Setting up a new trade association is not something to be taken lightly. There are many associations already established, some of which may well be undertaking the activities that a new organisation may wish to cover. For this reason, we would encourage anyone thinking about setting up a new trade association to think very carefully about what they are trying to do and whether this can be achieved by working collaboratively with another organisation already set up. If it is decided that a new trade association is definitely the way to go, and someone is prepared to do all the hard work to realise the ambition, then here are some thoughts around the logistics of this and some tools to help you get started.
Is there a real need for a new Association?
A trade association should only be established if there is a real demand for its services. Just because a significant number of individuals or businesses in a particular sector want there to be one, this is not reason enough. People and business will only join an association if it can provide tangible benefits and demonstrate value for money. These would normally fall under three headings:
- Representation and influence – usually regarding the regulation of the sector by a government agency or in some cases by customers and suppliers. A new statutory regime or a significant policy decision may well lead to the need for a new trade association in a specific field of expertise.
- Provision of products and services that cannot be easily provided by anyone other than a specialist organisation. This will include such items as expert information regarding the sector, training, education, events and insurance.
- Assistance to grow the business by expanding the market or providing a competitive advantage to those in membership – or a combination of both.
In regulated sectors, the representation function is arguably the most valuable, but this fact is not necessarily recognised by members. Members will often argue against this and make the point that those who do not pay a subscription are able to benefit from this also. This is true, but membership of a policy influencing body ensures a seat at the table and a say in what the body puts forward for the industry.
More tangible benefits can often be provided a lower cost by an association than those that can be found on the open market and business leads can often be a selling point. Each association needs to clearly understand up front the demand for the various products and services so that it can structure its activities accordingly. Once set, they are not always easy to change!
Size of an Association
An association needs a critical mass to be viable. There can be a temptation to spread the Association’s remit too widely to get in as many members as possible in the first instance.
Typically, businesses and individuals want to join a community of those who are very like themselves although, in practice, a wider grouping is often essential. Take care to limit the scope for competing interests, as opposed to different interests, within an Association. For this reason, horizontal expansion is generally preferable to vertical expansion although customers and suppliers can often play a vital role in helping to make an association viable.
Although most trade associations are not-for-profit, establishing a new one should be viewed in the same way as launching any other new business product or service. New associations are usually established by individuals and an entrepreneurial approach and clear leadership skills are needed to ensure success. The stages to establishing a new association are:
1. Research your market well
Every association needs a core market and potential other peripheral markets that enhance the association’s value as well as provide it with income.
2. Design the services that will be offered to potential members
The offering will need to develop over time. It should be remembered that most members will only want a few services. It is also inevitable that some services will fail whilst others are much more successful than originally expected. Experimentation is needed here and no one size fits all – perhaps include, for example:
- Model contracts and other documents
- Insurance offering
- Information and advice on legal or health and safety requirements
- Training and seminars – a range from basic to more advanced
- Events and Networking
- Discounts for goods and services
- Affinity partnerships and agreements to provide other expertise/services
However, remember that offering a huge menu of services is not usually the way to go and often has limited success.
3. Agree the subscription scales
This is different to normal business activities in that what you offer is a package arrangement, some of which may not be of interest to all members. Hand in hand with this is a clear membership criteria and what is required of member. Take care not to include inappropriate hurdles for those wishing to join and ensure that there is no inappropriate blocking of members – if an individual or business meets your criteria, you must allow them into membership. Associate membership may be an option for those who do not meet the criteria fully, but are in some way involved in the industry.
Setting these can be a bit ‘trial and error’ and you may at least initially include some discounts for early membership or other incentives you may offer to get yourselves up and running. However, initially at least, the Association will be funded and underwritten by its founding members. If there is enough concern in the industry about an external
threat which has led it the Association’s establishment, this will provide a good opportunity to market membership.
4. Develop a marketing strategy
Agree a launch date and send out marketing literature to potential members as well as ensure your website is up and running. Some media support is a good idea if you can arrange it. This should include:
- A good name that immediately tells people who you represent and/or what you do
- Create a good quality website and register the domain name. Include a directory of members on this with appropriate links or contact details. A search facility can also be useful depending upon the sector.
- Develop literature setting out why a business or an individual should join
- Find stakeholders and business leaders within the industry to support you
- Seek favourable media publicity which is likely to be read by potential members. Market research or something guaranteed to attract a headline can help here.
- Perhaps hold a launch event.
5. Maintain momentum
People lose interest if things don’t progress.
Your long-term success may well depend upon the ability to help your members build up their businesses. An association should be the first port of call for anyone in the industry who needs assistance.
An association must be run as a start-up business offering an ongoing service in return for an annual fee. If there is any hope of getting a new association off the ground properly, someone (the founding members, for example) must provide the start up capital, preferably guaranteed for two or three years. Ideally, members should be persuaded to sign direct debits at the point of joining. This will not only ease administration, but will also significantly help retention figures. Subscriptions are tax deductible, a point that needs to be emphasised to potential members. Subscriptions are not vatable, because trade associations are regarded as providing services only to their members. Where other services are provided, some complex issues arise in respect of VAT and these may well need professional advice from an expert.
An Association can take any form. If it is unincorporated, there is no need to register the organisation and no legal costs are incurred. However, it is sensible to seriously consider becoming a company limited by guarantee which provides protection to both the members and those who are running the organisation. This latter option requires registration at Companies House and the Association will be subject to Company law.
A formal governance structure will also be necessary. A Board or Executive Committee of between five and twelve members is the norm here. The composition should include industry leaders and should help to encourage others in the industry to join the Association. The Chairman or President will be an industry leader. Options for management of the Association may include an individual employed directly by the Association, an association management company or a consultancy arrangement.
To help further, becoming a member of the Trade Association Forum will provide guidance and advice on all areas of association activity. Further information on this can be obtained by contacting Mario Yiannacou on Tel: +44 (0)20 3869 8650.