several years ago when the golf industry turned to making hybrid irons (essentially a cross between an iron and a wood club), Adams Golf was the first to integrate the clubs within sales of full sets.

"Now everyone in the industry has a hybrid iron set," he says. "We were the first to market. We saw a need for it."

That helped Adams create its niche and separate itself from the pack.

"We sat there asking how to sell a set of irons against bigger brands. When you have 'me-too' products, those are easy for distributors to say no to. At the time no one had heard of Adams Golf," Blevins says. "We did not have any trouble getting this into our distribution channels. It filled a niche and there was no competition."

Adams has the No. 1 hybrid played on pro tours, Blevins says. "That was a very strategic thing for us because there's other categories out there on tour that are tougher to play poker against the big boys," such as drivers, he says.

The company acknowledges recession troubles, but with a turnaround seemingly in place Adams Golf is pressing on with multiple growth initiatives, including a January launch of a redesigned fairway wood that presents a "huge growth opportunity," Blevins says.

The company is seeking international expansion as well as greater market share in so-called green grass facilities -- the pro shops at golf courses. The company already has an in with its hybrid irons, he says.

Pro shops "are typically the toughest ones to get into. They're generally only going to carry very key products from very key brands" because of limited space, Blevins says.

Lesson learned: Find what your market is missing and establish a niche.

Malcolm DeMille
Jeweler and sculptor Malcolm DeMille started selling to the golf industry on a whim more than 20 years ago. Today, the California business is a premier trophy, award, money clip and accessory manufacturer and provider for the Professional Golfer's Association of America, as well as the National Football League and such large corporations as John Deere ( DEE) and Jaguar.

After being introduced to local country clubs seeking business, DeMille started to attend PGA Tour association meetings once a year. By attending, "we made contacts and over time we slowly began to build a business," DeMille says.

DeMille makes trophies for some of the top pro tournaments, but the glamorous pro-tournament winner trophies don't pay the bills. "We get paid decently, but we would not be able to make a living based off of that," he says.

Instead, the bulk of revenue is in golf's amateurs, in the pro-am tournaments taking place in the days leading up to a major tournament that allow amateurs to play with professionals for a price.

"For each one of those days they need favors," sometimes as many as 100 and typically with the sponsor's logo, he says. "The real money is for us is in the pro-am prizes, awards and gifts."

He acknowledges that while the industry is lucrative, he hasn't chased after business as much as he should, partially because of staff constraints. DeMille has roughly 16 employees.

"The biggest thing is really responding and telling them the truth and being very frank and candid about what you can do and what you can't do. "People are willing to pay us a good amount of money as long as it's on time. If it's late, it's almost worthless."

And never overpromise. It will go a long way for customers to build trust in your company. "I sometimes get myself in a pickle. We get it done, but sometimes it's not very fun," he says.

Lesson learned: Build slowly and carefully, protecting your reputation by delivering on time and never overpromising to customers.

Bio-S.I. Technology
Wayne Tucker, CEO of Bio-S.I. Technology, an organic lawn product and care business that markets to golf courses, baseball and football field operators, says golf courses are particularly under scrutiny for their fertilizer usage, and regulations are becoming a lot more strict, Tucker says.

Bio-S.I.'s Turf Formula improves the availability of nutrients in soil to make fertilizer work more efficiently so less can be used, meaning less ends up washing out in the water supply, Tucker says.

"We were able to play a key role in a lot of golf courses in areas where regulations were so tight, they couldn't keep their golf course healthy without using the right amount of fertilizers," he says.

Tucker's company didn't always sell to golf courses. The 6-year-old company started in agriculture, but "we were hearing a lot of noise from golf industry" on how to figure out more environmentally safe ways to treat greens, he says.

Now roughly 20% of his revenue comes from golf courses. He is looking to increase that, expanding to a number of states and in Korea, Tucker says.

Tucker says a key lesson learned is to be persistent with his message and not to give up even if the person says no the first time.

"We continue to inform them about what's going on and help them understand how our product helps them," he says. "That's when you really start selling your products -- when someone says 'No.'"

Lessons learned: Listen for an opening, then be persistent in growing the business.

-- Written by Laurie Kulikowski in New York.

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