10/15/2012

Advisor Newsletters - AEM Advisor

New Financial Model Delivers Resources Essential for Future Service to AEM Members

As an AEM member for more than 25 years, I appreciate the many actions AEM takes and the services it provides that directly benefit my company. I have become even more appreciative of the efforts of AEM staff on behalf of all members during my year as AEM Chair.

In appreciation of the benefits AEM brings to our respective industries, I would like to take this opportunity to comment on the new financial model, approved by the AEM Board of Directors and announced by AEM President Dennis Slater last week.

AEM is your equipment manufacturing association. It advocates for you in the halls of Congress and with the Administration in Washington. It provides you with statistics and market intelligence that you use to guide your business. It operates world-class trade shows on behalf of the industry and provides global coordination on safety, regulatory and technical issues. It helps you build your business in overseas markets and offers outstanding education opportunities for member staff.

These are vital services that we as AEM members wish to see continue. However, ensuring this requires a more sustainable and balanced financial model than the one currently in place.

Need for a Sustainable Financial Model

AEM’s very successful trade shows now provide more than 80 percent of our revenue budget and have allowed us to operate without raising dues rates for Full-level members in 10 years. Reliance on a single revenue area is not a sustainable model for long-term success, putting our association and the services we rely on at risk.

I applaud the foresight of AEM staff, the Strategic Planning Group and the AEM Board to be proactive in the development of this new financial model. A reactive approach at a later, possibly critical, point in time would not likely produce such a well thought out solution.

The new financial model flows directly from the AEM Strategic Plan approved by the AEM Board of Directors in 2011. “To achieve and maintain a sustainable and balanced financial model to provide the level of services needed by AEM members” is one of the six Key Results Areas in the plan.

In August, the AEM Board of Directors approved a proposal for the new financial model. The projected results of the new financial model will significantly reduce AEM’s reliance on exhibition revenue. The model will also deliver additional resources to provide the level of services desired by AEM members now and in the future.

Establishment of New Revenue Initiatives

The new financial model establishes revenue initiatives in three key areas: services and programs, membership dues rates, and membership retention and recruitment. Here are some of the details:

In services and programs, AEM will develop and offer more “content-driven” products of value to members in market intelligence, education, safety materials and market development. These products will be purchased by members at or below fair market price.

In addition, AEM will maintain current statistical programs and other services as part of membership dues, but cap the benefit. Payment schedules will be established to allow for the growth of programs to benefit participants who may require services beyond the standard benefit package.

AEM will also implement modest increases in base dues rates in 2013, 2014 and 2015 to regain part of the dues revenue value lost to inflation over the past 10 years. The base dues rates will increase by just $150 per year for Full and Mid-level members and $100 to $125 per year for Associate members.

Beginning in 2016, the AEM Board will review and adjust dues rates based on CPI to maintain the value of dues revenue in the future. The dues caps for Mid-level and Associate member categories, which have not been adjusted for many years, will also be increased.

Membership and the New Financial Model

Finally, a priority will be placed on membership retention to reduce annual losses, with an emphasis on recruiting the right companies that would get the most benefits from AEM services and activities. AEM has averaged almost 100 new members annually for the past five years while losing most of the gains – an average of nearly 80 resignations or non-renewals annually – which undercuts our recruitment success.

With improved retention and a return to our original strategic goal to increase membership to 1,000, we will initiate actions for a new, longer term goal of reaching 1,200 members by 2018. Membership will improve by a net gain of 50 members annually and contribute to the growth in dues revenue.

Importance of a New Financial Model

This past year, AEM members have witnessed several hard-won legislative victories such as the passage of a fully-funded two-year transportation bill and three foreign trade agreements. AEM-led projects like the Agricultural Industry Electronics Foundation (AEF) continue to thrive and pay dividends for member companies.

New trade shows like AG CONNECT Expo & Summit are building momentum, and services like statistics, market intelligence and global business development enhance our ability to plan and grow our businesses. The I Make America campaign has given our industry a voice and enhanced our ability to engage with members of Congress.

There is much more on the horizon, of course. Legislative and regulatory threats to our industry abound. However, by understanding the importance of the new financial model and giving AEM the firm financial foundation that it needs, we will ensure the products and services we require to succeed. I hope you will join me in expressing your support.

Sincerely,

Rusty Fowler
AEM Chair

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