An association CEO mentioned recently that his Board had asked him what they were paying on a per-member basis to deliver services to their membership. He told them he would get back to them with the answer. In the meantime, having never done such an analysis before, he reached out for advice. It got me thinking: he is probably among the majority when it comes to not knowing precisely the true cost of delivering services to one’s members.
Although my years on staff at a number of associations never included C-level responsibilities, I do have considerable experience as a small business owner. And what I consider a universal truth is this: it is not possible to effectively run any business (including an association) without knowing the numbers inside-out.
Now, what you do with that information is another matter altogether. In a traditional for-profit business, the price of goods or services you provide to your customers is based on some form of “cost plus” formula that ensures a reasonable profit margin. In the case of associations, it is very common (more likely the norm) for the total cost of the services delivered to one’s members to exceed the dues charged. This is why non-dues revenue is so critical.
Frankly, the amount of deficit (i.e., the cost to serve a member vs. the dues paid) an organization is willing to accept is one only they can determine. But it all starts with knowing the numbers (and as you go through the process of calculating your costs, in addition to all the obvious, quantifiable benefits you deliver to your members, be sure to look for all the less obvious things like the cost of acquiring and retaining members – things that are often overlooked).