Wednesday, January 15, 2014

The Key to Taking Risk in 2014 is Non-Dues Revenue

It is amazing to me how many association professionals believe that because you are a non-profit, that means you can't think like a "capitalized for profit" business when it comes to managing and developing new programs and services.  There is a lack of innovation, seeking out member's business needs, and listening for those things that could be huge drivers to member engagement, expanded revenues, and rising net worth.

After the 2009 economic bust, every non-profit should be doing everything it can to enhance revenue streams to build its reserve funds.  You never know when such a decline may happen again, and the last thing any association wants to have happen is to be forced to deliver less value and cut programs, because they didn't have enough money in the bank to thrive.

  1. Having significant reserves in the bank allows the board of directors and the association, to take on more risk when it comes to new program development, than members could take individually.  
  2. When you have significant reserves in the bank, your association can afford to create new programs without increased cost to the members.
  3. With significant reserves in the bank, your association can afford to NOT CUT costs during a downturn, just for the sake of cutting costs.  They can afford to keep member programs running full steam ahead, and the brand high.
You may be asking yourself, "Tom, what do you consider significant reserves?"  I'm glad you asked.  I believe that over one-full year's budget would be considered significant enough reserves. 

The next question you may be asking is, "Well Tom, how do we build up those significant reserves?"  That is another good question.

In order for associations to build healthy income streams, it take a diverse set of non-dues revenue streams that include meetings, services, training, and interest income.  Yes, I said interest income.  Think about it...if you have $1,000,000 in invested reserves, there are conservative investments in the marketplace that you could be earning $25,000 to $40,000 on your money, depending on your risk tolerance.  So don't rule out interest income as a revenue source.  

When looking at non-dues programs, there are three types to look at.  I personally believe that two of them should get very little of your time, and the third one should get all of your time.  It is critical that associations build value based benefits and programs, because the next generation doesn't have the emotional attachment to it that their grandfathers and fathers had.  The WWII and baby boomer generations birthed a lot of the associations.  Gen X grew up as kids in them, and have somewhat of an emotional attachment.  Gen Y is far removed from the birth, and with that emotional detachment, they are looking for value.  The following are the three types of benefits:

Program Type #1 - Those Your Members Can Get For Free Anywhere
Associations used to have a lock on those types of programs that generated information.  However, the growth of the internet and Google search have virtually taken away this golden handcuff for associations.  We are not the only place to get information now.  An Association's niche in this area has been changed from being a knowledge provider, to being a knowledge manager.  There is so much information available now, that members can "WASTE" a ton of valuable time wrapped up in it.  The value of an association is in being able to get the right information to your members...quickly.

Program #2 - Those You Are Going to Do Whether We Are Members or Not
These programs generally focus a lot in the area of advocacy.  With all their strong efforts in state capitols and Washington D.C, .almost every association has heard this comment after delivering to a prospective member, "Well you are doing that whether I'm a member or not, so I'm not interested right now."  With the distaste many have with the governmental process, for many associations, there is a huge risk making this the key value you bring to the table.  For some it works, for the majority, it does not.

Program #3 - Doing Things For Your Members More Effectively Than They Can Do Themselves
In my opinion, this third type of program or service is where associations should focus the vast majority of their time.  This type of program maximizes value because it fits a direct need or want of the member.  Yes, they could do the program on their own, but at great cost in time and financial resources.  

Some key programs and services that associations can always do better than their members are:

Networking Meetings:  A member could never bring the best minds together once or twice a year for the cost of dues and the meeting.  The time it takes to coordinate a meeting alone would take them totally away from serving their own customer.

Online Training:  This is like printing money.  Once your content is in place, members enroll, take courses, and money flows into the association bank account with little human interaction.  If you are not doing online training, you are missing an amazing program that saves your members a great deal of money on training, and drives revenue into the association.

Financial Benchmarking:  Being able to see how you compare to your competitors, sales trends, and cost ratios, help any association member to make really good business decisions.  Benchmarking takes an unclear future and makes it pretty clear, if done right.  Another benefit of benchmarking is if you get great participation, there are companies who will purchase the compiled results from the association.  Again, members could never do this alone because other members would never submit their financial numbers to a competitor, but they would submit them to a third party research firm that the association has partnered with.

Leadership Training:   When it comes to leadership training, large companies can afford to bring in a high-caliber company.  The average association member, which represents about 90% of memberships, cannot.  They have to be satisfied with little, to no training at all.  Our association has proven that if you choose a top notch leadership training company, who trains Fortune 500 companies, and bring them aboard, then you can provide the same high-caliber training to every member for a fraction of the costs.  The benefit here is, you engage the next generation of leaders, and you have a year in the program to motive and inspire them as to why the association is so important to them.

The key behind discovering the programs and services that will maximize your member engagement and per member revenue reside in two things:
  1. Having a great understanding of how your member operates, and what their pain points in business are.
  2. Choosing to develop programs in areas that the association can do more effectively than the member can individually.
Our association developed this mantra in 2005, and since 2006, our per member revenue has increased 33%.  The increase in annual services income has played a large role in our association going from having 1 month of reserves in the bank in 2006, to now having 15 months of reserves in the bank today.

So what is your next step:  Take a team of members and staff, and analyze every aspect of your member's business, operations, and financials.  Look for the areas that cause your members the most heartache in the daily grind of doing business, and solve those pains with programs from your association.

A key element to program development is, who should you use as partners.  We only partner with the best in any area.  I've placed the companies and contact information for our partners for your reference. I have also included a couple of companies I know who are excellent in their area.  For meetings, I've noted a few incredible speakers because they brought great value to our meeting experience which led to higher attendance.

Financial Benchmarking
Ilumen: - Michael O-Schannesey - 404-446-1600 x1607

Online Training Platform  www.mindflash - Jason McMurtry - 800-771-1900 x21-

Others in Online Learning
Peach New Media: - Dave Will - 770-805-6292 -
Digitec Interactive: - Amy Bassett - 407-299-1800 -

Leadership Training Program
The Corps Group: - Kyle Howlin - 678-464-7037

Key Speakers Who Will Bring Value to Your Conference
Kenn Kington: -
Kenneth Gronboch: -
Janine Driver: -
Dan Thurmon:

Association News & Conference Video
Association Studios: - Jim Wacksman - 850-556-9669 -

Website and Graphics Design
Design Extensions: - Jay Owen - 877-378-6101

So there you have it, the choice is yours in 2014.  Don't let dues drive your value!  Seek out the areas that are the most painful to your member's daily operations and needs, and plug in programs that will maximize engagement and revenues.  Remember...."You will only achieve, what you can conceive."