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Revenue Management in an Economic Downturn

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					Economic Downturn—Use of Reserves—

   It’s Raining—Time to get out the Reserve Umbrella

As we head into an economic downturn and continue to face stiff
competition today with for-profit competitors and other associations
that are threatening to steal some or all of our marketplaces in a
variety of product and service areas, we need to examine the role of
our reserve line in these times.

 Many associations indicate that they simply don’t have the capital to
invest in competitive dues or nondues ventures to compete fairly in
the marketplace.

On the other hand, many associations have 30 - 100% and more of
their operating revenue held in reserve for rainy days. Even if
somewhat depleted by current market swings, these funds, usually
designated as funds to be held in reserve in case the association has
a significant downturn, are sitting in the association’s account, waiting
for serious downturns in the association’s fortunes to occur.

What some associations don’t realize is that in this economic
environment with competition so stiff, they do need to upgrade their
electronic and e-business systems to compete in a rapidly expanding
marketplace. They need to look at their reserve lines as an avenue to
use to gain “venture capital” to reinforce their own presence to protect
their content, product and service areas and let members know that
they are doing everything they can to help members in need.

The reserves of the association are there for the specific purpose of
helping an association in times like these. Given a worsening
economic environment, and continuing uncertainty, associations need
to review carefully their reserve policies and use them to retain and
attract vital personnel assets (not cut raises and benefits!), assist in
remaining competitive with their product lines, and to bolster
marketing and communications programs of vital need to the
members. Namely, in times like these, associations need this type of
reserve capital to fund rebuild or bolster the internal marketing and
communications infrastructure of the association so that it can remain
competitive both today and tomorrow.
This is not to say that a designated portion of reserves (say 50%)
should not be held in reserve for a rainy day. It is to say that
sometimes it is not only raining, but pouring and the association is
hesitant to use these “sacred funds.”

Associations that complain that they must downsize or freeze
funding, and who also have a healthy reserve line, but have not
tapped into that reserve to build their own infrastructures, are
neglecting one of their most important resources needed to maintain
current or build future structure and resources. The same holds true
for associations that have cut staff and services to the bone yet put
away more than 3-5% of their income year after year, and there are
many of those out there in associationland. Given the present
economic downturn and the severity of market, economic and job
losses, I can’t think of a more appropriate time to examine what we
might need to maintain and sustain services and use our reserve line
to assist in this effort.


Stephen C. Carey Ph.D., CAE, Lead Strategist
Association Management + Marketing Resources
5807 Grosvenor Lane, Suite 100 Bethesda, MD 20814-1835
phone: 301.530.9066 fax: 301.530.9076 web:
http://www.ammr.com

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posted:7/26/2011
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