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5 Methods for a Successful Non-Dues Revenue Strategy

Let's cover the basics about how revenue analyses are performed, and show how to apply the findings to discover non-dues revenue opportunities and deficiencies.

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Let’s face it: none of us really loves going over finances. And it’s not just because, well... math... although that can certainly be a factor for some. The real difficulty with money is that everyone has a different perspective on how to use it, how to manage it, how much is needed for specific tasks, and so forth. But like everything else in life, digging deep and analyzing your budget is the only way to see what problems exist, discover how to fix them, and create an efficient revenue strategy.

Associations are no different from any other organization in this respect. Revenue streams are critical, and knowing where the revenue is currently coming from, where it will come from in the future, how much is there for upcoming projects, and how much is needed for general expenses. All of these are things that simply must be known in order to operate smoothly and without interruption. Beyond this though, analyzing your revenue can also show you opportunities -- where you can expand your revenue and through what means.

In this post, we’ll uncover the basic means by which revenue analyses are performed, and show how to apply the findings to discover non-dues revenue opportunities and deficiencies. After all, you can’t solve a problem without first knowing what the problem is. To start, let’s talk more about the fundamentals of revenue analysis.

What is revenue analysis?

Simply put, a revenue analysis shows you all the sources from which your revenue comes, how much comes from each source, and with what frequency. Now, this is a pretty basic definition. There are various methods to analyze your revenue streams (which we’ll get into a little later), but the basic point to remember is this: knowing all the facets of your revenue sources shows you how to increase your revenue with the least amount of effort.

For example, suppose you discover that putting on a conference gains you X amount, but after you subtract the costs associated with hosting this conference, it evens out to be the same amount as adding Y new members. You see that the cost, labor, and time that goes into putting together a conference is much higher than the cost associated with running additional marketing to secure new members, so you choose to invest in new marketing rather than a conference.

Now this is a very broad example, obviously -- no one here is advocating for eliminating conferences. But, you get the gist. By really looking at what you gain from each endeavor you undertake, you begin to see where the most opportunity for the greatest revenue lies.

How to perform revenue analysis

Now, there are a number of ways to gauge your organization’s financial health. You can choose to use one means over another, or use several together to get a better picture of your overall stability. It all depends on what you want to learn from your revenue analysis.

Let’s dig into some of the ratios that are used to analyze revenue and financial health within non-profit organizations.

Fundraising efficiency.

How effective are your fundraising efforts? Are they worthwhile, or are you sinking more money in than you’re gaining in the long run? The ratio that determines your fundraising efficiency can be found by dividing the contributions you get from fundraising by the amount you spent on the fundraiser itself. This can show you whether your fundraising efforts are truly paying off -- or whether you need to rethink this strategy, whether by lowering your expenses, adjusting the number of fundraisers you perform each year, or changing up the way you perform fundraising.

Reliance ratio.

This is a very important number for non-profits. It tells you how reliant you are on each revenue stream, and therefore where the most impact would occur should you lose a stream. This number is determined by dividing the amount you gain from a revenue source by your total income. By performing this on each of your revenue streams, you quickly see which source is most critical to maintaining a solid footing in your organization. And from there, you can focus on strategies for maintaining these most important revenue sources.

Self-sufficiency ratio.

Does your organization sell goods or services? Many non-profits sell products in order to have a steady and reliable revenue stream. If your association is one that uses this strategy, then you have earned income, and thus can perform a self-sufficiency ratio to discover the health of this aspect of your association. This ratio can be found by dividing your total earned income by the operating expenses, and it tells you whether your earned income streams are a robust and stable source of revenue or not.

Debt ratio.
Of course, no revenue analysis would be complete without talking about debt. Your debt ratio is your total liabilities divided by your total unrestricted net assets. If your association has loans or other debt, this is a good way to see how healthy your financial situation really is, because at the end of the day, all your revenue streams are for naught if they are outweighed by a crippling amount of debt.

There are more ratios beyond these if you wish to explore every aspect of your organization’s financial health. These are just a highlight of the calculations you can perform to get a quick picture of how your association is doing and where improvements can be made.

Creating a revenue strategy from your analysis

Now obviously it’s great to have numbers and pie charts and graphs to look at when you’re talking about your association’s finances. But all of the calculations in the world will be absolutely useless if they are not applied and used to create change.

This brings us to the revenue strategy side of things. How are you going to make changes to your association in light of the discoveries you’ve made?One way to to this is by performing yet another analysis known as a SWOT analysis.

This method takes all your data and helps you to categorize it according to whether it could be considered a Strength, Weakness, Opportunity, or Threat (hence, the acronym SWOT). For example, a high amount of debt could be considered a threat to your organization, whereas a high degree of self-sufficiency could be considered a strength. A low fundraising efficiency may be considered a weakness, or simply an opportunity for your organization to grow.

By bucketing your ratio outcomes according to how they can potentially benefit or detract from your association, you can develop a strategy to mitigate threats, take advantage of opportunities, and play off your strengths so that your approach to financial stability is taken holistically.

Implementing strategy to increase non-dues revenue

Once you’ve developed a strategy by using SWOT, all that’s left is to put your plan into action. Remember that any revenue strategy take time. You can’t expect to fix all your budget issues overnight, or see heavier non-dues revenue streams come pouring in all at once. Take your strategy one step at a time, continue to reassess and tailor your strategy as you go along, and regularly factor your ratios to see whether your efforts are showing improvement. Place special emphasis on developing your opportunities (the “O” in SWOT).

These are the areas that can most easily become strengths if you nurture and pursue these opportunities -- and they may even go on to mitigate threats and weaknesses. Because non-dues revenue is such a significant part of any association’s existence, you know how carefully it needs to be monitored to ensure the best use is being made of your organization’s resources. Take the time to examine your revenue strategy and streams so you can continue to explore areas of potential growth.