This is a long and somewhat complex newsletter and it is geared toward private or semi private clubs (those that sale memberships) but it may just save your club...

     Sometimes you see something so obviously stupid that you can't believe it continues to occur. Yet almost every single private (and semi-private) club start their memberships on January 1 and expire them on December 31. If a member does not resign prior to the new membership period, they are in for the next year. Why does just about every club with private membership do this? Simple... because they always did it that way.

     So, as a member you get used to being auto-renewed every January 1 and you are obligated to pay dues until December. If you want to resign, you need to do so 30 days prior to the next annual renewal date. A new member joining during the year may pay initiation, bonds and pro-rated membership until the end of the current year and then you start the annual membership with the rest of the sheep err... members.

     For the club, this keeps the billing process and contractual process a once a year chore that is somewhat easy to manage - shearing the sheep in the spring.

A simple example:

     Let's say you have a club of 360 members who pay $10,000 per year ($833 per month). We will keep initiation, bonds and other revenue out of the picture for this exercise. Let's assume this club is up north (since it makes the story more interesting).

     Income on Annual Membership = 360 x $10,000 = $3,600,000.

     You expect some attrition (let's say 5%) and some new memberships to make up for that. However, imagine we have an unusual event (think 2008-2009 economic crisis).

     So on December 1, 2009, you get an unusual percentage (let's say 25%) that resign because they either don't have the cash, or their job and/or financial security is uncertain, or they are just panicking... so they want to opt out.

     Now all of a sudden you have 90 members resign... 90 x $10,000 = $900,000.

     You are now running your club for 2010 on $900,000 less (bottom line if you spread out a membership over 12 months is you are short $75,000 for the month of January and every month thereafter until you recruit some new members)!

     According to the experts, there are at least 500, and as many as 1,000, private clubs facing these kinds of problems today and not expected to survive the next year. These (and others) are trying all kinds of incentives to get people to join their clubs (waived initiation, lower fees, incentives, etc.) to recover the loss from resigning members, but most are missing the very thing that everyone is doing to compound this risk. They run the membership from January 1 thru December 31.

     Why this is stupid:

     Follow me on a new path of risk management of membership. Let's take the same core group of 360 members. However, instead of every membership contract starting on January 1 and ending on December 31, let's say the population was evenly distributed over the 12 months of the year (stay with the premise, we will discuss how you make that happen later).

     So in January, we have 30 members (360 members/12 months) whose membership starts on January 1, 2009 and runs to December 31, 2009.

     In February, we have 30 members whose membership starts on February 1, 2009 and runs to January 31, 2010.

     In March we have 30 members whose membership starts on March 1, 2009 and runs to February 28, 2010.

     Etc., etc., ...

     ...Roughly 8% of your membership is up for renewal each month instead of 100% of your membership up for renewal January 1.

     Why this is significant:

     Now, for any given event (financial crisis) at any time... a Maximum of 8% of your membership (30 members) could resign. And by comparing statistically (25% of those eligible resign due to a significant event) only 7 members of those 30 would potentially resign.

     Understand that this does not resolve the underlying issues - it only manages the risk. So you may drop 7 members in one month (now you are only short $5,800 for the month of January vs. $75,000) and you may face the same the following months. What this model does is give you time to recover vs. losing 90 members in January and trying to recover when you may even be closed due to snow until March (the clubs up north factor)!

     How do you get there:

     Now, most everyone from your bookkeeper to your board will say, "that is not possible at our club because we are special and we have always done it the old way, blah, blah, blah..." "Further, how could we ever change all of our processes, plus everyone is already on the January through December timeframe -- our members would never put up with that, blah, blah, blah..." and a thousand other excuses and objections (Note: read "Desperately Seeking Members" to see how your club is EXACTLY like every other club... your membership is not that special!)

     First off, we are no longer playing the same game. Resignation lists are replacing waiting lists, so we can no longer play under the old rules. If you are not willing to change the rules, get out of the game. For every 10 clubs that fail, there will be a few that barely survive and maybe one club that thrives.

     The immediate action would be, for any and all new members, you no longer pay monthly dues until the end of the year and then go on the January-December contractual billing schedule. You now pay pro-rata until the end of the month and then you go from the 1st of the following month until the last day of the month one year later. So, if I join on June 15, I pay a pro-rata for the remainder of June and my membership actually goes from July 1 until June 30 of the following year. Note that this method also gets the club an additional 2 weeks of membership (you sell a 1 yr + 2 week membership vs. a one year membership)!

     If you are in good shape today, this may be all you need to do. If you are on shaky ground, a heart-to-heart with your membership is required to distribute members across the calendar year. Members are owners in most private clubs. If they understand the long-term survival of their club relies on the change and that it has no financial impact on them, they will go along. This does not need to be an additional burden on the members; you are simply shifting their contractual obligation dates. In fact, for those on the fence, it may get many to stay for at least their interim contract period. For example, I am in the group that moves to June of 2010 as my start date. On January 1, I get a 5-month membership. This gives me the option to bail prior to June 1 or sign up for an additional year starting June 1 and going through the end of May the following year.

     [Side-note: CPS uses this same model with one modification. We believe so much in our product and service that we dropped the contract all together. You just pay a simple monthly number for as long as you like. Result is that even in this economic crunch we have just had two of our best years ever!]

     If I have lost you, read the above a few times. It is important to understand the dynamics of the associated risk. It is like putting all of your money into one stock vs. a diversified portfolio to minimize risk.

     Ok... if you are still with me, the next logical objection is, "How are we ever going to manage all of that?"

     The short answer is that if you are on POS Express v3, all you need is the new "CPS Elite Billing Module" and you're good to go. Here is how it works:

Step 1: Setup an inventory product to sell for your membership(s).

     Here, I set up a Resident Family Dues product. It is important to set the Item Type to Membership Dues. I priced this item at $833, which will be my monthly dues amount.

     Now click on the Dues tab:

I am going to set the Pay Method to Member Account.
Check the box for Prorate month #0.
Set the Manually paid months # to 0.
And set the Auto paid months # to 12.

     This will set up a yearly membership that will require the new member to pay the balance of the current month and begin his membership on the first of the following month. These parameters offer a lot of flexibility but I will leave that topic for an advanced lesson.

     Let's go sell this product to a customer.

     I bring up my member (Bobby Jones) and sell him the family membership we set up above. We priced the DuesRF product at $833/month (or approx $10,000 per year), which is reflected in the Price of the line item. So why does the Extended price come out to $416.50? I sold this product on November 16, 2009. The system will prorate the remainder of the month and compute the percentage of the line item to charge. In this case Qty = .5. So I am paying for the remainder of days in November. My actual membership starts on December 1 and will continue for 12 months expiring on November 30, 2010. So in this case I not only sold a yearly membership, I picked up an extra $416.50 by selling an additional 2 weeks in the process. Finalize the sale and select Member Account as the payment method.

     Let's take a look at the effect on Bobby's account. In the Ledger is today's sale for the prorated portion of the remainder of November with the $416.50 debit to his account.

     Nothing new here, but let's take a look at the Recurring Charges tab. Here we see that the Item Code DuesRF is listed in Recurring Charges and that we will Start Billing December 1, 2009 and Stop Billing on November 30, 2010. Click on the Edit button to see the details.

     Note that the billing will start on December 1 but that the membership actually started on 11/12/09. Starting on 12/1/09 and going through 11/30/09, Bobby will be billed $833 each month as the Recurring Charges are run. The Last Charged date will be updated as each month is processed.

     To run the billing cycle, go to the Sales screen and from the Menu Bar, click on Sales > Recurring Charges:

     Select the month and year you want to bill for and click the Charge button. Each member with an associated Recurring Charge will be billed as defined for the amount and billing dates.

Sound appealing? It should! Next step... Get the CPS Elite Billing Module added to your system. Call Mike Stanovich at 800-793-1872 or email him at Mike@ClubProphetSystems.com and stop the bleeding.

Until Next time,

Enjoy :)