Earned Income for Arts Organizations

This series of blog posts will relate to increasing earned income at non-profit cultural attractions.  This has become a necessity for a variety of reasons and hopefully this will help guide some through the change.

Background

Earned income has been a challenge for non-profit organizations for many years.  It has been particularly a challenge in the state of Florida where state funding, and, indeed, in many cases, municipal funding has been something that governments have either reduced significantly or eliminated altogether.  This in a state that hasn’t had a great history of support for the arts to begin with.

This will be a series of examinations of how our cultural non-profit organizations can expand their revenue streams and search for new earned NET income.  But first a little background so you understand where I am coming at this from.

Many years ago, as Director of Marketing for the Salvador Dali Museum in St. Petersburg, Florida, we had a problem in that no governmental agencies believed they should support such an institution.  In those days (the early 90s), grants panels were made up of purists who, for whatever reason, didn’t believe in the support of that particular institution. and therefore that institution wouldn’t receive government funding.

It probably was a blessing in disguise as the Dali Museum became self-sufficient and extended into programs that didn’t generate net income only as it could afford to have the operation subsidize them.  It was very judicious at making sure the operation was sustainable.  In fact, during the eight years I was there we were able to buy three significant pieces of artwork and spend nearly $2 million to do so.

I spent some years also at another museum whose revenue model was almost all earned income – MOSI – the Museum of Science & Industry in Tampa.  Prior to that I produced blockbuster exhibitions for the Florida International Museum whose operational budget was solely based on earned income while some capital improvements were funded by the state (no longer an option in Florida).

That said, it takes time to build a culture of discipline, especially in an arts organization. This is especially true when an organization has been habitually subsidized and has not had time to learn how to live within its means or earn its own NET income.  Each museum I’ve been with has has its share of successes and failures in the earned income foray.

Take stock of your intellectual capital

Who do you have on your team?  What are their strengths?  Without doing a full SWOT analysis complete with flip charts, really look at who you have and run a filter on who the most entrepreneurial ones are.  This really doesn’t require a lot of over-analysis.  Do they understand the basic concept of revenue less expenses equals NET?  Do they comprehend that part of the expenses are insurance, mortgages, accounting fees, advertising and other overhead expenses?

Not every employee will need to “get it” but most do.  In very rare situations of heavy government subsidies or endowments are curators allowed to control exhibition and conservation programs without much check.  There usually needs to be offsetting revenue to cover these types of expenses and museum and arts administrators have really started to take notice of this business model that for many of them is fairly new.

I will remind everyone that with no money, there is generally no mission.  It is fine to have people strictly mission-based, but there needs to be a balance and more often than not in the past decade we have seen a co-mingling of staff focused on mission as well as NET.

You will hear some in the rank and file who perhaps don’t understand this new model state things like “our only mission is to make money” or “it is all about chasing the almighty dollar.”  Certainly I’ve heard it in the past and I doubt I it is the last.

Sales and marketing oriented individuals will be where you will want your staff to gravitate.  You will recognize employees who can only grasp the concept of being given a budget to spend.  This, unfortunately, is a good portion of the work force.  This is in no way to say there is no room for those individuals in an organization.  They may have invaluable talents that many others do not possess.

Earned Income

What exactly is earned income?  Well, it isn’t local, state or federal grants.  It is income that you, the non-profit actually earns.  You make something and sell it for a profit (hopefully) is an industrial example.  Or you provide a service, for example, your facility for an evening with a tour to a group, and you charge a fee for it.

This series will examine earned income possibilities for non-profits and specifically cultural attractions and museums.  While not every example is going to be applicable it helps to pull yourself away from your organization so that you don’t immediately say things like “that will never work here” or “we don’t allow that.”

Earned income can include the following:

– Food and Beverage

– Facility Rentals for Events

– In-house Events

– Landlord/Tenant relationships

– Retail Items

– Wholesale Items

– Licensing

– Location fees

– Membership

– Sponsorships

– Artifact or Exhibit Rental fees

– Endowment Income

Keep an open mind and we’ll help you look at ways to improve your non-profit.  It all takes buy in from your board and staff though and a shift in culture.  We’ll look at some ways to accomplish this without considerable capital expense.  These will be actual cases of increased income.  There is no shortage of ideas out there.  But fundamental changes to the way you do business that will increase your earned income has been much harder to find.