Matt Baehr posted a small piece to his blog asking, “What if Associations Were For-Profit entities? What would change in your organization? Would your organization change at all? … I would be willing to bet that associations that run themselves more like a for-profit are doing better than those that don’t.”
The for-profit vs. non-profit question comes up occasionally among association executives. In comments to Matt’s post, Peggy Hoffman mentions Bruce Butterfield’s incubations, which often get pointed to as an example of innovation in this particular area. While taking nothing away from Butterfield’s Forbes Group (with which I am not personally familiar), I think this may be further proof of insularity among association professionals. Because there are already tons — as in hundreds, if not thousands — of for-profit associations, which almost never get pointed toward in this discussion. They just don’t necessarily call themselves associations (though some do) and almost none of them are involved in “the association community.”
For example there are hundreds of subscription-based or “membership” websites, offering specialized services such as content, training (both online and off-), “networking”, directories, and other benefits to their members. They operate in a large number of specializations, both B2B and B2C. Anne Holland (no relation), the feisty and brilliant creator of MarketingSherpa, recently created a “Subscription Site Benchmarking Report“ offering a huge amount of data on these sorts of sites; I have a copy and will be posting a longer review here as soon as I have a chance to wade through all the numbers, since this data has great value to associations that operate in competitive environments (which is, I think, all of us).
According to Anne’s data, some of these for-profit sites are hugely profitable (as in seven-figure profits), many are six-figure profitable, and a large number are making just a little money. Since they tend to be very small operations, with low overhead, they don’t really need to make a lot of money. But the most successful ones move far beyond pure Internet play; they offer face-to-face events, magazines, trade shows … Sound familiar?
Subscription sites are not the only for-profit associations that are already out there. Many industries have, for lack of a better term, for-profit “best practice” groups that charge high annual fees in exchange for in-depth operational materials, coaching, in-person training, magazines and newsletters, conferences, online discussions and networking, etc. There are several of these in the broader construction industry in which I operate.
In providing services for an industry or profession, there are any number of approaches an organization (or an entrepreneur) can take. But let’s not lose sight of the value that a non-profit association model still has. Associations with a non-profit mission have, by necessity, a broader view of the sector they are serving. Because of its mission, associations can get involved in things — like advocacy, standards development, long-term sector-building — that have, really, no business model. (Anne and I discussed the differences between associations and for-profit membership sites in an interview she posted on her blog.)
Yes, sometimes taking this broad view means some associations take too long to make a decision, and clinging to the concept of consensus can sometimes cause associations to grind to a halt or water down their policy positions. But I think operational challenges like that can be addressed, if they are recognized and dealt with structurally.
In fact, the whole reason for an association to “think” like a for-profit and create high-margin products and services (like those I discussed in my last post), is to generate cash to help support the mission activities that an association undertakes but which aren’t easily “charged” for. The money doesn’t go to shareholders, it goes to the organization, which can then use it to (hopefully) “think (and act) big” in terms of the sector it serves.
Now, if your association doesn’t actually do any “mission” activities — if all you offer are things like training, content, magazines, tradeshows, etc. — then maybe it’s time to rethink your tax status. In that case, your non-profit governance baggage and lack of entrepreneurial-type rewards for staff is probably putting you at a disadvantage compared to other competitors.
But for those of us who work for associations because we like making a bigger difference for the sectors we serve, I think the non-profit status still makes sense. (And for-profit groups recognize the value of non-profit operations; I know of at least two in the construction industry that have formed c(3) foundations to raise money for educational support.) But I believe we must be conscious of the structure we choose (or “structures” for those who have more than one corporation) and its impact on how we operate. As opposed to just “being” a certain way because that’s what we have always been.
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Bravo Kevin on an excellent post – but perhaps more so for the link to Anne’s post in which you made two thought-provoking observations:
“Successful assns are what I call a perfect triangle of influence, value, and resources …” and
…”Assns focus too much on what other assns are doing and need to focus instead on their market and its own unique environment.”
It is less about IRS designation and more about structure and the focus.
As a long-time CEO of a trade association (Realtor), I think your comments are right on target! Particularly driven by the current economy, our association is working harder to position our members for success, and we are also more proactive is finding ‘non-dues’ revenue. Our sense of ‘mission’ as you define it is becoming increasingly sector-specific. It’s time, I think, to shed our non-profit status and organize our governance to perform according to our current goals.
Well said Kevin. MarketingSherpa and thousands of for-profit specialized information publishing companies have been thriving in the information/quasi-membership/association space for decades. It can be a tremendously profitable arena. Interestingly, many of those folks launched their firms by leveraging industry experience and the networks derived from participating in not-for-profit associations along with the lessons (good and bad) they learned as members. I am sure it will be enlightening to learn more about Anne Holland’s findings.
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