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?"
WHAT IS THE STANDALONE-PREMIUM?
The standalone-premium is the difference organizations pay for essentially owning their resources, such as: hiring their own staff, owning or leasing their own office space, and spending their scarce revenue on capital goods like furniture, furnishings and IT resources. From the perspective of the standalone organization, this premium is, on average, about 50% higher than what the organization would pay to an AMC in fees for the same basket of resources they buy today. This is the "rent" vs. "buy" option.
Example: If standalone organization "A" pays about 45% of their revenue for the basket of management and support services, it could obtain those services from an AMC for about 30.5% of their revenue. These comparisons are "industry averages" and therefore could be lesser or greater depending on specific circumstances.
For more information about whether an AMC is right for your organization, contact L&M for a no cost, no obligation conversation with us. If we're not the best fit for your organization, we can refer you to other excellent firms in the field that may be a better suited for your challenges and opportunities.