REALTOR® ASSOCIATION EXECUTIVE
Veteran AEs on planning in uncertain times
By Kevin Fritz
Drafting your annual budget has become more challenging in today’s uncertain economy. Even for associations in areas that are not experiencing a real estate market decline, it’s difficult to predict how much the overall economy could affect your income or which types of programs will attract members.
Of course, this isn’t the first time the market has fluctuated or the economy slumped, so RAE caught up with some veteran AEs in the midst of their budgeting processes to ask for advice.
Creativity and Crumbs
Creativity is the key to getting through the next year or so, according to Christine Todd, CEO of the 12,000-member Northern Virginia Association of REALTORS®.
To get creative, Todd scrapped the association’s old curriculum and now bases all class offerings on the local market. Currently, the association is offering more free classes focusing on short sales, foreclosures, and working with today’s buyer. To cut costs, most of her speakers are hired pro bono and include out-of-work real estate office managers and title professionals banking on future business.
Todd, who has 30 years’ experience in association management, advised against raising dues or fees. Instead, to cover her projected 20 percent revenue drop in 2009, she encourages staff to suggest ways to get creative with their programs and focus on offering more for less.
Rather than allowing her board of directors to scrutinize the entire budget, Todd presents a menu of cutback options. “It shows them that you’re doing your homework,” she says, “and it focuses the discussion on your options as opposed to a free-for-all when you can lose control of the situation.”
Todd’s budget-balancing mantra is “look for the crumbs.” The small things, she says, can quickly add up to a big piece of the pie. For example, NVAR cut back on staff business cards by printing them from their own computers. The association also recycles print cartridges and uses only black ink. Additionally, the monthly magazine is being cut to nine issues, and staff will now share rooms when traveling to conventions.
Shedding the added fat that accumulated during the boom years is a healthy and cathartic process, Todd believes. No more five-star hotel convention sites or expensive member gifts. Besides, she says, “a personal note has much more meaning than another engraved paperweight.”
Divide and Conquer
John Fridlington, CEO of the 132,500-member Florida Association of REALTORS®, says he started his 2009 budgeting process by dividing membership projections into two categories, “renewing” and “new,” instead of making an overall estimate. To arrive at his figures, he surveys local associations and MLSs to get a feel for their projections in each category. “It’s more accurate to split them up,” he says.
He then meets with senior management to create a set of proposals suggesting where they could make up the shortfall. Although Fridlington believes “the meat-ax approach is not the way to go,” he does deem some cuts to be a necessary evil as long as they are done sensibly. For example, he says although it’s a lot easier to cut a little from Program A, and a little from programs B and C, sometimes it’s best to just get rid of Program A altogether. “If you spread the peanut butter too thin, at some point there is no peanut butter.”
For 2009, however, Fridlington does not anticipate cutting any programs or services to make up for his projected 15 percent revenue drop. Instead, he has instituted a hiring freeze and will tap reserves to make up the shortfall.
Like Todd, one thing Fridlington has learned about budgeting from his 30 years in association management is not to let elected leaders pick away at line items. He talks about numbers only in terms of revenue and expenses. “You want them to say they are willing to fund up to X number of dollars,” he explains, “then let the CEO and management decide what to do.”
Know Your Local Market
Gene Binsbacher, CEO of the Santa Clara County Association of REALTORS®, believes this down economy—part of the normal business cycle—should be embraced, not dreaded.
“I look at times like these as a challenge,” says the 16-year veteran. “I don’t look at this as doom and gloom. We’ll get through it; we have in the past.”
Binsbacher’s budget advice is to be as accurate as possible in the initial budget process and err on the side of liberal expenses and conservative income. “If I need three PCs,” he says, “I may budget for five. There will be cutting, so I’ll probably get my three.”
This year, the process took about three weeks, he says, creating budget scenario after budget scenario before it ended in the black.
Balancing your budget in uncertain times comes down to knowing your local market, Binsbacher says. He talks to members as much as possible and uses his education attendance as an indicator. He notes that more members are coming to classes for RELO, foreclosures, and short sales, which means members are adapting to sell in today’s market. Binsbacher believes this foretells a market turnaround. “Do whatever you can to keep your pulse on the local market and what your members are going through,” he says. Binsbacher predicted a 20 percent drop in membership for 2008 and it’s currently down 18 percent.
Binsbacher’s 2009 strategy is to avoid cutting core services. “The best thing you can do is make your association more relevant,” he says. To do so, he will make more efficient use of marketing dollars and shift education offerings to focus on REOs and short-sales seminars. He also plans to use the increased education revenue to offset some of the dues loss.
The “Genius of the And”
Mike Brooks, executive vice president and CFO of the Kellen Company, which manages more than 100 associations and professional societies worldwide, says CEOs like Binsbacher are right on target in realizing that this is not an either/or situation. By employing what he refers to as the “genius of the and”—a budgeting strategy in which association executives take into account other people, places, and things—other association executives can more successfully budget.
“CEOs need to control expenses and go after revenue streams and challenge spending,” explains Brooks. Too often, it seems, association executives fixate on a single approach. For example, he says, by following the association’s overall goals, one can drop sacred programs, and beef up core services, and aggressively seek new revenue.
As these veterans’ insights show, there’s no shortage of creative ways to get back on track when the economy throws the budgeting process for a loop.
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