Financial Resources: Strength Through Diversity

Virgil R. Carter

Non-profit organizations need financial resources in order to achieve their mission. Non-profit finances are really simple-no money, no mission--it's that simple! For success, of course, non-profit organizations also need other essential resources--human resources and value-added knowledge resources, for example, which pertain to the field, discipline or industry of the non-profit. Non-profit organizations don't exist to make money, but successful financial operations are essential for non-profits to remain viable and successfully pursue their mission over time.

For many individual member and trade associations, annual revenue streams may result from one or two major sources--dues and non-dues revenues. Dues revenues come from new members who join and existing members who re-new their membership annually. Non-dues revenues may come from members and from non-member customers and supporters. Non-dues revenues are important for at least two reasons: 1) they enable financial diversity for associations, and 2) they provide additional resources for associations to address their mission in ways beyond that which is possible when revenues are solely from membership dues. Financial strength for non-profit organizations is obtained when there are diverse, dependable revenue sources.

There's an old association rule of thumb that says that associations whose dues revenues comprise more than 50% of their total revenue stream may be "cash poor" and may not have sufficient resources to address many of the needs of their members, customers and other constituencies. Organizations whose majority revenues are derived from member dues may live a "hand-to-mouth" annual existence, since new member recruitment and existing member renewal are frequently processes beyond the direct control of the organization. Who hasn't struggled to increase membership through increased recruitment and/or improved retention?

This "hand-to-mouth" financial condition is often typical of non-profit organizations whose annual revenues are under $1 million USD. On the other hand, non-profit organizations whose annual revenues are over $10 million USD may have annual revenues where membership dues may be in the 25%-30% range of total revenues. Many non-profit organizations find themselves somewhere in between these two examples, challenged to increase both dues revenues and non-dues revenues, striving for some reasonable financial balance between dependable dues and non-dues revenues.

Where do non-dues revenues come from? Sources of non-dues revenues may be from members, non-members and sponsors/advertisers who purchase goods and services from the non-profit, such as event registrations, product sales and fees for services and business opportunities, event sponsorships and the like. For many associations, non-dues revenues are developed from "traditional" meetings and conventions, trade shows, educational programming and advertising/publication sales. Other associations have found non-dues revenue opportunities in "innovative" global partnerships and programming, standards development, certification and credentialing programs and professional development/continuing professional education activities, etc. Grants, intellectual property and licensing also offer non-dues revenue opportunities for associations in the "knowledge-development" arena. The range of opportunity for non-dues revenues may be limited only by one's imagination.

Control over finances is the number one skill needed in association work, according to Critical Competencies of Association Executives, commissioned by ASAE and conducted by Lawrence Leiter & Company. Uncertain and challenging economic times are strong incentives for prudent non-profit organizations to seek to accomplish their mission through diversified revenue-producing activities, supplementing membership dues revenues with new and/or expanded non-dues revenues. Financial diversity is strength, especially when it comes to non-profit organizations. Does your organization have the strength of financial diversity?