Nondues Revenue in Pandemic Times: The Power of Passive Revenue Streams
For associations with small staffs, generating revenue on top of other duties can feel overwhelming. One association discusses how it uses revenue share programs to cut down the work and bring in a steady flow of funding.
While creating new products and events are stalwarts of association revenue, it is also useful to have revenue streams that take less work to maintain. In this final piece in our nondues revenue series, I look at how associations can use revenue share and affinity programs to bolster their finances.
Alan DeYoung, executive director of the Wisconsin EMS Association, has a small staff—just three people—and members who don’t earn a lot and wouldn’t renew if the organization had regular dues increases. So, DeYoung spends his time thinking about ways to generate revenue that are easy for a small staff.
“I feel like Mr. Krabs from SpongeBob SquarePants sometimes,” DeYoung said. “I see money everywhere because we can’t charge very much for our membership dues. The majority of our revenue comes from nondues-related things.”
Because he’s got a small staff, DeYoung likes revenue share and affinity programs because once they’re in place, he doesn’t have to do anything else but watch the funds come in. Revenue share and affinity programs generally work like this: a company offers a product or service to your members at a discount, and when members purchase the product or service, the association gets a share of the purchase price.
David Frankil, CEO of Frankil Advisory Services, notes that for these types of programs to be effective for both the association and the sponsoring company, the benefit to the member has to be good.
“So, saving 1 percent on paper is interesting, but it’s not going to make me jump up and down, and say, ‘Oh my gosh, I see tremendous value in my association membership,’” Frankil said. “If you’re in the dental space and able to negotiate special pricing for software to manage a dental practice or in the financial sector and able to negotiate core processors for credit unions—something that goes to the core of what members do and how they do it—then that’s more tailored and more interesting.”
DeYoung agrees that finding the sweet spot of deals that are of interest to members is crucial. He says talking to members can give associations ideas for which companies to try.
“I ask our members: Who do you buy from, and what do you buy?” DeYoung said. “It’s a simple question, obviously, and you can get a thousand different answers. A lot of times, the easiest one to start out with is who do you buy from, because there is overlap between who they buy from.”
Due Diligence Required
Once DeYoung has talked to members and found companies that overlap, he does some background work to see if they’re a good fit and have a record of serving customers well.
Frankil agrees with this approach. “You have to go through a meaningful due diligence period with your perspective partners,” he said.
Once DeYoung is satisfied a business is a good fit, he’ll reach out to them. “I try to negotiate as much as possible, and ask, ‘How much of a revenue share are you willing to give us?’” DeYoung said. “That normally depends on what they’re selling. A software company might be able to give you 10 percent, but a commodity company might only be able to give you 3 to 5 percent as a revenue share.”
This revenue approach also works well because it helps your members, who are likely busy.
“They don’t have time to go looking around for vendors, looking around for discounted pricing, even just vetting out vendors,” DeYoung said. “Through this whole process of getting some type of referral rebate agreement, you’re doing some vetting in that process: Is this something our members want? Does this company have enough resources to serve our members? You’re doing all that leg work through this process.”
Finding a product that helps members do their jobs better is a win-win for everyone involved. “If you can help make one of your members successful, then you’ve got a member for life,” Frankil said.
Once a revenue share is in place, DeYoung is a happy camper because that means he can move on to other association business and wait for the revenue to come in.
“Some of these, we might see 500 bucks a year, but I really don’t have to do much but list them and [share] how to access them, and other ones bring in tens of thousands of dollars a year,” DeYoung said. “It just all kind of depends on what they’re buying.”
(AndreyPopov/iStock/Getty Images Plus)