There are probably relatively few people left in the Detroit area who haven’t been invited to a charity or corporate event, grabbed their kids for some fun or decided to take friends to Auburn Hills’ Top Golf location. But what was once applauded as a revolutionary merging of golf, entertainment and technological innovation has become one of the most expensive corporate missteps in recent memory. 

TopGolf, once heralded as an innovative and successful company for the present and future, has taken a significant fall, culminating in a $1.45 billion non-cash impairment charge and a dramatic split from its former partner, Callaway Golf.  And there are a bevy of lessons learned from a faulty outlook on acquisition strategy and market saturation to grossly misjudging consumer behavior.

The Acquisition That Went Wrong

When Callaway Golf acquired TopGolf in 2021 for $2.6 billion, it seemed like a brilliant merging of a growing entertainment mecca and the biggest name in golf. The deal initially promised to transform the traditional golf equipment manufacturer into a modern entertainment powerhouse. However, the marriage between the two quickly succumbed to financial pressures as the share price plummeted to the $7–$8 range by 2024. 

The financial hemorrhaging became hard to hide when TopGolf Callaway reported devastating losses caused by a 4.5 percent drop in sales from Q1 of 2024, while quarterly profits plummeted nearly 68%. 

What Happened? 

TopGolf’s struggles stemmed from a myriad of operational missteps and market miscalculations. The company’s primary challenge has been a significant drop in corporate events being held at the venues, which has significantly impacted revenue. CEO Chip Brewer admitted publicly that the decline in sales was directly attributed to a noticeable decrease in its customer base. 

Another factor affecting the company was the rapid growth of new TopGolf venues, contributing to the old bugaboo for a company flying above its own airspace, getting too big too fast. The company’s “eatertainment” concept also began to be perceived as relatively expensive as mid-income consumers became more financially stretched.

The Invasion of the Golf Simulators

While TopGolf was trying to regain its economic footing, it was hit by an influx of indoor golf simulator market competitors, which have exploded, offering smaller and more affordable options that provide golfers with a similar experience at a lower cost.  Golf simulators can be installed in existing bars, cigar lounges, restaurants, and entertainment centers at a fraction of the cost, which could significantly impact TopGolf’s experiential golf market share. 

Calloway had Seen Enough 

By September 2024, Callaway was ready to head to the exits. The company announced plans to separate TopGolf into an independent entity, with the separation expected to be completed by the second half of 2025. This decision followed a 8.2% drop in TopGolf’s sales in the last quarter, with conditions deteriorating in July.

The split also burdened Calloway with an estimated incremental $15 million in operating expenses for standalone public company costs, further pressuring its already troubled business.

What Can Businesses Learn from This? 

TopGolf’s failure offers several critical lessons for today’s small, medium and large-scale businesses. 

Overpaying for Growth: Callaway’s $2.6 billion acquisition price now looks dramatically overvalued. Companies need to resist the temptation to pay for what in hindsight, turned out to be a trendy concept without thorough long-term market analysis.

Market Saturation Risks: Rapid expansion can actually hurt existing locations. TopGolf’s aggressive growth strategy created internal competition between venues, ultimately hurting its overall profitability. In 2015, TopGolf had 28 locations. Today, they own more than 80 locations globally. With a startup cost of between $18 and $24 million, depending on location, the rapid growth turned out to be a big stress on company operations. 

Post-COVID Reality Check: The business model that thrived when people emerged from the pandemic failed to adapt to changing consumer behavior and economic pressures. Companies must build flexibility into their operations to adapt to changing market conditions and consumer preferences. 

A Dependency on Corporate Events: Over-reliance on corporate customers created a vulnerability when business entertainment budgets tightened, not unlike the drop in reservations for other sports venue suites. Many companies looking to host events found that client and potential client policies had changed in what they could and could not accept. But the bottom line was that TopGolf was too dependent on corporations and failed to diversify its revenue streams. 

Value Proposition Misalignment: As economic conditions changed, and people found they had less money for entertainment, TopGolf’s pricing became disconnected from what its target market could actually afford.  With bay rentals and food, the average TopGolf experience costs $35 per person.  

What’s Next for TopGolf? 

As TopGolf prepares for its independence, they are facing a monumental challenge of reinventing itself in a more competitive and cost-conscious market. The split from Callaway, while necessary, removes the financial cushion that might have funded a comprehensive turnaround strategy.

TopGolf’s story serves as a cautionary tale about the dangers of acquiring growth-stage businesses at peak valuations and the importance of maintaining operational discipline during expansion. For investors and business leaders, it underscores that even innovative concepts can fail when execution doesn’t match market realities.