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May 2, 2018

My Advice for Association CEOs

Here is advice I have given to association CEOs over the years:

Have you ever had a member of your leadership team propose giving the money back to members because the association had a surplus year and some funds on reserves? Here is my impatient response to such ignorance and shortsightedness (am I being too harsh?) when the following question was posted on AETalk:

>>
Dear Fellow AE's

I have a member of my Board of Directors who believes a balanced budget means just that; no more income or expenses than budgeted for. We are looking for a good year, with a fairly substantial bottom line. This Board member is screaming for us to refund some of our membership dues and to reduce them for next year. Does anyone have something "official" that explains in clear language why it is important to actually make money and have a cushion?

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My Reply:

The board member you are referring to is just kidding, or is irresponsible, or is crazy...or is not a very good
business person and does not understand the dynamics of association financial management.

1. Associations have perpetual existence. They live into the future, and they need reserves to be able to function and offer the stability of services to members.

2. Associations do not exist solely because of the dues and efforts of the current membership, but because of the efforts of past members and their contributions, money, and labor, over many years. A surplus is the result of many years of good planning and execution. Should someone who has been a member for a year be the recipient of the benefits brought on by long-term members? This is just plain stupid (would you like to know how I really feel? :-).

3. In a good market, when there may be a surplus, a well-managed association must build reserves to avoid the necessity of having to cut services when the market slows. Members need the association most when the market slows, and that would be the worst time to cut services, which is what you would have to do if you had inadequate reserves because you budget based on an annual point of view and not a strategic point of view.

I could go on over the years I have lost patience with association volunteers who have no concept of business. Who run their own businesses and personal lives on a shoestring and who speak with such authority about how things "should be done."

This is your burden as an AE and part of your challenge.

"Teach your children well"

Saul

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