Girl Scouts marching in a parade. (Photo by: Jeff Greenberg/Universal Images Group via Getty Images)
The Girl Scouts will increase dues from $25 to $65 over two years. That’s a huge percentage of growth and a lesson for businesses, as well as other non-profits.
This increase will take place in two steps, the first in 2026 and the second in 2027. It is the first quota increase in eight years. The Consumer Price Index has increased by 29% over the past eight years. Adding the expected inflation in the Survey of Professional Forecasters compounds the total price increases to 39% since the last cure increases. It seems obvious that a quota should be increased by some amount, but that is not the whole story.
Other nonprofit membership organizations have tackled the problem, including athletic clubs, service clubs, and fraternal lodges. The management wanted to maintain the quota level despite the rising costs. Eventually they looked at the books and realized their financial model was unsustainable.
Two issues must be addressed in cases like this. First, avoiding the increase in fees will lead to the anger of the members when the fees are eventually increased by a large amount. In the decade before the pandemic, inflation was quite low, only 1.8% per year on average. But over ten years that compounded at an increase of 19%. In most organizations, members do not object to the increase of two percent each year. But squawk at a 20% increase. Small annual increases are accepted by people who see the same in their utility bills, food costs and earnings.
Members of nonprofit organizations—and business customers—pay money for valuable goods and services. Parents believe that the Girl Scout experience benefits their daughters, and almost all of them understand that the costs add up over time. No one, however, likes to be surprised by a large increase.
The second issue that needs to be addressed is the long-term viability of the organization. A background document on the increase in the rate of Girl Scouts noted that the national organization has been in a deficit, dipping in reserve. A deficit in any organization, whether for profit or non-profit, should be a wake-up call. Some deficits are clearly temporary, others clearly permanent if no changes are made, with still others of an uncertain nature. The evaluation of the probability of temporary or permanent should be the first work of the board of directors.
In addition to assessing short-term financial health, all businesses, regardless of their profit goals, must assess their long-term viability. Will the current revenue model and expense structure allow the organization to continue for the next five to ten years? If not, or if in doubt, changes should be made sooner rather than later.
For example, the Girl Scouts reported some rising costs that were independent of the number of active scouts, such as for technology. That makes member entry crucial. Falling membership with fixed costs makes losses. To some extent, costs that are not related to revenue inevitably occur in any organization. In any case, the existence of the discrepancy must be a risk recognized by the management.
A simple example would be a non-profit that signs a long-term lease to provide services. If the income is not enough, the organization is in trouble. In contrast, another organization might use short-term rentals to better match expenses with revenue. In the long run, the long-term commitment would usually be less expensive, but also more dangerous. The amount of cushion guides the choice. An organization that makes substantial net earnings (what businesses call profit) and with large reserves (retained earnings) has a cushion against temporary downturns. An organization that has a budget for very low net earnings, and with small reserves, must be quite cautious in its commitments.
What the Girl Scouts would have done cannot be determined by an outsider. Of course, I don’t know. Maybe this big increase in quotas is the right choice. But the experience of a well-respected organization should alert the leaders of other organizations to assess financial problems. The staff and volunteers of an organization are typically passionate about the mission, and the mission of Girl Scouts is admirable. But a great mission is not enough to deliver value. Someone has to crunch numbers and make tough choices.