Putting the Business in Your Business Model
Updated: May 3
In this article published in Boardroom Magazine, Chair of ESAE's Programming Committee Dianna Steinbach dives into practical tactics for Associations to manage risk and diversify members' value portfolios.
In recent years, reactionary rethinking has been the norm for many association executives. Adjusting business models to one crisis after another has created an awareness that stagnant cycles are at risk and so-called “crisis-proof” strategies are a preferred method of managing association activities. However, that is easier said than done.
There is no way to be “crisis-proof,” but you can diversify your portfolio to reduce the likelihood of a single catastrophic hit – a common practice in the for-profit world. This requires a business-driven mindset, thoughtful planning, investment of time and funds into strategic value areas for your members and an eye toward where your growth can have the biggest impact the fastest.
Associations that were able to pivot best in the last few years, did so because they had created a culture of long-range planning like a for-profit business, had a strong mix of business-minded board members, had accumulated enough reserves to weather financial hits, or simply were lucky. Luck usually lasts only so long, so how can you shore up these other strategic areas for your organization?
Manage like a For-profit
One forward thinking association executive recently said, “You can’t make a bunch of value and then hope members will pay for it. You need to plan to make money so you can expand the value.” This translates into evaluating what your members would need regardless of what economic, political or professional climate they face, and recognizing that offering multiple “all-weather” value items will increase the chances that, in good or bad times, you will capture enough of the market share to remain relevant and hopefully grow revenue.
Evaluate your customer mix today and the larger industry mix that you may not yet have captured. Who makes up most of the profession or industry you serve? What do they have in common? Given the Boomer generation demographics, do you have a significant number of business owners who will need a succession plan soon? Is there about to be a brain-drain of knowledge leaving the field? Is there a shortage of people entering your industry? Is there legislation that can change the playing field? What are the top three business or operations pain points members wrestle with? What is the biggest challenge your members face with their customers?
Build a culture of development
Then, what would it take to build an eventual toolkit of programs, events or resources to address the top three items that you identify? It may not require brand new programs either. Where can you strengthen your existing offering or freshen up benefits to meet challenges anew? Your ultimate goal is to surround your member or potential member within a solution bubble so, as they flip through their top challenges, your organization keeps popping up from all sides.
This means constantly having something in update or development stages. Today’s instant gratification world makes the need for fresh solutions even more necessary to remain valuable. That alone can be a business model shift for organizations that have traditionally had a routine value proposition of a conference, an accreditation, regular reports. To move to an ongoing R&D model, you’ll need to strategically carve out time and resources to weave new projects into your existing responsibilities. Take a page from the product development world by considering how you can implement a stage-gate process to put structure to your development. This is the project management approach with five phases: idea, scoping, business case, development and launch.
Plant the right leadership
While evaluating your customer and needs mix, also evaluate your association leadership mix. Do you have business-minded and innovative thinkers on your board? Do you have representation from today’s majority and tomorrow’s? This goes beyond today’s drive for diversity, equity and inclusion and strikes at the heart of solid business practice – you need people who can help you run your association as wisely as they do their own businesses.
If you have successful or innovative for-profit companies in your industry, but may not be able to invite them onto your board, how are you tapping them for more than their sponsorship and exhibition funds? Whether informally through one-on-one conversations or through a supplier council, tap these business leaders to see where they are planning next and to learn the tactics they have used to fortify, diversify and grow their operations.
Not only will you strengthen your strategic support for key decisions, you also may find your next program partner.
Find the Blue Ocean
A timeless approach to business model shifts is the Blue Ocean Strategy, which proposes to create an uncontested market space that creates and captures new demand, among other things. In 2022, the National Association of Wholesaler-Distributors created a blue ocean. We recognized members have a difficult time recruiting labor and profit margins are razor thing. Technology would need to be part of the solution to these issues. Yet, the broader industry lags on many innovation curves and there is a big gap between the technological advancements of large and publicly traded companies, and the rest of the industry. Rather than leverage the usual answer of conference panels sharing how members improved, while chasing tech providers to sponsor existing business events, we partnered with a tech investment and consulting firm to offer a unique matching event between forward-thinking companies of various sizes and unique tech providers.
Tech firms paid to present rotating pitch sessions and attendees could set up one-on-one private meetings with them to discuss mutual opportunities. Some attendees were large enough to possibly invest in this new tech, while others might become new customers. The overall result was a first-ever industry tech incubator that made larger margins than anticipated and will grow significantly in year two.
You don’t have to launch solutions alone. You have expertise in hosting industry events, so seek an innovative partner who doesn’t have event expertise but brings connections your association doesn’t have. Then structure the deal in a way that allows you the chance to expand based on proven success.
Bring technology to you – don’t wait for them to come looking for your members. Fresh innovators can improve your members profit margins or solve a problem, even if it isn’t at the core of their business expertise. As a leader for your industry, you need to be the one seeking them out. Members will pay for that approach.
A pilot event can be small. We took the risk of putting a minimum size to the companies who could register, curating the right mix of minds and wallets in the room.
Reasonably budgeted pilots can make it easier to gain leadership approval if the business plan is solid. Small success is easier to accomplish and scale if it works well.
Don’t be discouraged when it is harder to convince early adopters to join an unproven experience. If you pay extra attention to make it a powerful experience, however small, you will have a goldmine of testimonials and word-of-mouth to attract more participants in year two.
Bringing new stakeholders into your pilot can often lead to their desire to get involved in other activities, once they realize your market’s potential. This not only widens your revenue-generating relationships with fresh organizations, but also can deepen your revenue in year two amongst this new audience.
Make or buy
There often are great diversification areas an association can branch into, however, building something new has a longer development cycle. The world is moving so fast that you could be mid-development and find an industry, geo-political or economic shift renders your new project less valuable or beats you to the punch.
Buying can mean multiple things in the association world: merging two associations together, purchasing a publication or event, investing in a third party’s certification or program concept or purchasing existing research capabilities instead of building your own. Key to building internal confidence in a buy strategy is having a few board members who have done this in their own businesses. They are more apt to encourage it within the association and can be valuable resources in understanding how to accomplish the negotiations and integrations required.
Right now, is an optimal time for many associations, societies, publishers and event providers to consider selling or merging. After the last few years of instability and surprises, there is security in combining forces to weather future economic storms. If the right combination is found, both parties can increase their audience or value portfolio while also gaining the expertise to manage and expand it. The lead time is shortened and tangible revenue growth can happen, within as little as 12 months, if due diligence and integration are done well.
Such deals can focus on a single program, event or item or can be a larger merging of two organizations, based on what makes the most sense for both parties. They also can involve a partnership buy-in for a percentage ownership of the item desired. This allows flexibility of funding and can be a first step for an association into the world of buying solutions.
The best of both worlds
To determine how to structure a merger or purchase, look at what both parties value most. The biggest obstacle in the association world to mergers is the fear of losing identify, revenue, value and more. When leadership focuses on preserving points of critical value with an open mind, the fear of losing is overtaken by an excitement about gaining.
In one example, an educational conference with a small exhibition was growing smaller and needed to align with a larger industry event in their market. But their leadership still wanted to maintain their revenue stream from exhibitors and attendees. The larger group wanted to expand the audience they could offer their exhibitors and found value in mingling the different attendees into one main industry event. Their biggest mutual concern was losing exhibitor revenue to one another.
The solution was to co-locate the smaller event during the time of the larger, in a way that allowed the smaller event to have a pavilion of exhibitors within the larger exhibition. They identified which exhibitors each had brought in for the last 3 years. The original owner of those relationships would keep that revenue. A few mutual exhibitors were identified and they agreed on a profit split. Anyone new would go into the new pavilion. For every pavilion exhibitor the smaller group brought in, they received a percentage of the profit margin. Any sponsorships they sold to the smaller conference they kept. On the attendee side, the smaller group could leverage the larger group’s meeting space and hotel block, continue to charge for their niche education to their followers, and only pay for services such as speakers, A/V and food and beverage. Those niche attendees also received free access to the larger group’s education, which was strategically staggered so participants could attend both.
The smaller group was able to maintain their community’s legacy value and revenue stream, without as much overhead expense or minimums risk. The larger group gained more visitors for their exhibitors, the prestige of strengthening their reputation as “the” event for their profession and reduced the number of events it had to compete with for participant time and investment.
You don’t have to give up to move away from a traditional concept.
Identifying and accommodating for legacy participants in both events allows a merger to account for how both sides can maintain their revenue streams.
Sometimes giving up some revenue is more profitable if you gain greater operational and expense efficiencies together.
Two identities can co-exist within one event week, ensuring no one has to lose their brand presence, value or pride.
Combining two events allows both to increase their value without adding expense.
Lay the right foundation for a weather-proof plan
Critical in any business model shift, diversification strategy or acquisition approach is to start with the right decision makers who can think innovatively for the association and create a culture of ongoing development through gradual steps that can gain trust through success. Then your team can gain the consideration they need for solid business cases and work to reduce the common fears or misconceptions those business moves might spark. Working from the belief that there can always be a solution allows you to avoid the many pitfalls that keep plans from even getting started.
With these elements as the base, you can cultivate creative ideas, greater organizational flexibility and take manageable risks, all as you maintain ongoing services members value. Before you know it, you’ll be closer to “crisis-proof,” without having to go through a crisis to get there.