VP Publications Product Review

Publications Committee7 Jan 2010

Current Environment

• Challenging budget development environment in FY10 and FY11 Easy revenue opportunities hard to find Expenses pressures rising due to:

– AMS absorbed into FY10 budget– Rising medical and pension expenses– Strategic Plan initiatives planned to be absorbed in FY11

• FY10 Operations budget balanced but relies on strict expense management and aggressive revenue targets

• FY11 Operations budget must address both revenue and expenses to balance

Our Challenge

• How do we absorb $1M in Operations in FY11 so that we can eliminate reliance on investment portfolio for ongoing operational expenses?

• What is the right mix of products and services to keep our business financials in balance and our members happy?

• Where will sustainable growth come? Expense management is not a growth strategy. Relying on vended and one-time events is a risky operational

plan.

Product Review Process

• VP Product Reviews (June and July 2009): Drilled into VP Net Margin, showing financials for individual products on a

total cost basis. Revenue sources/direct expenses category breakdowns were provided.

• Institute Product Review (August 2009): Review products and their relationship to each other within the context of

the whole Institute to provide VPs with a “total financial picture”.

• VP Presentations (September-November 2009): Outline major program areas for each VP and their priorities

FY09 Revenue Breakdown by VP

• In FY09, Operations generated $21.7M in revenue.

FY09 Expense Breakdown by VP

• In FY09, operations required $23.5M in expenses, including $2.3M of Association Management System (AMS) implementation expenses.

AIAA Financial Terminology

• Direct Expenses Expenses specifically associated with a particular project, such as staff travel,

printing, paper, promotion, food and beverage, audio visual (excludes labor)• Direct Operating Margin

Revenue less direct expenses• Labor

Manpower charged to a project based on time accounting system. Includes salaries, payroll taxes and fringe benefits

• Indirect Expenses Expenses necessary for general operations which cannot be readily assigned to a

particular activity and are therefore allocated proportionately throughout programs– IT & AMS (Association Management System)– Office Services– General and Administrative (Executive, H/R, Accounting, Communications)– Support expenses such as Customer Service, Marketing, Business

Development• Net Margin

Revenue less direct expenses, labor, and indirect expenses 7

Institute Operations Performance by VP

• VP Publications net margin for FY09 was $222K.

DRAFT