The Guide to Membership Fees for Nonprofit Organizations
When you are creating a membership program there are several factors you must consider: the associated benefits, how you will communicate with members, membership rights, how you will manage membership information, and the price associated with membership.
To make it easier for you, we have assembled our best tactics for determining the right membership fees for your nonprofit organization!
In this article we will cover:
Here we go!
Benefits of Membership Campaigns
Before diving into how you will form the pricing structure of your membership, you should first understand why you decided on a membership structure for your organization to begin with.
Other than the benefits that are specific to your organization, membership structures have a couple of perks for every type of nonprofit. Specifically, they allow you to:
Receive funds immediately. Because memberships are usually defined in terms of campaigns or programs, a member will enroll and these funds will be automatically available to your organization. The amount you receive does depend on the payment options that you chose to offer (keep reading to find out more about this), but no matter which plan you choose you will be able to access these funds upon enrollment.
Predict future contributions. These campaigns also allow you to determine the average number of members per year, and therefore how much funds you will receive from this revenue stream. This can help you in your strategic planning because you can predict your contributions for years to come based on past performance.
Membership structures have plenty of advantages, and defining your memberships can help you to realize benefits that are specific to your nonprofit.
The easiest way to do this is by considering the goals of your membership. To help you figure this out, we recommend answering the following questions:
What do you want members to receive?
How will this program help your organization?
How does it relate to your mission and vision?
By answering these questions you will be on the right track to understanding how a membership campaign can help your organization, and how you can define the program based on this.
Pro Tip: You don’t need to do this by yourself, in fact we recommend you don’t! Two minds are better than one. You may consider having a roundtable with other colleagues or board members to help you answer these questions! Getting a second opinion will allow you to see another point of view and realize benefits you might not have seen yourself.
How to Determine the Price
Figuring out how to set a price for your membership campaign can be tricky, but we have a few tips to help you find the best amount for your organization and members!
Connect Fees to Benefits
Now that you have a starting point of figuring out what your nonprofit can get from this membership, you should think about what you will give to make this possible.
The first step is to determine the benefits your organization will offer to your members in exchange for their membership. Most nonprofit membership programs offer a certain list of benefits in return for the price of membership. Usually these are centered around the organization’s mission, but can also include things like exclusive access to certain events.
For example, if you are a veteran’s association, your membership might include member exclusive events, newsletters, and member specific content. On the other hand, if you are a hiking club, you might incorporate discounts to local gear shops or a free national parks pass.
Pro Tip: When defining these benefits don’t hesitate to reach out to your community! Ask anyone that fits your member profile what they would want to be included with their membership. This will give you a better idea of what you should be offering and how much to charge for it, and also ensure that your members are engaged.
Once you have established a list of benefits, you can determine the cost of these perks to your organization. The easiest way to do this is to simply list each benefit and put the monetary cost to your nonprofit next to each item. When determining this, don’t forget about the overhead costs like staff salaries, volunteer onboarding, and facility operations.
The easiest way to calculate them for each benefit is to convert the benefit and the cost into units of time. For example, if your sports club is offering specialty coaching, you can decide the number of hours of coaching each member will receive, the time taken to advertise, how many hours you will be using a rental space, etc. and then convert your costs to hourly measurements (I.e. How much does the coach, rental facility, and advertising cost each hour).
The last step of connecting your membership fee to your benefits is to ensure you cover the costs of benefits, and make a margin on top of this. By profit margin we are referring to your ability as a nonprofit to cover the administrative costs associated with membership programs, and give back to the community on top of this. Keeping this in mind, your goal for a profit margin will change depending on the mission of your organization.
For example, if your nonprofit’s mission revolves around your members and their membership experience, you may only need to cover the cost of benefits and administration to manage the program. However, if your organization’s beneficiaries are those other than members, you may want to consider calculating extra room in the dues to give back to the organization.
Align with Member Rights
Along with offering benefits to members, many organizations also include selected rights in the membership. The most common version of this is speaking ability, like voting rights on organization decisions.
If you do decide to offer these rights to your members, consider adjusting your membership dues to align with this! Think of your members as stockholders and by paying a certain amount, they will have a certain amount of rights.
For example, if you want your members to have a high level of voting responsibility, like in electing board members, you can charge more than if you were to only allow them to vote on where your next event will be held.
Be sure to take membership rights into consideration, and modify your dues to reflect this!
Conduct a Market Survey
Another way to decide how much to charge for dues is to conduct a market study. These studies essentially enable you to find out what other organizations are charging for dues.
Using research like this will help you compare your nonprofit to other nonprofits in your area, and then help to determine how you can position your organization in comparison. Depending on the area that your organization operates in, these studies may be available for purchase, or you can find this information for yourself.
If you have the budget to purchase a study, we highly recommend this option. You will be able to find out information on membership dues, but also other valuable information like membership churn rates and average yearly membership.
If your organization doesn’t have the resources to purchase this, no worries! You can easily find this information yourself, it will just require a bit more of a time commitment. To conduct your own market study, you can check the websites of similar organizations in your area, or even call and inquire.
You might have to turn on your detective mode to find this information, but it is extremely beneficial when creating a dues estimate.
Localize Your Memberships
If your nonprofit is a national organization with local chapters or locations, make sure you consider local costs when determining the cost of your dues! This can include things like taxes, property cost, and the cost of living.
This is important because you need to be sure that you are able to pay for all of your administrative costs while also making sure your membership is affordable for your members.
Pro Tip: If you are a national organization, don’t hesitate to break down your dues to show your local costs! Members might wonder why dues are different in one state vs another, and it is important to be able to provide this information to them when they ask.
Consider Tax Regulations
When determining the price of your membership you will want to check your local tax regulations to be sure:
Membership dues are tax exempt. In certain cases the revenue from your membership dues could be classified as an unrelated business expense, and therefore are not tax exempt for your organization. When determining the purpose of membership programs you should keep in mind that to be tax exempt the membership campaign needs to be linked to the organization’s exempt purpose.
They are tax deductible. Just like you want to ensure that your organization doesn’t need to pay taxes on revenue from dues, you also want to ensure you are providing your members with the best chances for tax deductions. In order for your members to be able to qualify their dues as tax deductible, there needs to be proof that they are paying for more than the benefits they receive. For example, with the profit margin we talked about earlier, you should be able to show them how much of their dues are benefits based and how much is "donated" to the organization.
By considering both of these, it will help you ensure that both your organization and your members benefit from the tax policies.
Length of Membership
Depending on what type of membership your organization will offer, you can modify your dues based on the length of time that someone is a member.
For example, when we talked earlier about calculating benefits in hours, you could also do this for a period of months, and decide your membership dues from that.
It is also important to keep length of membership in mind when you are comparing your membership to other organizations. You should be sure to compare the same length of time when comparing dues!
Another option for nonprofit organizations is to consider offering a discount on dues based on the length of membership. For example, if a one year membership is $200 you could offer a two year membership for $300.
This can help you get funds faster, and also ensure the member stays with your organization for a longer period of time!
Online Transaction Fees
Another thing to consider when establishing the price of membership dues is to see the cost of online transactions.
Many organizations have switched their membership registrations to be entirely online, including the payment of dues. If this is the case for your organization, you should be sure to keep the transaction fees in mind when you are calculating the cost of membership!
To do this, you can simply look at the payment processor you will use, check the transaction fees, and ensure that you cover these costs in your membership dues.
The last part of determining membership fees is to decide how you will charge your members.
Establishing several forms of pricing can help your organization boost membership because it allows people to become members that otherwise might not be able to afford it.
There are a couple forms of payment options we recommend, including:
A payment plan is essentially like a layaway program. The member enrolls in membership, and can pay the dues in installments instead of paying all at once.
Payment plans are beneficial because they help members that cannot afford your dues all at once to be able to join your organization.
If you think a payment plan sounds like the right option for your nonprofit, be sure to consider these factors:
Number of installments. A payment plan can be delivered in two or more installments, based on the needs of your members and your organization. Be sure to think about what is the best option for both parties, and modify this plan accordingly.
Affordability. Part of determining the best situation for you and your members is to ensure that your organization can afford to do this. Earlier we said that membership campaigns are beneficial because you have immediate access to the funds, but payment plans can delay your organization from receiving these funds. You will need to ensure that your organization can operate effectively even if you are receiving membership dues in installments instead of in one amount.
Availability of payment plans. If your organization cannot afford to have all of its members on payment plans, you might consider limiting their availability. You can either do this by simply limiting the number available, or by creating an application process. Some organizations reserve payment plans to members that have expressed a clear need for it, and who genuinely would not be able to afford their membership without one.
Depending on your organization you can determine if payment plans are right for you, and if so, how you will offer them to your members.
Tiered Price Plans
The last thing to consider is offering tiered prices for your membership dues. This will allow your organization to offer several membership options, and prices, that can change based on things like donations, benefits, hours volunteered.
Tiered prices can help to ensure that anyone can afford your membership, but can also allow members to give more that want to! You can even consider offering special programs, discounts, information, voting rights, and more, to members that opt for a more expensive option.
We hope this article has helped you determine how to find the right membership fees for your nonprofit! Let us know if you used any of these tactics, or if you found some that we didn’t mention in this article.
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