Written by Bill Pawlucy, CAE and Bob Harris, CAE
These are the words of association executives panicked by the pandemic’s financial havoc.
“Our conference is canceled, accounting for a 50 percent loss of revenue; what do we do now?”
“We may lose 25 percent of our members and that will put our finances in the red for 2020 and beyond!”
“We won’t make it through this.”
Hopefully your association’s 2020 budget will hold tight and your value proposition is strong enough to survive. If not, convene your finance committee to assess the damage:
Start with the general principle of budgeting income. The proportion of revenue is usually 40 percent dues 40 percent meetings, and 20 percent other. Of course, every association is unique.
“Other” revenue are the innovative programs and services such as product sales, sponsorships, certification, data management, advertising, royalties, rent and interest.
The conclusion of this article offers a dozen ideas to generate non-dues revenue.
Regarding the principle of ratios, one expects a balance of about 50 percent dues income and 50 percent from other sources. The rationale is that if you lost a major revenue source, for example the annual conference, you would have sustainability through other sources.
Another ratio is that of percentage of savings compared to income. Most associations maintain an amount equal to half their budget set aside as assets to be drawn upon as needed. For example, a budget of $1 million would warrant savings of a half million. The rationale being that an organization could survive and pay its bills for at least six months in a period of uncertainty.
If you don’t have at least half of your budget in reserves, it is important to have enough reserves to cover your largest revenue source loss (i.e. if your conference is bringing in 40 percent of a million-dollar budget, the association should have at least $400,000 in reserves).
Many organizations reference reserves as their “rainy day fund.” Do not look at reserve funds as, “we can’t touch that.”
Funds may need to be tapped for survival. Assets may need to be liquefied to access cash. Reserves exist to be used to maintain relevance and serve members. Be good stewards.
Resetting the Budget
A budget is a guide. There are times when adjustments should be made, especially impacts by external threats and opportunities. Now is the time to analyze and make prudent decisions.
The finance committee, officers and executive should assess the impact of current conditions. Discuss and project each income line item. Remain positive, there may be new opportunities to serve members that generates new income and enhances the membership experience.
What to Analyze
Dues – Expect hardships to be expressed by members. Some may not be able to pay their dues. You don’t want the coronavirus to dismantle years of building a successful membership.
The customer-member relationship is invaluable. Flexibility and adjustments may need to be made. Consider extending current members by a period of months. Waive dues for members who simply cannot renew now. Allow for making smaller payments.
Position 2020 – 2021 programs as indispensable to member success. Clearly express ROI and communicate value.
In the Danger Report commissioned by the National Association of REALTORS®, they suggest that the loss of a primary income source will threaten associations reliant too much on a single program. The counsel is to diversify beyond dues by creating valued programs for members.
Sponsors and Advertisers – The association partners with corporate or affiliate members. These companies provide sponsorships, advertisements and scholarships in order to build their brands and sell services or products.
Corporations are cutting back all but essential costs. Position the association as a partner in their recovery. Understand and respond to their needs.
For example, a summer golf sponsorship they bought may no longer have worth. Transition their sponsorships into what adds value to them. Maybe instead of a lunch sponsor they may prefer a year of website banners or the back page of the magazine.
If they seek refunds, ask about issuing a credit or offering a better package for them, so you don’t lose the income. Move their contributions to programs later in the year.
Reforecast the advertising and sponsorships for 2020.
Create a new “sponsor opportunity menu” that improves value for 2020-2021. In an article published by Associations Now, How to Nurture Sponsor Relationships Amid Virus Cancellations, there is an important quote,
“One key lesson learned—for strategic planning, emergency planning—is for many years, most have put our sponsorship eggs in the conference basket…While this is an extreme instance, it’s really risky because of the presence of disease, weather, and other calamities. We have to ask what can we do differently in the future.”
Royalties – Endorsed programs generate royalties. If the membership doesn’t use the programs the revenue will decline.
Work with endorsed partners to help them make their programs stronger. Expect changes in royalty revenues, making practical adjustments to save programs and restart for better times.
Education – Many associations rely on the conference and expo for more than half their annual income. Ironically, some associations don’t purchase meeting cancellation insurance.
Conference cancellation policies may not cover a pandemic unless you have a rider on your policy. Check with your insurance company now to see if you are covered. In an article from Venable LLP, it states,
“Those seeking to recoup the costs of cancelling a convention or conference should look first to their event cancellation insurance policy, if they have one, as it is most likely to provide such coverage. However, many of these policies exclude coverage for uncommon and catastrophic events. For example, virtually all such policies have coverage exclusions for losses that are caused by acts of war, and some may also exclude terrorist attacks. Many event cancellation policies also exclude coverage for natural disasters and, most pertinent here, communicable diseases.”
If a conference cancels, repurpose it as a virtual event. Transform seminars to Zoom for an online audience. Consider a virtual awards banquet, find a way to offer virtual fun.
Another idea is to chunk the conference into smaller portions, offered over a period of six-months. This will deliver necessary education while maintaining a connection with members. Include topics on how members can rebuild, revamp and thrive.
Do what you can to save the face-to-face meetings. The hotel and travel partners have been generous to associations, this is the moment to help them.
Ask speakers and experts to provide varied forms of education. Build an on-line library of seminars and articles by experts on coping in uncertain times. Be the most credible source of education. Pent up demand for face to face meeting will drive strong 2021 conferences.
Information Packaging – Members need data more than ever. What are the market trends, where do opportunities exist?
Associations are great aggregators of information. Package the information you glean, let the experts add to it, format it and make it available to members at a discount and non-members at a premium. Be sure to protect your intellectual property.
We asked Heather Schafer, CAE and CEO of the National Volunteer Fire Council around her response strategy and this is what she said,
“The NVFC’s response strategy to the pandemic is to provide the tools and resources our members need so they can safely respond in their communities, take care of themselves and their families. The NVFC developed a dedicated COVID-19 resource page on our site with pertinent information. NVFC has expanded its Support Fund to provide $350 stipends to volunteer firefighters who have lost wages as a result of COVID-19. Volunteer firefighters may be temporarily off from work but they continue to work as volunteer firefighters, without pay, to respond to those in need in their community. This is a stressful time for many given the health concerns, financial uncertainties and disruption from daily activities. We held a free webinar on how to handle stress in these uncertain times. It was the highest attended webinar the NVFC has offered. We’ve opened up complimentary online training during this time while many might be at home and have time to hone their skills. The NVFC is also sending out weekly email updates every Friday to our membership in a concise format.”
The response strategy is critical and collecting real-time data from members and the business sector via surveys and virtual focus groups is important. Consider virtual town halls to answer questions and provide members with a chance to network with other members.
Identify what information can be gleaned and packaged. Reach out to related organizations such as a university to add credibility and crunch the data. Make it available through the association.
Generating New Revenues
The board, committees and staff should brainstorm ideas to generate new income. Review this list to identify want might be adapted for your membership. Be innovative and strategic in developing programs and services.
Certificate programs are less intense to manage than a certification program and it allows someone to complete several courses and earn a certificate without the need for continuing education.
Enhance the Value Proposition
Expectations and satisfaction of members will be shaped by what happened in 2020 and how the association responded. This is the chance to do business differently. Transform the budget to be less dependent on membership dues or an annual conference. Create programs that better engage members.
Touching members every day, in different ways, creates value and relevance. It positions the association as an indispensable partner.
We hope your budget will hold as the board adopted it for 2020. If not, adjust. If so, save these ideas four future consideration.
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