Multiyear budget view helps board see past short-term pain

Budget cuts can come fast when revenue plunges, as shown during pandemic, but forecasting can keep groups positioned for recovery


“Deficit” doesn’t have to be a bad word.

It may be written in scarlet letters as far as your board is concerned. But offering voluntary leaders a multiyear financial picture—and sketching an end to the red ink—can help avoid knee-jerk budget cuts that may be penny-wise but pound-foolish.

Taking a longer view has been useful for Peter O’Neil, an association veteran now in his second top leadership role as CEO of security-industry professional society ASIS International.

“I’ve always been a three-year budget guy,” O’Neil told CEO Update. Some deficits can be foreseen—and may even be part of a plan—while others can’t be predicted.

COVID pounded ASIS’s bottom line last year as its annual meeting went virtual. From net meeting revenue of $7 million or more prepandemic, ASIS ended up losing about $4 million on the event, for a swing of $11 million, O’Neil said. This year’s meeting Sept. 27-29 in Orlando will be hybrid, and ASIS projects a loss of as much as $2.5 million. ASIS reported revenue of $27 million in fiscal 2019.

“If you’re not forecasting three years out right now, how do you know when you’re going to get out of COVID?” he said. “For ASIS, we know through our forecasting that we are likely to get back to revenue positive” in two years.

“We believe that based on data and a little bit of crystal ball,” he said. Last year, the association established key performance indicators to gauge recovery from the pandemic revenue loss. “We keep meeting those KPIs, which continues to tell us that we are notionally correct,” he said.

O’Neil traces his belief in multiyear budgeting to a CFO he worked with at the Produce Marketing Association 25 years ago. Farsightedness also helped O’Neil and his board make appropriate budget adjustments when he was executive director of the American Industrial Hygiene Association, a position he took in the depths of the 2008-09 financial crisis.

“The reasons you forecast are as much about what you think is coming—and how do you make good decisions right here for this point in time—as how do you position yourself to take advantage of the recovery?” he said.


Informed discussions

The Auto Care Association and the Virginia Society of CPAs also employ multiyear budget forecasts. (Auto Care Association CFO Nathan Perrine is a member of the VSCPA.)

Like O’Neil, Perrine stresses that the process is about forecasting—the board still approves budgets one year at a time. The forward projections are not voted on by the board.

“Its value was demonstrated in our management of the treasury” when the pandemic forced cancellation of the trade show co-owned by the group in 2020, Perrine said.

“With the COVID environment, things have changed with the trade show, of course,” he said. “Whether that’s an insurance payout or a cancellation, with all our events, things have changed.

“So what we have done is we’ve tried to model what the current year looks like, and what the future years will look like for the trade show, and what kind of cash flows we could expect in the future,” he said.

“And the discussion was then, ‘How do we manage our cash in the meantime, to get us through this dip until the profitability or the normal revenue streams resume?” Perrine said.

The association tapped its line of credit.

“We do have a reserve policy, and it mandates that we carry a minimum level of reserves,” he said. “Future projections of our revenue and expenses helped inform our conversations around that policy, and how worried we should be about our level of reserves.”

A multiyear picture can forestall or limit immediate budget cuts—but revenue modeling cuts both ways, both O’Neil and Perrine said. The long view may suggest that losses will continue for an association, or for one of its programs. In such a case, cutbacks would be called for.

Perrine said multiyear budgeting is most useful for associations with large and potentially variable nondues revenue, and less so for groups with steady membership income.

Flip the scenario

At VSCPA, Vice President of Finance and Administration Beth Bickford sees forecasting as a planning tool with which the association can compare different scenarios. Professional education is a big part of the group’s revenue.

VSCPA has been using multiyear budgeting since 2009.

“We use it to look at, ‘What if we were all online? What if we were partially online?’ And we can run a variety of scenarios and run them through the multiyear budget to see how that impacts us in the in the coming years,” Bickford said.

“And it’s pretty easy, the way we have it, to flip back and forth between one scenario and another and see the impact.

“We’ll look at large capital expenditures and see when the funds will be available for that, and then what kind of time horizon can we invest our funds in?” she said.

“We’ve really found it invaluable, and we’ve gotten more sophisticated as we’ve gone along,” Bickford said.

Awash in cash, private investors seek profits with nonprofit groups

New $35 million investment company seeks minority stakes in association events, programs


You might think that nonprofit associations and private equity—which has a reputation for putting profits above all—don’t belong in the same room.

But they’ve already started shaking hands and doing deals. Well-heeled investors are flush with cash and looking for ways to put it to work while many associations could use the capital. In the latest development, a new investment company co-founded by a senior association executive has been created.

“This is a really compelling opportunity for associations and we’re going to see more of this, particularly for organizations that have valuable intellectual property,” said Jay Younger, CEO of association strategic consulting firm McKinley Advisors.

Association Investment Partners is looking for such opportunities, as well as the chance to invest in trade shows at a time when show profits are depressed.

AIP is an investment company whose co-founders include Velma Hart, COO of the Construction Specifications Institute, and Robin Lokerman, Singapore-based group president of association management company MCI.

The company has raised $35 million to date, all from European sources such as family offices, Lokerman told CEO Update.

These entities are privately held companies that manage investments for wealthy families; Lokerman described them as “social impact” investors. He said that his firm, MCI, is a strategic partner with the investment company but has not invested in it.

MCI’s resources are available to help partner associations transition to hybrid shows and manage programs, he said.

AIP’s six-member investment board includes Lokerman, Hart, former American Geophysical Union CEO Christine McEntee, dmg events Vice Chairman Galen Poss and two European association figures. Board members will use existing relationships to open doors and also will vet association programs and events for potential investment.

“The decisions are made by the six of us as a board completely independent from MCI,” Lokerman said.

Closing deals

Lokerman said he expects deals with two U.S.-based associations with global reach to close by October. AIP hopes to make 15 to 20 investments over the next 18 months, he said, with a minimum capital stake of $500,000. The investment board has spoken with about 60 associations.

“We don’t believe today is probably the right time to sell a trade show, because all trade shows are depressed,” Lokerman said. “It would be a shame to do that in a rush.

“We are offering to take a minority stake—20%, 30%, maximum 40%—and the association stays fully in control of the event,” he said. “We pay in cash, at a certain multiple (of net profits) upfront and become a minority partner for five years. After five years, the association has the option—but not the requirement—to buy back our stake.

“We don’t want to take over; this is their program. We just want to add value to it,” Lokerman said.

The partnerships will require the associations to commit some of their own capital. Lokerman said associations will establish for-profit companies, sell a percentage to AIP and form an independent board with three association representatives and two from the investment company.


“The way I think about it is that AIP is like two ‘C’s.’ We’re the ‘connectors,’ connecting venture capital interested in investing in what associations can offer,” McEntee said. Venture capital is a form of private equity.

“But we’re also like the ‘counselors’ in terms of assuring that the associations are planning well, doing their financials well, projecting their future well, so that they can use the investment to scale and grow, bring in new revenue sources, but with the benefit of private equity.

“I could add a third ‘C’ for ‘collaborator,’ because we’re collaborating both with the venture capitalists and with the association that chooses to pursue this path,” she said.

McEntee said the board would help evaluate investments and assist associations preparing to make presentations to the investors, but the investors have the final say on whether to proceed.

“We’ll be bringing our financial and programmatic and strategy expertise to assist in deciding which ones we should continue to work on to develop the plan that we’ll take ultimately to the investors,” she said.

“For a long, long time associations have been talking about, ‘How do we get new business models? How do we create more impactful services that we can scale more quickly? How do we get our boards to give us some investment funds, knowing that they might not get a return for several years?

“This really brings a brand-new opportunity that will not only benefit associations, but all the members and stakeholders and societies that they serve. It’s been long overdue and needed. In crisis, there are opportunities,” McEntee said.

‘Coach for CEOs’

Lokerman said board members commonly fear giving up control and are concerned about how the buyback option works. Associations will have the chance to buy back their shows and programs at the same multiple AIP has paid for them, he said. Chief staff executives are generally more amenable to the proposals than are their boards, he said.

“That’s why Chris is a great member of our team,” he said. “She is so expert in dealing with boards from the CEO level. She’s kind of the head coach for the CEOs, to help them get these things by their volunteer leaders.”

Lokerman said AIP would also like to attract U.S. investors.

“Although many associations are suffering, the demand for their products and their importance is actually growing,” Lokerman said. “We need associations more now than ever. They might not have the resources to deliver the value  people are seeking, and we hope to bridge that gap with this additional equity investment.”

Younger, of McKinley Advisors, who is not affiliated with or advising AIP, pointed to other recent deals. These include a partnership formed nearly a year ago between the American Institute of Architects and San Francisco-based, tech-focused private equity firm True Wind Capital to invest in AIA Contract Documents (ACD). Through an online platform, AIA sells about 200 editable contracts and other documents used in design and construction projects.

“This is a great opportunity for the profession,” said AIA EVP/CEO Robert Ivy in a statement at the time. “The construction technology industry is rapidly evolving. Alongside True Wind, AIA is eager to continue to invest in ACD to drive long-term value to constituents across the industry.”

AIA said the partnership will enable it to “focus on its mission-based priorities where it can have the greatest impact.”

Younger also noted the deals between the National Restaurant Association and media, events and data company Winsight. The private-equity-backed company purchased the association’s huge trade show in 2018, but the show’s cancellation in 2020 and 2021 because of the pandemic caused major losses. In a reversal of fortunes, the restaurant association then purchased a majority stake in Winsight earlier this year.