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RAE’s Ultimate Nondues Revenue Guide

January 1, 2012

Moneymaking program ideas, tax concerns, setup tips

Associations facing another year of shrinking membership and revenue need new ways to make money to fund association programs, pay staff, and stay viable. Although many associations have raised dues, no one wants to over-tap cash-strapped members. There are, however, other opportunities to generate revenue from sponsors, advertisers, -community groups, consumers, and businesses. Here we feature ideas for associations of all sizes. Although the programs below are moneymakers, also look here for ideas for free member benefit offerings, budget permitting. Ultimately, remember that no nondues revenue program is right for every association. Each one takes careful planning and should be tailored to an association’s unique needs and strengths.

Hot-topic classes

Classes are the most common revenue generator for associations, but they’ve taken a big hit in the recession. Associations say attendance is way down, and once-robust offerings are being cut. But there’s still opportunity, especially in hot topics, which remain short sales, foreclosure sales, and marketing with social media. Save on costs by tapping experienced members as speakers, charge just a nominal fee, and seek sponsors to provide snacks, coffee, or lunch.

Sign up more affiliate members

Some associations allow only licensed real estate practitioners to be members while others have a robust system of affiliate memberships to attract corporations and businesses. From dentists and jewelers to software manufacturers and home-builders, associations’ membership types can increase revenue and build a pool of potential sponsors and advertisers. (Read more on the right way to build affiliate memberships at http://www.REALTOR.org/eomag.nsf/pages/affiliatewi05.)

Home office services

Many brokerages are abandoning established office space as a cost-cutting measure, in favor of promoting home offices. Working from home, however, can leave members with new expenses. Fill this need by offering brochure design and printing, letterhead printing, and Web site hosting and e-mail services. You can also rent dedicated cubicles or space at your association where members can work on occasion.

Offer niche market training and certifications

As markets continue to strive for stability in many parts of the country, members are eager to diversify their business and explore commercial or international ventures. Classes and certifications in these and other niche areas may prove a profitable new offering. Niche offerings are ideal for launching an education partnership program with neighboring associations.

Tip: Watch the Overhead

In any revenue program, don’t overlook overhead expenses. The labor and resource costs of providing a member service can easily eat up a small profit margin built into the service fee. Your overhead costs will probably be reduced if you offer a larger number of services, since you’ll be able to spread out the costs.

Sponsored Webcasts

How you deliver education is also important to the bottom line. Virtual classes and Webcasts are becoming more popular as state licensing agencies approve the use of the Internet in continuing education. These vehicles are often cheaper and more convenient for members, in addition to being especially ripe for sponsorship by companies that want to sell your members online video capabilities, such as virtual tours.

Rent space

For associations that own property, renting out conference centers, meeting rooms, or other office spaces can bring in significant revenue. Some associations have built state-of-the-art conference and training facilities for just this purpose. Associations with technology education centers have attracted students from neighboring boards to their hands-on classes. Associations that own their own small office buildings often designate an amount of rental office space that pays for building maintenance and taxes. Associations also purchase property, such as parking lots, homes, and offices, as income streams and long-term investments.

Tip: Don’t Bite Off More than You Can Chew

Make sure in advance that your association’s operational infrastructure can handle all aspects of your planned revenue-generating program. For example, if your program involves billing salespeople directly for a service, be sure that your association’s bookkeeping system can be modified to accommodate that practice.

Boost attendance with discountsAEs have found that marketing educational programs to members with incentives, package deals, and discounts is key to filling classrooms. Some promotional strategies to attract new students include offering flat-fee annual education passes, deep discounts for early-bird registration, and buy-two-get-one-free sales. Additionally, lure members with evening and weekend classes, food, and the promise of networking time.

Build the association store

Selling everything from forms to software has proven profitable for associations large and small. Associations often use their size to negotiate better prices. A successful store keeps prices competitive, orders what members request, advertises sales and new items, and offers delivery and new-member gift certificates.

TIP: Associations often use their size to negotiate better prices and buy at wholesale prices. Some association stores buy office supplies in bulk and resell them to save members a trip to the office supply store; others sell specialty items such as REALTOR® jewelry, logo coffee mugs, and membership plaques. A successful in-office store is located so that it’s visible to all member traffic through your office. Virtual stores allow associations to sell their products nationwide and possibly reallocate the space used by an actual store. Associations can buy NAR publications, videos, guides, reports, and manuals at wholesale prices (10 to 30 percent below retail) for resale to members and nonmembers.

Profits from the peripherals

To aid struggling practitioners, many associations are offering more free and low-cost education classes. The resulting budget shortfalls can then be partially remedied by peripheral revenue opportunities, such as obtaining event sponsorship, opening up the class to nonmembers, and selling session recordings, collateral materials, and tabletop exhibit space. Some associations even sell coffee and baked goods during free sessions.

Sign up sponsors

The key behind association sponsors—whether they sponsor an event, a T-shirt, or a podcast—is to have them cover the costs of an event fully, enabling you to make a small profit on peripherals, such as registration fees, raffle ticket sales, or food and beverage sales. Ideally, sponsors are businesses or companies that have a logical and meaningful tie to your members, but stay open to new opportunities. (For more on building a profitable sponsor-ship program, visit http://www.REALTOR.org/eomag.nsf/pages/eventsfa06.)

Sell staff expertise

Even though your job is to run the association, you’ve developed expertise over the years in other areas that your members need. Offer consulting, for a nominal fee, to member brokerages on everything from running sales meetings to motivating staff and forecasting the market. Your tech and communications staff can sell their expert consulting as well, and not just to members but to other associations and community groups, as well.

Affinity programs

A popular strategy among associations is to collect revenue by permitting companies, such as wireless phone providers or computer hardware makers, to market directly to your members in return for offering members a special rate or program. Partnerships with service providers and product vendors can offer associations great returns, often with little or no effort. The key to profitable affinity programs, AEs say, is to support the partners and make sure the service is one that members want. (For more on how to set up affinity programs, see http://www.REALTOR.org/eomag.nsf/pages/marketwi03.)

Sell advertising

In addition to print publications and brochures, associations generate advertising revenue by having sponsors for their e-newsletters, as well as advertisers in their online publications and on their Web sites. In fact, eMarketer, the Internet marketing research firm, says online advertising is on an upswing fueled by advertising in social media spaces. Package your varied advertising opportunities to offer maximum appeal to sponsors.

Tip: Your Revenue Mantra

My association’s products and services must be unique products and services that members are willing to pay for. They must be actively marketed, and should be less expensive, of better quality, or more convenient than those offered by the competition.

Tap the consumer audience

Your membership represents your area’s number-one knowledge base on home buying, home selling, and real estate values. Tap this knowledge to develop sessions for home buyers and sellers on everything from decorating, staging, and remodeling for value to real estate investing and using online tools for home searches. Attract consumers to your association for how-to classes on home improvement, perhaps sponsored by the local Lowe’s, or home security tips sponsored by a local security company. The possibilities are endless.

Mailing list rental

Vendors, researchers, and allied industry professionals all want to get their message to your members. This makes your membership list a valuable piece of data. Renting member mailing lists an or e-mail list can provide a steady revenue stream, but make sure that you strictly control the list’s use. Require list users to provide you with an advance copy of the material they’re sending to members to make sure it is business-related and relevant to your members. Members’ names, e-mails, and addresses should never be provided directly to the entity renting the list. Rather, the names and addresses are provided to a bonded third-party direct mail organization that handles the mailing. This ensures that you retain control over the data. Remember to always enable members to opt out of having their e-mail rented.

Fee-for-service business support centers

Fee-for-service business support programs or centers are a way associations offer specific services to the members who are willing to pay extra for them. Associations have created these support centers (many of which are separate for-profit organizations) to offer the broker community, in particular, special rates on technology services such as DSL hookup and consulting; office services, such as printing and supplies; and education services, such as sales meeting facilitators or marketing trainers.

However, if you can’t offer services better, or cheaper, than anyone else, you probably won’t profit.

Tip: Learn What They Want

Keep in touch with changing member needs through member surveys, focus groups, and tracking data on actual use and demand for the products and services offered. Be prepared to drop a service if it becomes outmoded, inefficient, or unpopular.

Bring back the cocktail party

Associations report a resurgence in the popularity of membership social events, both free and for a nominal fee. Five years ago, associations were slashing Christmas parties and happy-hour networking sessions because overworked members didn’t have time. Now they do. Social events where a sponsor picks up the food and beverage tab and the association advertises its classes, certifications, or other products are a win-win.

Homes magazines

Even if you don’t have an MLS, you can still offer members this alternative way to display their property listings. Members buy space to display photos and descriptions of their listings in a print publication that is distributed free at local stores and business. Homes magazines are especially popular in tourist areas. Either publish the magazine yourself, share advertising profits with an outside company that produces your magazine, or rent data on listings to local newspapers who create their own real estate section.

Have other ideas that worked at your assications? E-mail them to me and I'll list them here. (e-mail to cschwaar@realtors.org)

What you need to know: Nondues Revenue and the IRS

If your association is a nonprofit organization, you know that section 501(c)(6) of the U.S. tax code allows you to operate and not pay most federal income taxes. The downside is that a substantial amount of your activities must be related to the association’s tax-exempt purpose, which is generally to improve the business conditions of the real estate industry and its members as a whole.

Activities such as meetings, educational programs, publishing, and even trade shows generally are considered related to a REALTOR® association’s exempt purpose and any net income earned on them is not taxable. In fact, there are no limitations on how much nondues income an association can generate, provided that the activities generating the income are related to the association’s tax-exempt purposes. As a practical matter, though, an association that earns an extraordinary amount of income on such activities may jeopardize its exempt status.

Tax-exempt associations can engage in revenue-generating activities that are not related to their core purpose (for example, operating an MLS) but have to pay taxes on those revenues. An association can risk its tax-exempt status by becoming more than “insubstantially” engaged in nonrelated revenue-generating activity (referred to as unrelated business income), which can raise red flags at the IRS. When unrelated business income predominates, an association appears to be in business for unrelated purposes, rather than exempt purposes. (For more on not-for-profit, for-profit, and all the tax classes in between, visit http://www.REALTOR.org/eomag.nsf/pages/ProfitFA01.)

In addition to making too much money and making it on activities outside of your association’s core mission, there’s another tax factor to watch out for if your association is a nonprofit. It’s called inurement, and RAE covers it in great detail here: REALTOR.org/eomag.nsf/pages/legalsu07. But in brief, inurement is any activity that may benefit some members over others; for example, promoting specific brands or products to the benefit of individual members or entering into unusually lucrative agreements with association directors or officers. A second type of inurement is called the “performance of particular services,” which occurs when the association provides the member with something he or she otherwise would have to buy for his or her own business. Rather than bettering the industry as a whole, this service benefits an individual. This sounds a lot like our recommendation on p. 17 to make a profit off of selling office supplies to members, but with the performance of particular services, the association risks losing its tax-exempt status only if the service is a “primary activity.”

Making Money with NAR

NAR and some of its REALTOR Benefits® Program partners offer exceptional opportunities for earning non-dues revenue—participate in all of them for the strongest return.

REALTOR Team Store®, NAR’s official supplier of REALTOR® premium incentive products and promotional items. REALTOR Team Store® offers associations a way to earn nondues revenue: Your members receive 5 percent off of all REALTOR Team Store® products and your association receives 5 per-cent of what members spend (excluding tax and shipping). This offer is valid only for member purchases, not board/association purchases. To learn more, e-mail: jordan@teamstoreonline.com.

REALTOR® University’s School of Professional Development & Continuing Education is NAR’s online -education destination. Promote REALTOR® University to members through your association’s Web site and earn 15 percent from course registrations and 10 percent from digital products if a student clicks and purchases from the special REALTOR® University link on your Web site. To learn more, e-mail: realtor
university@realtors.org.

DocuSign, the official and exclusive e-signature provider for NAR members: Now associations can earn nondues revenue by promoting the DocuSign for REALTORS® editions to members. Through your marketing efforts using materials provided by DocuSign, you will be compensated based on the number of paid members tracked back to your unique registration link. To learn more, e-mail: mike.pressnall@docusign.com.

zipLogix, creator of zipForm® real estate forms software, zipForm Mobile, zipVault® document storage, and relay® transaction management tool. With zipLogix solutions, state and local associations receive a range of flexible licensing, partnership, member benefit adoption, and non-dues revenue share opportunities. To learn more, e-mail: wwaldrep@ziplogix.com.