Looking for Revenue in Plain Sight
Balancing a mission-driven board while ensuring financial sustainability for the association can be a challenge during the best of economic times. But add in a pandemic and ever-increasing inflation, and it can seem like an insurmountable uphill climb.
While many associations were created with a mission in mind, it’s not enough for leaders to just focus on achieving that mission—they must ensure the organization is sustainable too. The challenge then becomes how to incorporate a business approach to the operation of a mission-focused organization and create an intentional culture around revenue generation, pricing, and program accountability.
Mission Driven While Fiscally Focused
For our mission-driven volunteer boards and leaders, the focus on finances can feel uncomfortable. Financial success or sustainability typically isn’t what engages them to volunteer. Volunteer leaders bring the passion and expertise to drive an association’s mission forward but are not necessarily looking at the operation of the organization with an external, market-driven lens.
But, for associations to achieve their missions and accomplish strategic plan goals, they must build a fiscally sustainable operation—no mission, no margin. That means that those of us who manage associations must help our boards consider how to meet member needs in support of the mission while also being intentional about revenue.
A healthy association has several sources of revenue that support the net income: often membership dues and an annual meeting. During the pandemic, which caused the cancellation of many annual meetings, organizations that relied heavily on those meetings for revenue were at risk. Some had reserves, others had enough time to pivot to a virtual offering, and some, sadly, did not survive.
According to a report on pandemic shortfalls by CEO Update, from June 30, 2020, through June 30, 2021, more than $2.6 million was lost from among 1,600 national groups they reviewed. “Seventy eight percent experienced revenue declines. More than half of them reported revenue losses of 10% or more,” CEO Update reports. It is fair to say that many came out of 2020 actively seeking new or expanded sources of revenue.
Renovate or Innovate?
I am an artist at heart and creativity is one of my values. I love to innovate; you can ask my team.
But, when it comes to increasing association revenue, I am a big fan of “renovation.”
Identifying, developing, and implementing new programs takes significant staff resources and doesn’t always pay off in the end. Sometimes new programs are launched without member data that could reveal interest in the product or program and inform pricing, creating a tremendous amount of risk. And sometimes, launching a new product or program is the right move.
However, I encourage associations to look first at renovating existing revenue streams. It is a faster way to increase revenue and less risk than launching a new product or program.
Identify Your Areas of Greatest Opportunity
The first step is to begin transparent discussions about your organization’s financial position with your treasurer, president, and board. Prioritize your areas of greatest opportunity, beginning with a review of your dues. Build dashboards for key program areas such as membership, annual meeting, and development to track progress against goals and create a culture of accountability. Assess relationships with long-time partners, vendors, and stakeholders.
Start by Asking these Questions
- When was the last time you raised dues? Does it make sense to move toward an annual dues increase, since it costs more each year to run the operation? Research shows that small annual dues increases are better for member retention than holding dues steady and making a large increase intermittently. Marketing General’s Annual Benchmark Report shows that “a dues increase of 5% or less will likely not constrict renewal rates. Dues increases at higher levels, especially of more than 10%, have produced lower renewal returns.”
- Are there segments of your membership that receive the same benefits and pay less? If so, how does that align with the strategic direction of your organization? Sometimes there are active life members who pay nothing and enjoy benefits while early career members receive no discount. With so many associations trying to engage new members, does this make sense for you?
- Do you only look at cost when setting prices instead of member value? If so, there may be an opportunity to increase pricing incrementally over time for high-value products/programs.
- Can you collect data to better understand the value of your products and programs? Is it time to fund a member research or a pricing study?
- Have your contracts been reviewed recently? Are they evergreen? Are there opportunities to reduce costs or bid the service to get more competitive pricing, which can increase the net income of a product or program.
- Do you have contracts that deliver royalties? Look at these as well. Perhaps there is an opportunity to increase the royalty or bid the contract out. You might discover that your product is more valuable than you realize.
- If you’re a 501(c)3, are you building a culture of philanthropy to increase revenue? Can you focus on increasing major donors? Are your members giving at an average level for association members?
Courage is Essential
What is not readily apparent is that all of this requires courage. Focusing first on “renovating” by making adjustments to existing products, programs, and pricing is an easier first step toward creating change than introducing a new program from scratch. Bringing forward new approaches during a period of disruption requires a high degree of trust, transparency, and fortitude—for your board and your staff.
Courage is essential for leaders who choose to lead organizational change. During these times of uncertainty and disruption, leaders must ensure the sustainability of their organizations and renovate for the future. And, by increasing your existing revenue streams, you’ll be building a stronger foundation for innovation.
Wendy-Jo Toyama, MBA CAE FASAE, is CEO of the American Academy of Hospice and Palliative Medicine (AAHPM), a client partner of AMC.
Be the first to know about the latest articles, news, and events from AMC. Sign up for our emails!