April 27, 2005

You may have received an e-mail containing statements about a wide variety of issues that relate to the proposed dues increase. As your elected president, I’m pleased to take this opportunity to provide you with more information about the proposed dues increase and respond to some of the issues that have been raised.

Since I have a lot of information to share with you, I’ve divided this correspondence into several sections for easier reading. Many members have expressed a desire to access more detailed and comprehensive information than I have sent previously. I hope this document provides the information you need to support your Board of Directors in voting for the proposed dues increase.

The Role of the Board of Directors

Your Board of Directors is composed of Toastmasters members who have been elected by you, the membership, to oversee the organization. Board members are fiduciaries responsible for ensuring the continued health and success of the organization. They have duties that include regular review of  the organization’s financial results, ensuring that the organization is fiscally sound, and developing policies and procedures that govern the organization. Board members come from different parts of the world and from many different cultural, educational and career backgrounds. They give a tremendous amount of time to the organization and take their responsibilities seriously.

Ensuring The Organization’s Financial Viability

When discussing the possibility of a dues increase, the Board carefully considered a number of factors. High on the list was the fact that the organization had projected a deficit budget for each of the last four years. Through careful management of expenses, we were able to avoid a loss the first two years, but realized a loss the last two years. A deficit budget is also in place for fiscal year 2005. No organization can continue to operate at a loss. Because we will have operated in the red for three years at the end of this year, we need to cover past expenses as well as current and short-term future expenses. It is not fiscally responsible to continue to operate in this manner and it has become necessary to raise dues.

The Board studied several sets of financial projections and analyzed five different possibilities for the amount of the increase. After detailed analysis and lengthy discussion, the Board agreed on the amount that is included in the proposal.

The Board has set a number of new short- and long-term organizational goals. We are introducing a new leadership manual this coming year that will be part of the new member kit and will be available to existing members. There will be a new educational award for those completing that manual. The leadership track will be expanded to include more levels. Additionally, the Board wants to improve our marketing efforts and materials to help existing clubs retain members, as well as build new clubs. There also will be an expanded focus on corporations and other large organizations to encourage their support of Toastmasters programs. If the dues increase does not pass, some or all of these organizational goals will have to be postponed or shelved. Other areas for consideration could include frequency of the magazine, staff cut (which would greatly impact member services), no new technology updates/no new internet services. Consideration would also have to be given to reducing or eliminating education awards, recognition programs, educational programs, administrative materials provided to clubs at no charge, no or very limited new programs, no or very little updating of existing programs, to name a few.

Reinforcing District Support of Clubs

Toastmasters International provides 25% of  the dues revenue collected to districts to support district operations. The proposed dues increase would result in more funds to districts so they can continue to train officers, help clubs succeed, and build new clubs. As stated previously, the additional income retained by Toastmasters International will pay for past and current deficits and enable the organization to operate in the black and fund new short- and long-term programs that support members, clubs and districts.

The Value of Toastmasters to the Individual Member

We have received feedback that clubs are concerned about the dues amount that will be paid semiannually. In my view, clubs don’t pay dues, individual members do. The value that each member receives from participation in the program far outweighs the investment of an additional $1.50 a month for each member. Consider that it costs hundreds or even thousands of dollars for short term communication and leadership seminars or the cost of self-development books. At $4.50 per month, Toastmasters is a bargain. Think in terms of what $4.50 can buy today. I personally can’t think of any other organization that provides so much and charges so little. You can’t buy a paperback book or a cup of specialty coffee for less than the cost of monthly dues. Few, if any, companies have survived since 1992 without increasing the price of their product or service.

Effects of Growth on Revenue and Infrastructure

We were able to postpone the dues increase for several years because of a consistently positive growth rate in new members, new clubs and membership renewals. In 1992 there were 170,000 members, and now in 2005 there are more than 200,000. This increase has resulted in the organization reaching a diseconomy of scale – the point at which a resource cannot increase its product or service output. The new computer system is a perfect example. While the old system was acceptable to manage the organization as it grew from 80,000 to 180,000 members, it could not be used efficiently to manage a 200,000 plus member organization and it was replaced. It has been suggested that the cost of one additional member could not justify the need for additional dues from that member. However, there are 80,000 new members per year and membership is 200,000 and growing. At some point that one additional member tipped the scales and surpassed the economy of scale.

Financial Reserves and Their Use

Toastmasters International has annual operating revenue and expense and also has financial reserves. Reserves, or “net assets,” are important in the operation of a business for the stability and flexibility they can provide. Adequate reserve levels will sustain the organization through any economic downturns as well as provide adequate funding for major capital expenditures.

In order to ensure its financial viability, Toastmasters International maintains reserves in the following designated funds:

Infrastructure Fund - This fund provides for major technology and facility needs.

Disaster Recovery Fund - This fund enables the organization to re-establish operations following a disaster, either natural or man-made. Specifically, Toastmasters International does not purchase earthquake insurance for the World Headquarters, which is located in Southern California, an area known to have periodic earthquake activity.

Sustaining Fund - This fund enables Toastmasters International to withstand the impact of economic downturns, both internally and/or externally generated. Reserves not designated in the above funds become part of the sustaining fund. At a minimum, Toastmasters International seeks to maintain, in the sustaining fund, an amount equal to six months, or 50%, of planned annual operating expenses.

Online Services to Better Meet Members’ Expectations and Needs

We anticipate that efficiencies will increase as more and more people use the online services. Renewals that don't require research are the ones that come through the Web site. More complex renewals come by fax or mail and require extensive research, in some cases, and additional manual steps. The World Headquarters staff receives many thousands of e-mails, phone calls, and pieces of mail, so we see our human resources shifting more and more to customer care and less data entry. Until the members and clubs get used to using the online services, the staff is faced with calls for help and fixing errors that were made (including hitting the submit button several times causing multiple transactions, entering incorrect information or paying dues for the wrong people).

Timing of Proposal Announcement

An issue has been raised about the timing of the Board’s decision and the process for other proposals. I want to be very clear that your Board of Directors did not and would not intentionally time the announcement of the dues proposal in such a way to limit the democratic process. The announcement was made following the February Board of Directors meeting which was the first opportunity for the Board to review the final financial statements and the auditor’s report for 2004. Furthermore, the Bylaws, regardless of the timing aspect, do not allow for competing proposals.

Member and Market Expectations

While some may feel that existing programs and manuals are adequate, most of our members demand products and services that are up-to-date and meet the expectations of the marketplace. Stagnant products and programs will not attract prospective members’ interest or encourage existing members to stay in Toastmasters, nor would they encourage product sales, another significant revenue component.

Because Toastmasters International has an in-house production facility, costs are low, easily controllable and production is efficient. The Toastmasters business cycles are predictable and, therefore, seasonal peaks and valleys are anticipated and production is adjusted accordingly.

We Need Your Support

The Board feels strongly that this increase should be passed now to ensure the financial health of the organization. We have heard very clearly from the membership a desire for smaller, incremental increases in the future. The Board will be discussing this in an upcoming meeting.

The decision to propose a dues increase was not taken lightly by your Board of Directors. I hope this additional information has given you the information you need to support your organization and vote “for” the proposed dues increase.

Sincerely,

Jon Greiner, DTM

2004-2005 International President

Toastmasters International