Many of Optimal’s longest-standing clients are trade and professional associations in the DC, Maryland, and Virginia area. After working with these types of organizations for over two decades, we’ve become quite familiar with not only how associations are unique in the nonprofit arena, but also how technology tends to play a critical role in achieving their mission.
Whether your members are businesses or professionals in a particular industry, your association’s revenue is directly tied to maintaining and increasing your member count. In some cases, this translates into using technology to gain competitive advantage in your space. In other cases, technology is the only means by which you can possibly keep all of your members’ data straight, and communicate with them effectively.
With such a heavy reliance on technology as a driver of your mission, it becomes all the more important to create an accurate and detailed budget to guide your investments over the next year. Below we’ll walk through both the characteristics of a successful IT budget, as well as what technical elements need to be accounted for in your plan.
Characteristics of a Successful IT Budget
These guidelines can apply to all kinds of budgets, but are essential to keep in mind when creating your association's IT budget nonetheless:
1. It’s realistic. This goes both ways—your technology can’t function on $5/month, and you cannot logically complete 20 million-dollar upgrade projects in the span of one fiscal year. As a guideline for associations, we recommend using 3-4% of your revenue as a yardstick for your annual IT investment. If you are in a growth of heavy change mode, you should spend more towards 6-7%.
2. You can use it as a launching point for the next year. When you get to the end of your fiscal year, will you have something to measure against to see how well you did? Places where you could have reallocated? Your projections should be detailed (we’ll help with that next), and you should track their development over the course of the year.
If you can manage it, include a forecast for the following two years with your annual budget. These projections need not be as granular, but they should account for any of the following large capital expenditures.
Capital Expenses to Consider for your Association
What one-time capital investments do you need to account for when creating your budget?
1. Software. Do you use an Association Management System to track your member data? Is this software due for an upgrade? What about your accounting software? Will you need to purchase any Microsoft Office licenses? Anti-virus?
2. Hardware. How old are your servers? Your workstations? Will any need to be replaced? What about ancillary devices like your firewall and copiers? Are there any expiring warranties that you’ll need to extend?
3. Labor. In most all cases, these upgrades will require a separate labor investment. Whether you have an outside consultant evaluate your AMS software selection or have your existing IT team physically implement your hardware upgrade, be sure you account for their time as well.
Operating Expenses to Consider for your Association
What are you putting into your technology systems on an ongoing basis?
1. Internal IT Staff. Do you have an IT team in-house? What are their salaries? What sort of training might they need to complete over the next year?
2. Managed Services. Do you pay an outsourced team to take care of hardware monitoring and maintenance? Helpdesk? Off-site backup of your member database? Will your provider’s current rates stay the same, or will you need to plan for an increase?
3. Hosted Services. Is your website hosted by a third party? Do you use a hosted email solution? Or do you have a complete hosted desktop environment where your infrastructure is off-site? Will these investments stay constant?
It’s a lot to consider, and does require a deep understanding of your association’s technologies and how they function. This is why it’s important to work with the people who will actually be performing all of this work so that you’re sure all is accounted for, and that your cost projections are as accurate as they can be.
Wherever possible, leave wiggle-room in your budgets to allow for emergencies or unexpected needs; while you may have allotted funds for a few new workstations, where would you be if your database server crashed?
Creating your IT budget is an intricate (and sometimes painful) process, but don’t be discouraged—the value you’ll get out of a comprehensive and thorough budget is more than worth the effort.