AMC-Management Model Has Advantages over Non-AMC Models

The results are in – AMC-management model generated more consistent operating surpluses and grew reserves to a greater extent between 2006 and 2015 than did the non-AMC-model (i.e., directly employed staff and full financial responsibility for occupancy and capital costs).
(Full report here…)

For those familiar with the AMC-model, this is not a big surprise. What is newsworthy about the results is that we have credible evidence about the advantages of the model for associations. These results add to previous studies conducted in the past decade showing that the AMC-model is both the less-expensive alternative to hiring staff directly and shouldering all operational costs, including capital purchases, but also the more productive association management model. In short, the non-AMC model is overpriced and under-performing!

These latest results lead to a more interesting set of questions: Why does the AMC-model outperform the non-AMC-model? What’s the AMC-model’s ‘secret-sauce”?

Continue reading AMC-Management Model Has Advantages over Non-AMC Models

Is There a New Normal — Not So Much

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OVERVIEW:
For years the association community has been treated to passionate claims about how the world has been changing, resulting in a new normal or paradigm shifts and how our organizations will become extinct if we don’t change our “membership model,” or “give it all away.” Do these dooms-day claims have merit? Not according to how the community of associations were actually led and managed over the last two decades! According to the data, the association model is still strong and vibrant and not facing extinction.

Download the entire report as a PDF document:
NewNormal-Not-So-Much-print.pdf.

AMCs Manage Client Bottom Lines Through Recession


OVERVIEW: After adding 990 tax return data for 2010 to the original study, we learned that organizations managed by AMCs essentially left the Great Recession behind in 2009, returning to pre-recession operating levels of performance in 2010. Conversely, standalone organizations were still struggling to recover from the recession. We also learned more about the whys of these trends. Basically, the AMC-model was more adept at adjusting expenses to match revenue.

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AMC-managed Associations Continue to Show Resilience During Recession


OVERVIEW: After updating last year’s study with 2009 data the AMC-model continued to provide better protection than the standalone-model against the impacts of the second year of the recession. In this updated report, revenue and expense trends were also analyzed for both association groups over the four-year period revealing that the AMC-model was better able to align expenses and revenues than the standalone model.


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IMPLICATION: Standalone organizations up to $5M in annual operating revenue should answer one question: “Are we receiving a return on investment in our management model, given that on average we may be spending 50% more for that management approach than if we were managed by an AMC — especially given the performance benefits produced by AMCs?”

AMC-Managed and Standalone Organizations — A Sibling Study


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CONCLUSION: Based on a comparative analysis of two parallel operating ratio studies of AMC-managed and standalone organizations, AMC-managed organizations reap considerable qualitative and quantitative advantages for membership-based organizations up to $5M in annual revenue. These results are likely valid for organizations above $5M in annual revenue, however, there was not a sufficient number of organizations above $5M in the study of AMC-managed organizations to draw any conclusions about those organizations.
 
IMPLICATION: Standalone organizations up to $5M in annual operating revenue should answer one question: “Are we receiving the return on our management model investment, given that on average, we may be spending 50% more for the resources to manage our organization than if we were managed by an AMC?”

AMC and Standalone Organizations – a Sibling Study

Are AMC-Managed Organizations Recession Resistant?

Based on results of recent study, it appears they are!


OVERVIEW: The current economic climate is having an impact on associations, just as it is on virtually all business sectors. This paper reports on a recent study showing that until 2007, about 30% of all organizations up to $5M in annual revenue operated at a loss. But, organizations that employ their own staff, lease their own office space and incur their own capital expenses (aka: standalone) were nearly twice as likely to have ended 2008 with deficits than AMC-managed organizations. More than 50% of standalone organizations with up to $5M in annual operating revenue operated at a loss that year! The reduction for AMC-managed organizations between 2007 and 2008 was a nominal 7% — two-thirds of AMC-managed organizations reported a surplus in 2008! Therefore, the answer to the question posed in the title would seem to be a resounding “yes.”

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IMPLICATION: Standalone organizations up to $5M in annual operating revenue should answer one question: “Are we receiving a return on investment in our management model, given that on average we may be spending 50% more for that management approach than if we were managed by an AMC — especially given the performance benefits produced by AMCs?”

More on ‘AMC Clients Measuring Up…’

Michael LoBue writes: Last month I shared the comparative analysis between AMC-managed clients and standalone organizations in terms of key performance indicators. This post contains a slightly more refined grouping of the standalone organizations — the following will be included in a soon-to-be released white paper discussing about 13 different comparisons.

Net Profitability
Figure 5 below reveals that in the case of organizations up to $1M in annual revenue, AMC-managed organizations enjoyed a nearly 10-fold increase in their profitability vs. organizations under the standalone model, which was barely profitable at a half of a percent. This gap closes considerably for organizations between $1M and $5M in annual revenue, but AMC-managed organizations still enjoy a 33% greater rate of profitability at 8.4% vs. standalone organizations at 6.3%.

Operating Efficiency
Operating Efficiency is charted in Figure 6 below. According to the ASAE Operating Ratio 13th Edition, this ratio “tell us how many dollars in revenue are being generated by each dollar of assets employed in running the organization.” This comparison reveals that in the case of organizations up to $1M in annual revenue, the operating efficiency ratios are comparable between the two management models. However, in the case of for organizations between $1M and $5M in annual revenue, AMC-managed organizations at 1.3% are enjoying a 38% better level of efficiency than standalone organizations at .94%.

Leverage
The last metric in this series of key performance ratios is Leverage. This is often used when evaluating an organization’s need and/or ability to borrow funds. Given that most associations would not seek to acquire debt to support operations, like a profit-driven organization might, leverage then can be a useful proxy for general operating risk. In this case, a lower ratio is probably more desirable. This ratio is derived from dividing total liabilities by total fund balance; thus, the higher the ratio, the less able the organization is cover its commitments.

Figure 7 below reveals that for organizations between $1M and $5M in annual revenue, those AMC-managed organizations enjoy a slight, but probably insignificant edge over standalone organizations. Whereas, for organizations under $1M in annual revenue, those managed by AMCs appear to operate with 25% lower risk profile than organizations using the standalone model (.25% vs. .40%).