Back in (the) Black: The Association Revenue Recovery Plan
On May 28th, ASAE hosted a webinar featuring Chris Busky, president and CEO of the Infectious Diseases Society of America, Richard Hunt, president and CEO of the Consumer Bankers Association, and Don Neal, founder and CEO of 360 Live Media. The goal of the webinar was to help associations rethink the fundamentals of their economic model. The old formula—membership and live events—can no longer work.
Below are select excerpts from the transcript, edited for length and clarity.
What Data is Driving Decision-Making?
DON NEAL: Richard, what are the key indicators that you watch for in terms of guidance? What are the criteria you use to make decisions for returning to some form of normal?
RICHARD HUNT: One thing I'm looking at closely is reopening of many of our branches. We had to shut down probably 40 percent of all lobbies within a branch and about 5 percent of entire branches. Once I see our banks reopening, both the branch and the lobby section of the branch, that tells me we're getting back to some type of normalcy.
Also, we're looking at transaction data, both from Visa and MasterCard, how often are the public using their debit and/or credit card? We see trends on a weekly basis, you can just look at various states.
DN: Chris, do you have a point of view in terms of leading indicators for your organization as you start to navigate through these phases you just described?
CHRIS BUSKY: I'll answer that a slightly different way. I will say we don't want to go back to the old way. I don't want to go back to what normal looked like before because our field has been struggling a little bit, infectious disease physicians as a medical specialty have been underpaid for years. We have captured the media attention now like we've never had before. This may be a once in a lifetime opportunity for IDSA to have a megaphone, standing on the mountaintop.
One way we've done that is we jumped in early to do our own media briefings. For a time, we were running twice‑weekly media briefings--and had very good turnout with all the major networks and all the major trade publications out there-- to really share the facts about what's going on in this country and what's going on around the world and the value that our physicians bring, to hospitals and healthcare systems.
Revenue Recovery: Playing Defense
DN: I want to talk about playing defense in terms of trying to ensure that you have positive cash flow, that your organization is liquid, that you're de-risking where you can. Chris, what are you doing from a defensive play? Have you had to resort to layoffs? And what are you doing to ensure liquidity and cash flow?
CB: We have not laid off anyone. We do not plan to lay off anyone. Frankly, right now we are still in hiring mode.
Our organization financially is very strong, and that's because over the last 15‑plus years, we have budgeted for a pretty healthy surplus to save for a rainy day, and I would argue we're in the middle of a raging cyclone right now. We have not had the need to tap into our reserves, but I can tell you we've had discussions with our board, and our board is open to having that discussion if we need to. They understand that this is not only a time to keep momentum going on our strategic priorities, but also to invest. And we've been able to do that.
DN: So Chris, are you saying you had a separate fund of money, a separate fund aside from reserves that you were able to tap into?
CB: We do, yes.
DN: What percent of your operating income do your reserves represent?
CB: About 130 percent.
DN: Richard, have you had to lay off anyone yet and what defensive measures are you taking to ensure positive cash flow?
RH: When I took over at CBA, I interviewed every position, no matter what. Why are we hiring somebody? Is this a want or need? To answer your question directly, no, we have not [laid anyone off]. Do I think about it quite often? Of course, I do. But it is the last thing I am going to do because we've invested this that person and that person has invested in us.
Now, I think every CEO has to sit down and look at the worst case scenario. You have to look at your reserves, not only for a 2020 play but for 2021 as well. Just because you get through this summer does not mean you're going to get through 2021.So we've got a couple of other levers to push, we will draw down our reserves I think this year, we had about 65 percent of operating expenses within reserves. When I started at CBA, we had about is $1.6 million in reserves at about a $5 million revenue, we're now at $14 million in revenue and $8.6 million [in reserves], but Don, I will tell you that reserves went from $8.5 to$7.4 and we're looking at a $4 million operating loss. Now, that will get your attention quickly. And had all those numbers stayed the same going into 2021-- I would give us a 40 percent chance to survive.
Now, we're doing other measures, the market is back up, we're only down a whopping $30,000. Celebration time. But I would also caution you, you can never have too much reserves, although we all look at our reserves and say do you go to more operating expenses or do you go to reserves each and every year? It's a great question we have with other trade heads all the time, how much reserves do you have to have. You've all heard about bank stress testing, we've stress tested CBA many times, we thought we could handle another 2008 crisis, but I have to tell you, Don, we never planned for COVID‑19.
DN: Chris, it doesn't sound like this is even an issue for you, given your strong cash and liquidity position. Is that a correct assumption?
CB: I would say yes and no. We're aggressive with our reserve fund. We're 60 percent equities. But what I can tell you is we started to look at all the different scenarios, planning through the end of this year, we've not jumped into 2021. I think we want to see if there's this potential big second surge that will impact the economy yet another again. But with that, we've been able to cut a little over $4 million, we're projecting this year, and this is out of a $26 million budget.
So with that, and then the expected decline in our revenues this year, we've got kind of two scenarios, one relatively optimistic and the other a little bit more pessimistic.
One of the questions you haven't asked, Don, is--what does our association look like now versus what it looked like January 1?We've had to do a 50 percent-plus switch in what we actually thought we were going to be doing this year. We had to rip many of our staff away from programs that they were working on that we either deferred or killed for this year and put them on completely new projects--COVID‑19 member‑facing programs. So we have people in positions they never thought they would be working in. And that could be for the foreseeable future for us. So looking at skill sets and how people are doing in these areas--it's going on look very different for us in 2021 potentially.
Revenue Recovery: Playing Offense
DN: I would like to pivot to the offensive play. You can't save your way to prosperity so you have to go to the top line. I see four steps for revenue recovery. Number one, clear goals and objectives, board and staff have to be on board, there has to be an ambition and appetite to even begin this aggressive march forward. Number two, what value are you going to provide to these new sources of revenue, whether it's industry partners, sponsors, exhibitors, members? The same value proposition isn't going to yield more money. Third, what's the source of this revenue going to be? I would tell you that most of it's going to come from industry. For most associations and societies, you know, there's not going to be a lot of organic growth through membership, so how do you get your industry partners to better leverage the relationship with you and your members. Finally, how are you going to operationalize and implement it? What do you see are the elements to start building the top line?
RH: Here is what I would say. If you have not provided value to your membership over the last six weeks, not just a little value, but A‑plus value, you're toast. You should not exist. Going back to March 11, I thought we would be out of this on Memorial Day. And we said to ourselves, what would the membership value? How would they look at us on Memorial Day? Did we step up and help them navigate through the new order or are we a lap dog and we sat down and didn't do anything? And if we sat down and didn't do anything, they should not be a member of CBA. This was our time to step up in this crisis and to provide value. Now look, we had goals and objectives. Throw them out the window, the last eight weeks.
So again, I think history is already written for many trade associations.
DN: Let me ask you, Chris, what are you doing differently, and is there anything on this list that resonates or you think might be an option for you for the balance of this year going forward?
CB: I'll start with the way that we've approached new revenue development as an organization. First, is what are our core strengths? At the top of the list is the expertise that our members and staff have. Our intellectual property. One of the things that we are looking to leverage immediately is the exponential growth in the number of hits to our website because we put a COVID‑19 resource center together that not only our members are looking at, but physicians all over the world.
So we had some conversations internally, how can we leverage this exponential growth? And through re‑marketing ads and programs, we think that there's a significant revenue potential for us there, so we've started to pursue that.
The other thing is looking at nontraditional partners and industry. So we've had no relationship with companies like Clorox and others that are in the infection prevention space. We've dealt primarily with pharmaceutical companies and diagnostic companies.
Well, I think we can and should have a relationship with those other companies. You've got many companies that are now in the ventilator space that we never would have thought, you know, six months ago would have ever been into that space. So for example, at our annual meeting, we're having a fairly large COVID‑19 track that we're hoping to get fully sponsored not only by traditional but non-traditional partners that want to be visible in our space now. So we're very energetic about what some of the opportunities are from a revenue perspective.
Lessons Learned and Looking Forward
DN: Let's talk about what's next. I wanted to ask you as you look forward over the next 30 days, what do you see doing differently, specifically around revenue recovery, strengthening your economic foundation and really building the organization as well as you can, into the future?
RH: We made the decision a week ago after much deliberation we'll do our CBA Live virtual, we'll do it in September right at the end of our fiscal year, which is a big deal for us. When we cancelled in early March, we thought that was one of the most monumental decisions we had ever made. And now in hindsight, boy, that was such an easy decision to make. So we're going to go to virtual, we're going to try and keep every single person who registered. That means we have to have a great program, one that they cannot miss to be able to keep it all. Once you turn your mind to virtual, it opens up a lot of avenues, both from a revenue standpoint and attracting higher-level speakers, but we want to do everything live, we don't want to do anything recorded. Then we start planning for 2021 from a budgetary standpoint to close that revenue gap that we're going to lose because of that.
I will tell you this, Don, and Chris reminded me of this, I blew something. I totally missed how much revenue you can generate off of webinars and white papers. I first thought they were just a one hour talk about something. But it is amazing how much people are willing to spend to sponsor a webinar, or a white paper, to get in front of your audience.
DN: We're seeing as much as $25,000 for a hosted webinar to a targeted group. So for those of you out there thinking about how to monetize access to your audience, they're worth a lot because it’s a targeted approach with no friction, no inefficiency, and very high impact. As long as it's not a commercial, it can provide real member value.
CB: Specifically looking at our annual conference again, this is typically about a 14,000 person event. One is figuring out how we can continue to retain our sponsors and our exhibitors. If it moves into a completely virtual environment, how do we still provide significant value and creatively come up with, mutually beneficial arrangements with sponsors and exhibitors? And one of the things we learned from other organizations that have already gone virtual was rather than focusing on our entire exhibit base, which is over 100 exhibitors, focus on that top 10 to 15 percent, because that's where you'll get most of your revenue anyway.
And to figure out how to retain those, have some really tough conversations with them about, what they want. What do they want this to look like and kind of co‑create that together?
The second thing is our second-biggest source of revenue is our three medical journals. And early on we had conversations with our publisher about how can we drive more revenue to our journals. So we've already had two or three kind of strategy meetings with our publisher, and they've presented us with some fantastic options there.
DN: It just occurs to me, Richard and Chris, you're both very familiar with the organization [Hyve Group] that puts on Money 2020, ShopTalk and GroceryShop. The reason I bring that up is the virtual hosted buyer is the foundation of their business model, so they have somewhere between 100,000 and 250,000 meetings at their event. It’s the economic engine of those four events.
And what we're proposing and we're seeing is this virtual hosted buyer format, where you're underwriting your members to attend an event or an interaction and sponsors and exhibitors are paying for that up to $1,000 to $3,000 per meeting. It's an enormous opportunity which is a relatively light lift for the organization and frankly high value to your members. If you haven't looked at those four events, I would encourage all of you to learn what they're doing and understand how the commercial players are really trying to outsource the event business and take it away from associations.
So let's wrap up. I want to thank you, Richard, great conversation, Chris, really appreciate the candor, the transparency, you guys didn't leave anything on the table. I would like to thank all of you for watching this, it was a real pleasure to spend time with you.