Image Source: Pixabay
 

The Girl Scouts will raise dues from $25 to $65 over two years. That’s a whopping big percentage increase and a lesson for businesses as well as other non-profits.

This increase will occur in two steps, the first in 2026 and the second in 2027. It’s the first dues increase in eight years. The Consumer Price Index has increased by 29% over the last eight years. Adding in the inflation expected in the Survey of Professional Forecasters compounds the total price increases to 39% since the last dues increase. It seems obvious that a dues would need to be increased by some amount, but that’s not the whole story.

Other non-profit membership organizations have faced the issue, including athletic clubs, service clubs and fraternal lodges. Leadership wanted to keep dues level despite rising costs. Eventually they looked at the books and realized that their financial model was unsustainable.

Two issues should be addressed in cases like this. First, avoiding dues increases will lead to member anger when fees are eventually raised by a large amount. In the decade before the pandemic, inflation was fairly low, just 1.8% annually on average. But over ten years that compounds to a 19% increase. In most organizations, members wouldn’t object to two-percent dues increases every year. But they squawk at a 20% increase. Small annual increases are accepted by people who see the same in their utility bills, grocery costs and earnings.

Members of non-profit organizations—and customers of businesses—pay money for valuable goods and services. Parents believe that the Girl Scout experience benefits their daughters, and virtually everyone understands that costs go up over time. No one, though, likes to be surprised by a large increase.

The second issue to be addressed is the long-run viability of the organization. A background document on the Girl Scouts fee increase noted that the national organization has been running at a deficit, dipping into reserves. A deficit in any organization, whether for-profit or non-profit, must be a wake-up call. Some deficits are clearly temporary, others clearly permanent if no changes are made, with yet others of uncertain nature. Assessing the likelihood of temporary or permanence should be the board of directors’ first chore.

In addition to assessing short-term financial health, all enterprises regardless of their profit goals should assess their long-term viability. Will the current revenue model and expense structure enable the organization to continue for the next five to ten years? If not, or if doubtful, then changes should be made sooner rather than later.

For example, the Girl Scouts reported some rising costs that were independent of the number of active scouts, such as for technology. That makes membership revenue crucial. Falling membership with fixed costs makes for losses. To some extent, costs that are not linked to revenues inevitably occur in any organization. However, the existence of the mismatch should be a risk recognized by leadership.

A simple example would be a non-profit that signs a long-term building lease to provide services. If revenues are not sufficient, the organization is in trouble. In contrast, another organization might use short-term rentals to better match expenses with revenues. In the long run, the long-term commitment would usually be less expensive, but also more dangerous. The amount of cushion drives the choice. An organization making substantial net earnings (what businesses would call profit) and with large reserves (retained earnings) has cushion against temporary downturns. An organization budgeting for very low net earnings, and with small reserves, must be quite cautious in its commitments.

What the Girl Scouts should have done cannot be determined by an outsider. I certainly don’t know. Perhaps this big dues increase is the right choice. But the experience of a well-respected organization should alert the leaders of other organizations to assess financial issues. The staff and volunteers of an organization are typically passionate about the mission, and the mission of Girl Scouts is admirable. But a great mission is not enough to provide value. Someone has to crunch numbers and make difficult choices.

More By This Author: