Financial Model AIESEC in Serbia

Volume I

Volume I content

Funds model

Cost structure breakdown

New pricing

Income-expenses connection

ICX & OGX services

Pricing policy Welcome from your MC VP Business

Analyst!

As you can see, this is the content of Financial Model Volume I. There are many important topics, most of them regarding our prices, which we changed recently. Other than that, we also have the explanation of our pricing policy, why we changed, etc. You can also find many useful guidlines and frameworks, such as funds model and cost structure breakdown. That is not all, because we also have connections illustration and listed ICX & OGX services which we provide to our customers.

Get ready for some reading and hope you enjoy it!

Pricing policy

Very important: changing pricing policy can be done easily, but it should not be taken easily. Changing price of your product has a serious impact on your business which you need to take into consideration.

One of the most important things, which often falls on the side, is that your price should be equal to your service. What does it mean?

If your price is very high, according to standards, your service should also be high.

Example: if you offer your EPs for 180$ list of services you already provide them (OPS, help with CV, eduaction and preparation for interviews, etc) and you decide that next month you will increase the price to 200$, you need to know why you did it. Based on that, your services must be equal to your price. So, for 200$ you will offer something additional, something more, with more value. Check the details on the following pages.

How do you determine a product price on the market?

Good question! The most important facts that you should take into

consideration when deciding on a product

prices are these:

1. Expenses analysis

2. Competition

3. EY growth

Pricing policy

- How many RE do you plan to have in your term?

- How much income do you plan to have in this term?

Reviewing prices frequently in order to assure that they reflect the dynamics of cost, market demand, response to the competition, and profit objectives is important. Therefore, not every price can last forever and based on these factors should be reviewed at least every year.

Check it out in details here

- How much money do you need in order 1 RE to happen?

- Which expenses are certain to happen regardless of your performance?

- Go through your cost structure breakdown and see how much money you need for which fund.

- What is their price? - Who are their customers?

Check it out in details here

Our customers may ask why some of our prices are now different? Why should now pay more than before? What changed in our product and services?

This is a very important question and you might face with it.

Here’s how we can answer on it:

- Our cost dynamic chaged: we have our fixed costs and prices on the market go up and down, so we also need to adapt in order to cover our basic costs from all funds. Simply put: the market prices change, so do our product prices.

- Sustainability issues: we have been facing this problem for a while now, since we had costs of providing our services and not enough money to cover all costs, which led us to a long financial crisis and high risk situation.

- Better service objectives: we want to provide the best possible experience for our customers, which is why we want to enable them things we could not enable them before. That means investing more money in our own products and developing them so they can fulfill all of our customers demands.

1. Expenses analysis

2. Competition

3. EY growth

Income

Affiliation Fund Operational

Fund Marketing Fund

Investments Fund

Reserves Fund Product

sustainability

Cost structure breakdown

When you plan or replan your numbers of RE in all products and amount of money your ER plans to raise, you should always distribute it among these six funds you see in the illustration below.

This thing will help you keep track of your financial state and your general performance state, so you will know exactly, with a help of cashflow, where are your roadblocks and determine the best solutuion for your LC.

Determine your main focus for your term and where most of your incomes will go. Will you focus on R&R investments this year or invest more in your marketing activities? Do you want to create reserves for your LCs future or you want to send more members on international conferences?

Whatever is your answer, be aware how much money goes where and keep an eye on it everyday. With good tracking you will easily predict what will happen in the future and determine your financial stability.

Income

Affiliation Fund

MC fee, taxes, etc.

Operational Fund

Apartment, administration,

electricity, infostan,

accountant, office, office

materials, phones, meetings,

conferences etc

Marketing Fund

Offline (flyers, posters...) + online (ads, website...)

Investments Fund

International conferences, R&R,

educations, product

investments etc

Reserves Fund

For financial security and

stability

Product

sustainability

For iGV sustainability

Cost structure breakdown

Here’s a deeper look at our cost structure breakdown:

Product sustainability

It is not a secret that we have unsustainable products. It will take some time to build a sustainable iGV, so we need to make sure to have a special product sustainability fund which can help iGV in the future to build a sustainable base, from where it can become completely sustainable in the future.

Cost structure breakdown Affilation fund

You have fixed and variable affilation costs, which means you can calculate how much money in your term you will need for this. When you look at MC budget, you need to know which costs are fixed and which are variable, when are they happening, so you can plan your cashflow according to those facts.

Operational fund These are the things we need to cover if we want to support our operations and without money in this fund we are not going to last long. Most noticable expense here is apartment for EPs, which can take a lot of your money and it can especially harm your financial state if your RE in iGV, for example, are not sustainable and when you don’t have incomes from OP takers.

Marketing fund As it’s said, your OGX results mostly depend on this fund. The money from this fund should make sure you have enough people applying on OPs. One crucial thing to track here is ROI, for which we have a framework and you can check it out here.

Investments fund As we know, if we don’t invest in our people and operations, we can not expect to grow in anyway. Most of the time, we do not invest money in important things, which can give as a certain ROI, since we are too often facing sustainabillity issues.

Reserves fund By the months of financial reserves you can see if LC is operating healthy or not. Most of our LCs do not have reserves neither do they think much about them. This leads us to a very dangerous and high risk situation, which we often do not realize. Having enough amount of reserves and trying to save money for this fund must be a priority for our LCs and can stop future sustainability problems. And not to forget that we, according to our values, need to act sustainably, so our successors can enjoy in fruits of our labour.

10 000 $

Affiliation Fund

2000 $

Operational Fund

4000 $

Marketing Fund

2000 $

Investments Fund

1000 $

Reserves Fund

750 $

Product

Sustainability

250 $

Example of one LC who planned to have 10 000 $ of income this year. Depending on their goal and focuses, this is how their distribution can look like:

Take notice that distribution depends on the products. If, for example, one oGT RE costs 180$ you need to know where will this, oGT money, exactly go. Will it go to cover the MKT expenses? Will it used to build up reserves or you will use it to invest in your members to go to international conference?

Similar is for incoming. Let’s say you want to have 20 RE in iGE. It is clear that you will need to cover the apartment costs, welcome package and other things for your EPs. So, the question is the same: how much money from iGE RE will go to which fund?

Cost structure breakdown

Cost structure breakdown The % of money in each fund depends on LC goals and reality. If some LC would want to create reserves in the next year or two, they will probably make sure that they increase the % of money in that fund to 30-40%. If LC, in other case, would want to spend more on R&R, they will increase the % of money in the investment fund, and so on.

This is why it so crucial to have cost structure breakdown during EB planning, since these funds tell everything about LC goals in terms of money and numbers.

Wow, we need to be careful

here...

INCOME

OPERATIONAL

MARKETING

INVESTMENT

AFFILATION

RESERVES

SUSTAINABILITY

income structure breakdown

How much % comes from which fund?

Depending on your LC goals and focuses, you should determine your main income contributors and those you do not expect much. For example, if your LC is planning to have 80 RE in oGT and 10 in iGV, it is clear that most of your incomes in this case, will come from OGX. Therefore, if you don’t achieve your planned goals in oGT, your financial stability will be in question, since the money you planned to have is not there.

Determine your main focus for your term. Is it iGE or oGV? Maybe iGV and oGT? Do you expect more income from ER this year? Whatever you choose, be aware of financial consenquences that you will have depending on your choice.

You have to know these answers and to track the fulfillment of your goals and RE plans, since your financial stability depends on it.

There is also the other side!

Funds model

ER iGV iGE oGV oGE oGT Other

Income

The connection

Which incomes supports which expenses?

Or should we ask which expense is covered by which income?

If ER team ensures profit, where will that money go?

From which money to invest in marketing?

What about oGV money, can we spend that on buying a new promotion stand?

Is there enough money to send all members on NatCo?

We again come back to planning process. Every LC needs to know how their expenses and incomes are connected. If some incomes does not happen, some expenses also might not happen. But the problem is when you have fixed costs which you need to pay in order to fulfill your basic duties as an organization and there are not enough incomes to cover all of that.

In order to know how to make sure this does not happen we made this connection illustration on the next 2 pages, so we can see how our costs and incomes are connected and how they depend on each other. There is an answer to that, too.

iGV

Affilation

Fund

Operational Fund

The connection

iGE

Affilation

Fund

Operational Fund

ER

Marketing

Fund

Investment Fund

Other

Reserves

Fund

Product Sustainability

Fund

What does my ICX cover?

What does my ER cover?

What does my other cover?

As in ICX you have many direct costs, this money must be used to cover all of those costs. If you can not cover your costs for 1RE in iGV or iGE with the money you get from OP taker, that means that your product is not sustainable and you will need to find other sources of revenue. Luckily, our new prices ensure that every product is sustainable, so you do not need to that.

In ER you do not have a lot of costs, so this money should be used for marketing and investments. Example is servicing corporate partners, where we could be investing more money.

This fund is used in only if there is no other option. The ideal state is to lock this fund and use it only if there is no other resource. With this fund we are ensuring our long term financial sustainability and in general our organizational health.

The connection

oGV

Affilation

Fund

Operational Fund

Marketing

Fund

Investment

Fund

As you saw in cost structure breakdown, OGX operations do not demand a lot of costs, so they can be used for investments. It is neccessary to use money gained from OGX RE for marketing fund, because without marketing and attraction you will not have who to send on exchange, very simple.

oGE

Affilation

Fund

Operational Fund

Marketing

Fund

Investment

Fund

oGT

Affilation

Fund

Operational Fund

Marketing

Fund

Investment

Fund

What does my OGX cover?

New pricing

Analyzing the numbers, we realized that all LCs want to grow at least 80 %, which means they will need to increase their incomes. Seeing that most of our LCs are at 20 % of that plan fulfillment, we started asking questions what might be wrong. Are we getting enough money to cover all of our expenses? Do we have enough money for all of our plans to be achieved?

We determined in every LC how much money is needed for 1 RE to happen for every product, both OGX and ICX.

Our main competetors have much higher prices, but on the other side a completely different value proposition. We did analysis of our competion and came to a conclusion that our products are from 4 to 10 times cheaper that most of theirs.

1. Expenses analysis

2. Competition

3. EY growth

New pricing Product Belgrade Novi Sad Kragujevac,Niš

iGV EYF 150 150 130

iGV regular 200 200 150

iGV GSE 200 200 130

iGE 300 300 150

oGV 90 90 90

oGE 125 125 125

oGT 200 200 200

* all prices are in EUR

** every price is per 1 OP or 1 EP

This is a minimum price for a completely sustainable product. If we do not charge this amount, we risk being unsustainable.

So we changed our prices, but what about our services? Are they matching our prices? What do our customers get for these prices?

To answer on that we listed key services we provide to our EPs and OP takers, so we and them can be sure what do they get for the price they pay.

New pricing

oGV

oGE

oGT

1. Education about usage of opportunities.aiesec platform

2. Education about skills he might need during his internship

3. Support in making CV and cover letter

4. Support in preparation for interviews with organizations/companies

5. Preparation seminar before going on internship

6. AIESEC responsible person who is helping EP before his internship and during internship

7. Evaluation meeting after the internship

8. Issuing a special certificate

New pricing

iGV & iGE

*EYF & GSE

1. Providing and finding qualified candidate for the job description OP taker proposed

2. Providing needed information to OP taker about candidates profile in order to help OP taker make the right choice

3. Servicing and helping EP during his intergration in work and local community

4. Servicing and helping OP taker during EPs work

5. Evaluation of work with OP taker

6. Online promotion for OP taker

7. Creating report after EP finishes his work

1. Creation of workshops

2. Delivering workshops

3. Evaluation of workshops

Ok, so our services

are clear and defined!

What should we not forget is our unique value proposition. This is what makes AIESEC unique and this is basically what our customers pay for. Here’s a short reminder about our business model in a nutshell and about our cost/revenue structure, which we also mentioned many times in this booklet:

New pricing

This was Volume I of our new Financial Model. In the following months we will be working on:

What is next ?

For any questions be free to contact:

Miloš Crnobrnja

MC VP Business Analyst

milos.crnobrnja@aiesec.net

Distribution model Financial reporting system Conferences sustainability

Stay tuned for more informations and Volume II of AIESEC in Serbia Financial Model.

Internal auditng revision Financial planning framework

October 2016