If you were an AE in 2007 (the year of the economic collapse) you probably haven’t forgotten the drop in membership numbers that dragged down your revenue and spelled the end to a long list of programs and services. You remember the emergency board of directors meetings to authorize use of reserve funds and the creative ways you had to cut spending. You lost staff; maybe you took a pay cut.
All that is just a blurry memory in today’s booming economy and robust real estate market. But don’t be caught off guard. Those REALTOR® associations in 2007 that had sound financial policies, prudent investment of reserve funds, and a contingency plan for economic sluggishness fared well through the great recession; many others did not.
Now is a great time to take stock of your plan (or write one) for the next, inevitable downturn.
What’s your contingency plan?
Your members, directors, and leadership fully expect you to have a plan for steering your association through a recession. Not having a plan could be viewed as irresponsible or, worse, a career-ending failure to exercise due care. Entering a recession without a thoughtful, comprehensive plan can lead to hasty decisions, inefficiencies, and costly delays.
The size of your association will dictate the complexity of your plan, but every association should have one. At its most basic, an economic contingency plan details what steps your association will take to ensure the financial stability of the organization. It addresses where spending will be cut by prioritizing association services and programs.
The plan should outline a comprehensive menu of cost-saving initiatives that could be implemented in the event of a downturn. These might include reductions in travel, events, education, marketing, consulting fees, community support, charitable giving, personnel, or even salaries. They also might include suspending or discontinuing certain services or programs or charging a fee for them. Cost savings may also include delaying capital expenditures, such as new computers or furnishings, or selling assets such as property or vehicles. Your plan may also address alternative revenue-generating ideas including renting out association property or offering fee-for-service business support.
A vetted, predetermined contingency plan saves precious time when the day comes to implement it. Plus, when association leaders are involved in the plan’s development and approval, there is a broader base of support for its execution. That support base leads to more efficient implementation, making your job easier.