McConnell Golf CEO John McConnell joined High Point University President Nido Qubein in the Power List interview, a partnership for discussions with influential leaders. The interview was edited for clarity.
John McConnell says the only college course he dropped while attending Virginia Tech University was computer programming. He went on to start, run and sell two medical software businesses that made him among the state’s most successful entrepreneurs. Now, he’s best known as the founder-CEO of McConnell Golf, the largest owner of private golf courses in the Southeast. Its 17 courses are in North Carolina, South Carolina, Tennessee and Virginia. The N.C. courses are in Asheville, Charlotte, Durham, Greenville, Greensboro, New London, Raleigh, Wilmington and Wilson. More than 7,500 families hold memberships.
Most people begin their success in life because they’ve done something great. But not you, you were fired. And that was the beginning of your success story, right?
That’s correct. I was not fired because I was not talented in my field of sales. I was fired because I really didn’t believe in the strategic vision our company was headed in. And I made a point of telling management that very explicitly and they decided I was no
longer needed.
From that point in time, I made a personal decision that I would never put the future of my career in the hands of anyone other
than myself.
So they told you, “Thank you very much. Now you can go home. Don’t come back tomorrow.” And you went home and you decided to do what?
To start my own company because I realized that the market that we had been working in, which was automation systems for physician offices, had a future. And that I knew some talented people that I’d worked with in the past, called them up and said, “Hey, I wanna form this company. Why don’t you come to work with us and become a shareholder?” And they did.
Then you founded anther software company?
We founded one and we actually acquired a second small company later in my career. Our first company focused on selling back-office systems to physicians. We became the largest company in the nation doing that.
At our second company, we focused on selling electronic medical records to physicians and hospitals. That was an area that I had been very keenly interested in for many years but the timing was never appropriate for doctors to eliminate their medical charts or their paper charts.
How does one go from software to owning golf courses, starting with Raleigh Country Club in 2003?
It’s not planned. I’ve always been enamored with golf. I started playing when I was about 13 or 14 years old. The thing I liked about the sport was you had no one else to blame. You hit the ball, you get the result of your talent and there’s no one else to blame.
I really enjoy that as an independent-type person.
I was the CEO of a company, A4 Systems, and the Raleigh Country Club membership had borrowed $6 million and they did not have the ability to pay it back. I was not a member, but I’d played the course. It was Donald Ross’ last design. I truly thought it was one of the best golf courses I’d ever played.
Long story short, a developer group that purchased the note from the bank was waiting on the club to default. They would end up with the property, and they had no interest in golf.
I came in and bought the golf course with the membership’s blessing. Three or four years later, I sold the software company and started focusing on golf acquisitions.
How does one manage a golf course?
You start with a lot of capital to own the brick and mortar and to make the investment. Most of the courses that I’ve acquired were not in great financial situations. The industry in general has been in a decline for many years. There was an oversupply of golf courses versus the number of players to support those courses.
Our courses have needed capital investment and more of a strategic vision. Our concept was we will have properties in a geographical footprint and if you join one course, then you have access and privileges at all of our properties. That’s one of our competitive advantages.
The other competitive advantage we offer versus a member-owned club is that we have no assessments. We make any capital improvements. Raleigh Country Club had about $6 million in renovations, and the members paid no additional money for that improvement. The members don’t own any stock in the country club. They gave up their equity whenever we purchased these properties.
Is it supply and demand, or is it leadership that causes golf clubs to succeed or fail?
About 5% of the clubs in this nation do extremely well and are on solid financial footing every year. Carolina Country Club in Raleigh is an example with a big waiting list, a big initiation fee to join.
I call those perfect environments, with high net-worth individuals surrounding these clubs and old established neighborhoods. Those tend to be the ones that can survive.
You bought these clubs one at a time and thought, “I can turn them around. I can make the return on investment here worthwhile.” What made you think so?
I realized when I bought Raleigh Country Club that you can never make any significant money owning just one club because of efficiency, scale, management and talent. One of the real advantages we offer when we acquire a club is we can reduce the back office cost. It’s the same thing I did in software.
The other thing I realized very quickly is the country club business was woefully backward in its automation. So we went out and bought a software company to not only automate our organization, but we also sold to other entities or other clubs. Automation has been a big key for us to reduce costs.
When you bought the first club in Raleigh, were you criticized by members, or did they see you as the savior?
I think I was viewed as a savior. However, one of my best friends gave me some great sage advice on the front end. “You know John, country clubs are the first people to know that the recession is coming. And they’re the last people to know the recession is over.”
It is a discretionary product that we offer, a membership. It’s not like software. We had them locked in for a number of years. Whereas in golf, I can drop a membership today. Our focus is making sure that they get value every day they step on the property.
How do banks look at financing the purchase of golf clubs?
Historically, they did financing because many of the members were good customers of that bank. In today’s world, banks hardly ever want to touch a golf course. Most of our competitors are private equity firms that have started to recognize the value of clubs and golf courses. They’re now providing the capital for most of these other businesses.
What is your view of risk management? How does John McConnell manage risks?
I’ve got two principles that have driven me in my career. My first sales job was with a large computer company, and the sales manager says, “You know John, people talk about security. Let me tell you what security is. Security is being a good sales guy, because you can get a job tomorrow.”
The funny thing is that when I got fired, within 48 hours, I had two job offers. He was right. I could always provide for my family.
I view risk management as, “What is the worst thing that can happen to this company?” That’s how I manage risk. Can I deal with it? How can I plan around that?
What is your long-term outlook for your company?
The advantage or disadvantage that I have is that we are a family-owned business. The other two companies that I founded and acquired had outside investors. So I felt like I had a sincere responsibility to make sure that we built those companies and maximized shareholder value,
Whereas in this company, I’ve taken a much longer-term vision. I’m really not worried as much about how much money we make, but what is the value we’re building for the future.
Hopefully this will be a second-, third-, fourth-generation business if I can do things successfully.
What are the one or two most common complaints that members at golf clubs send your way or send your management’s way?
The rough is too high because one of the things at McConnell Golf is we challenge our players. We want championship courses on a daily basis. Oftentimes, members don’t appreciate that. They want zero rough.
The other most common denominator is food quality.
The North Carolina Entrepreneurial Hall of Fame inducted you as a distinguished member. Do you remember that night?
I remember that night very vividly. When I moved to North Carolina, there was no venture capital. Our first company that we established, we went down and got a bank loan for $25,000. My partner and I, along with our wives, went down and signed over the deed of trust for our homes to guarantee that $25,000 loan.
In today’s world, a kid can come out of MBA school with a business plan, and if it looks good on paper, might get a $10 million valuation.
I was at the beginning of where entrepreneurs were recognized as being leaders in business. Because when I came out of college, you worked for a big company, that was your career path.
How does it feel to have a PGA tournament played at your Sedgefield course in Greensboro?
It’s kinda like a kid in the candy shop. You see all these big-time athletes and stars on TV and you’re rubbing elbows with them. You know a lot of personal things about them after you get to know these players. There are maybe 45 PGA events each year, and we host one. That’s a unique position to have as a golf entity.
I really sense how good we are when I go to the back of the building, and we’ve got 12 corporate chefs that come together for this event, and they’re preparing food for the players, for the hospitality events, and they’re working as teams and I’m going, “I cannot believe we do this.”
As a company, it gives all of us a sense of pride. As an owner, I feel like I’m privileged to have been part of this. Thanks to the Sedgefield members for believing in McConnell Golf and turning over this historic property to our company.
When you visit a course, do you catch yourself looking around continually to see what has to be done? How can it be improved?
As a kid, I grew up on a farm. And every Sunday morning, my dad would get in his old pickup truck and go out and drive along the farm and just look and see what we’re going to do the next week.
And every time I’m on a golf course or in a club, I see things that need to be improved. I’ve got a notebook that I carry with me and I jot down items that we should look at, fix this, send it out to the management teams. I’m the secret shopper. ■
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