Forming a Trade Association

How to Form a Trade Association

Wondering how to form a trade association? This article discusses the necessary steps for forming a trade association and promoting a trade association. We also touch briefly on why trade associations are formed.

Forming a trade association? If so, you are following in the footsteps of many smart folks.

Trade associations play a valued role in our society.

For example, a group of companies might work together and create a trade association to establish industry standards that protect the public.

In another example, technology firms might join forces to create a trade association to ensure that components from different manufacturers are compatible, thus allowing a market to thrive that might otherwise be handicapped by inertia and competing approaches.

In a nutshell, a trade association allows an industry to communicate appropriately to various constituents in a way that improves the fortunes of everyone involved in the industry. In this capacity, trade associations interact with government agencies, legislators, customers, the media, industry companies, suppliers and many others.

Who Should Be Involved With Starting a Trade Association?

Credibility is important for trade associations. As such, a new trade association should be formed by a group of companies, not just by one company or one individual.

Ideally, the founding members include some of the largest companies in the sector, but the founding group should also be viewed as being representative of the entire industry.

Larry Hecker, who has founded many nonprofit trade associations and is currently the executive director of the Vehicle Protection Association, notes that participation of as many firms as possible is important. "Having multiple founding members conveys legitimacy to other industry participants," notes Hecker. "Without that credibility, it's very difficult to get others to join."

Steps for Forming a Nonprofit Trade Association

The process for establishing a nonprofit trade association is similar to the steps you would take to form any nonprofit organization.

Surprisingly, many trade associations are unincorporated. However, incorporation is highly recommended because it limits the liability of members. It also makes a trade association seem more legitimate and more official.

How to Promote a Trade Association

Once you've legally formed a trade association, you need to recruit members. Ideally, the recruitment of members includes some membership fees to fund association operations. Over time, promoting the trade association well is critical to trade association survival.

For starters, a new trade association should put out a press release explaining why the trade association is being formed and what the objectives are for the trade association. This information should also be highlighted in a trade association website.

At its founding and throughout its life, a trade association is like any other business. They need a compelling value proposition that keeps customers buying...although in the case of a trade association, this translates into maintaining an active membership.

Trade associations face the same challenges as most nonprofits, in that they often cannot afford full-time staff initially. In any case, a trade association should form a steering committee and elect a chairman and secretary.

The chairman should be responsible for defining tasks that members will volunteer to assist on - eventually, the trade association may evolve to the point where it has full-time or part-time staff to handle these tasks.

As a final piece of advice on forming a trade association, be sure you avoid any antitrust issues. For example, your trade association cannot gather to share pricing information, agree on standardized contract terms or otherwise engage in anticompetitive behaviors.

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