As an association, you rely on members and their commitment to your organization. It is important to keep an eye on membership trends as you plan for your financial future. Each member can help to further your mission and ensure financial stability. Member Lifetime Value (MLV) is the measure of the monetary value of a member based on the projected length of membership. Tracking this number can help guide your association on a steady path towards growth that will benefit both you and your members!
To get started, gather your most recent yearly numbers: net revenue paid by members, number of members, and their average membership tenure (AMT). Now, put the calculation to work:
Net member-paid revenue ÷ # of members x AMT
For example, in 2020, there were 3,000 total members who collectively invested $550,000 in dues and contributed $325,000 in non-dues revenue. The operating costs were $650,000 and the organization’s AMT was 17 years.
- $550,000 + $325,000 = $875,000 (dues revenue plus member-generated non-dues revenue)
- $875,000 – $650,000 = $225,000 (total member-generated revenue minus total operating costs)
- $225,000 ÷ 3,000 = $75 (net member-generated revenue divided by number of members)
- $75 x 17 = $1,275 (average member contributed revenue x AMT)
Membership Lifetime Value= $1,275
Despite the fact that keeping up with your association’s financial health can seem like a tedious task, making use of this simple calculation for MLV is a key step and will prove useful year after year. Take note: it is crucial to subtract operating costs from revenue to establish net member-generated revenue when calculating MLV. Put this calculation to work while planning for your financial future and watch your business thrive!