Budgeting

Will it Fly?

One of my favorite business books is Will it Fly by Thomas McKnight, who among other ventures helped create the popular newspaper USA Today. As a serial entrepreneur and investor, McKnight decided to publish a book to guide new business owners around common missteps and pitfalls when starting a new venture. Someday I’d like to write a version of this book just for associations [after all, just because you can create a 501(c)(6) organization, it doesn't mean you should.] Until I get around to that project, I’ve boiled my “Will It Fly — Association Edition” list to four main topics:

Define Your Purpose. Why are you forming this association? In particular, what significant, critical need is currently going unserved in your industry because your association doesn’t yet exist. Be very honest about this: all the energy and money in the world can’t save an association that lacks an essential purpose.

Find the Money. Even if your idea passes the Why test, how will you fund this organization? And not just in the first year? Develop a realistic two-year operating budget and then see if this idea still seems realistic. [Note: Counsel from an experienced AMC partner such as Virtual can be invaluable in this task.]

Build Critical Mass. Before taking any steps forward, make a list of at least 20 companies that need to become members of your organization. Of those 20, don’t even consider launching without a firm commitment from at least 10 of those organizations — and ideally in writing. Too many organizations fail to ascend because of the proverbial chicken-or-egg problem (i.e., we’ll join as soon as those other guys do). Make sure you navigate around such hazards before steaming ahead.

Bring Your Enemies In. When working on the critical mass problem, care should be taken to try to assemble a strong and diverse cross-section of industry players. A new initiative related to mobile phones, for instance, may suggest the need for quite a wide range of players (network operators, OEMs, chip manufacturers, component suppliers, etc.). More than that ensure your budding organization has competing interests in each segment or area of interest. Competition will not only balance the perspectives of your organization, but it will almost certainly ensure lively and engaged discourse among members — a hallmark of nearly all successful groups.

Without a doubt, there’s some heavy lifting embedded in these four tasks. And it will certainly take time to work through them. For instance, depending on the subject matter or the intellectual property involved, some larger companies might need months before they can membership commitment. Failing to do this ever-important homework before plunging ahead with formation, however, may well lead to a crash landing.

Virtual, Inc. frequently provides guidance and incubator services to organizations pre-formation.

Starting a new industry association or consortium is a complex endeavor, especially in the critical first few months. If you are starting ‒ or planning on starting ‒ one of these types of organizations, this webinar replay will provide you with advice on how to get your group successfully off the ground and drive it forward. Continue reading »