Magazine Article | April 1, 2002

Working The Club Scene

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VARs need to master POS, inventory, and accounting technologies to become dominant IT providers for membership-based organizations.

Business Solutions, April 2002

It's been said that if you want to succeed in business, you have to learn how to golf. That theory might not be completely true, but it couldn't be truer than in the case of Club Data Corporation. Almost all of its deals go down on the golf course, and that's right where the company usually stays to conduct business after a handshake at the 19th hole. Now, if you're a golfer, you're probably thinking, "This guy is writing about my dream job." Well, if you're a golfer and a VAR in the hospitality vertical, I probably am.

Membership-Based Organizations: A Lucrative POS Market
Country clubs and other membership-based clubs such as yacht, city, and alumni are the only clients Club Data pursues. Focusing on this niche has allowed the company to become a true, specialized total solution provider for its customers, managing their members' accounts from the customer interface at the POS (point of sale) to the account balancing and billing process. Considering the 20,000 country clubs operating in the United States, 17,000 health and fitness clubs, and 2,000 universities and colleges, you can begin to see the opportunity that exists with membership-based organizations. While Club Data services a variety of clubs (the 10,000-plus member Notre Dame Alumni Club is one of its larger clients), its focus is on country clubs.

The first transition that Larry Jensen made toward becoming a niche market VAR occurred in 1969. As an accountant at Interlachen Country Club in Minnesota, Jensen worked on an IBM System 3 mainframe computer the club installed for data processing, which was a novel concept in country club management back then. Jensen created a software program for the computer that managed billing for the multifaceted membership accounts common to country clubs. Other clubs heard about it and asked him if they could outsource their member account management duties to him. The roots of his business took hold when Jensen became a one-man service bureau, handling membership billing for several Minnesota country clubs from his office at Interlachen. But when PCs hit the club scene in the mid 1970s and his clients became comfortable with them, he found that they wanted to use his software to manage their own accounting in-house. This presented Jensen with transition number two, the one that sealed his destiny as a VAR.

Choose The Right People For The Job
Jensen honed his club accounting software for the PC and began to concentrate on software license sales, service, and support. He broke his business ties with Interlachen and formally created Club Data Corporation, of which he became president and CEO.

In the mid 1980s, Jensen hired John Mayerhofer to the position of technical director. Mayerhofer brought with him the DOS programming experience that led to Club Data's expansion into pro shop and restaurant POS and inventory management solutions, which the VAR excelled at interfacing with the company's club accounting software. The move opened the door for Club Data to become a reseller of Touch Industries' Touch and Sell, the touch screen-specific POS and inventory control software product that preceded the InfoTouch product it sells today. In 1993, Dave Haberle, a 25-year PGA member and a closet software programmer, was hired to lead the software's migration to Windows.

POS + Accounting = Deep Data
Integrating a club's accounting program with its pro shop and restaurant POS systems streamlines billing and account management. Jensen explains it like this: Mr. Mulligan pays $100 to enter a tournament on a Saturday morning, so his course account is debited. He places third and wins a $300 gift certificate to the pro shop, and his pro shop account is credited. He and Mrs. Mulligan, along with four other couples, have dinner that night in the clubhouse. The bill is $500. Mulligan's clubhouse account is debited. All of these separate transactions, taking place in separate accounts, must be integrated in order to track this member's accounts from the course, to the pro shop, to the clubhouse, to the bill that appears in his mailbox.

"The issues related to managing multiple accounts for each member are what set us apart from a typical retail or hospitality POS VAR. We have to accommodate those kinds of balance and accounting issues on the retail and hospitality side, and also the membership dues and fees side. It requires customization," Jensen asserts. "We offer a thousand different categorizations for each member's account, allowing us to simultaneously track balances like dues, locker fees, initiation fees, pro shop accounts, food and beverage minimums, tournament fees, and prize winnings, plus fees for clubs within the club, like the nine-hole club or the Bridge-O-Rama. In theory, we could automatically bill a thousand different items, at a different time in the month, at different rates." But Jensen warns that it's not as cut and dried as it might sound. "There are any number of issues and complications that come into play when managing multiple balances. Maybe a member is on an installment program to buy his $20,000 initiation fee. Maybe he's paying for it over five years with stock options. It can get complicated, and you have to have the programming expertise to address those circumstances."

Make The Green Through Service, Not Sales
With such an intricate software program to support, who has time for a sales effort? Not Club Data. That's why it's giving away software for free. Beginning with an ad the company took out in the newly launched Club Executive Magazine in February, it has been giving away its Club Accounting software and charging only for interfacing it to the POS, training, and monthly maintenance. The maintenance contract creates an annuity-based revenue stream, which is supplemented by the company's optional Protection Plus program for hardware. "Our hardware support contract is a crapshoot," Jensen admits. "If they have a problem with any of their hardware, from monitors to receipt printers, they send it back to us and we send them a new one."

In other words, if a potential customer asks Jensen what his gross revenue is on a club accounting software installation, he tells them that it's potentially zero. But if a prospect wants the whole shot - the Club Accounting software; pro shop and restaurant POS hardware and software; installation, integration, training, and support - it could be a multi-thousand dollar deal. Anticipating a positive reaction to his new sales approach, Jensen has vowed to take on no more than 10 new customers a month. He plans to expand that number by staffing up gradually as demand rises.

The no-cost-for-software sales approach should work well with Jensen's decision makers. To sell a complete solution, he must get his foot in the door with the general manager or controller and the golf pro who runs the pro shop. Once he's in, Jensen wastes no time getting to his demonstration, which he says is worth a thousand cold calls. "Cold calling is something we've never done and we'll never do. Our customers either heard about us from someone else, met us at a trade show, or answered an ad in a trade publication like Club Management Magazine," he says. And while he's seen the sales cycle range from a couple of days to a couple of years, he says the average cycle is about six months. The shortest cycles often follow trade show appearances, making them an integral part of the company's marketing plan.

Gaining A Commitment Is All In The Approach
For all the accounting and integration complexities on the back end, Jensen insists that the InfoTouch software interface is easy for a clerk to master. The hard part, he says, is convincing the pro shop to commit. More often than not, the pro shop is run by the club's golf pro. "Some of these people are more interested in other things, like taking two shots off their handicap," Jensen says. While yesterday's hurdle was the "old boys" mentality, where his clients were used to doing business out of a cigar box, today's hurdle is the young apprentices and junior golf pros who work in the pro shop. Jensen concedes that they have more computer experience than their predecessors, but he says many of them aren't committed to managing a business. He also continually combats turnover. In the golf industry, apprentice golf pros are constantly coming and going. But Club Data turns this around and capitalizes on turnover in its sales pitch. Knowing that they might not have the same clerk behind the counter of the pro shop for more than a season, and that the clerk isn't likely committed to the business, country clubs are sold on POS solutions with quick learning curves.

Profiting From Touch In Retail
Club Data charges $3,000 to interface its proprietary Club Accounting software with the club's choice of dining room POS software, and $1,500 to integrate its Club Accounting software with the InfoTouch software the company resells for pro shop applications. It doesn't use InfoTouch in the dining atmosphere, because while Jensen says he hasn't found a better software product on the market for managing inventory, it doesn't accommodate the exotic check splitting that Mr. Mulligan and his guests require while in their dinner jackets. All told, he estimates that 35% of his revenue comes from InfoTouch and related hardware sales.

Club Data's immediate task at hand is converting many of its clubs from DOS to Windows systems. Jensen estimates that 40% of Club Data's customers are still running DOS programs. The VAR charges a nominal fee for converting DOS files to a Windows format and also cashes in on the training end users require on the Windows system once the upgrade is complete.

Custom Software Integration Helps Establish Market Share
Club Data, Jensen contends, distinguishes itself from the other 20 or so players in the niche by giving the customer options for its restaurant POS system. Many of his competitors, he says, use proprietary accounting and POS software, a decision that Jensen feels limits the customer's choices. "We've never had to turn away a potential customer because we couldn't interface with their dining POS software," Jensen says. But that's not to say that the interfaces have been easy to create. "Each time, there's a different twist or wrinkle that comes down the line that you have to deal with. It's never as easy as just replicating some code." This, he says, is because of all the customization now offered by Micros, Squirrel, and other leading hospitality POS software vendors. "The ability to tailor the structure of a sales transaction for our customers means the data we capture gets altered a little bit, so we have to be ready to tweak things on a case-by-case basis," he says.

The double-edged sword for Jensen is his conservative nature. The big players in his market are large, well-financed companies. He, on the other hand, refuses to operate in debt to anyone and continues to approach new business with caution. However, his advice to a start-up VAR in this niche market is fitting for the economic climate of the day. "You'd want to be well financed. You'd want capital backup," he says. "When times are tough, you need to have the stability to ride out the low points." Reflecting on the past, he admits that had he taken a gamble or two in the beginning, he might have fueled his growth a little faster. But for now, staying true to his nature, Jensen says that his company will stay conservative and put on one knicker - er - pant leg, at a time.

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