Nonprofit arts organizations face a long list of challenges these days, from declining participation to increasing competition from a broad range of live and digital options. And then there’s Baumol’s cost disease, which suggests that because there are no productivity gains over time in the way that art is created, and given that costs are always increasing, producing organizations are falling further and further behind every year in terms of their financial sustainability. This means, through no fault of their own, that arts organizations have to raise more money each and every year just to stay even.
The National Center for Arts Research at Southern Methodist University has been doing annual reports on fundraising in and for the arts sector. The latest report reveals that income generated from fundraising efforts supports, on average, 57% of annual operating expenses for nonprofit organizations across the country. The researchers note that total contributed income grew 8.8% from 2011 to 2014, whereas revenue earned from paid subscriptions and memberships grew by only 3.3%. In fact, contributed income as a percentage of operating expenses has grown from 55.5% in 2011 to 56.3% in 2014.
Grantmakers in the Arts has been looking at this relationship for a longer period of time. Its “Estimates for Private Sector Sources of Arts Support” report, back in 2000, suggested that private donors’ share of all arts revenue had grown from 37% in 1995 to just under 40% in 2000. Foundation giving to the arts as a share of all revenue also grew slightly, from one-ninth in 1995 to one-eighth in 2000.
Like it or not, we are all in the business of fundraising. Yes, it all starts with mission –- that key expression of purpose — but if our largest sources of income are contributed, then we need to start thinking differently about fundraising. I’d like to offer three suggestions.
First, we tend to think of programs as things which drive earned income and get us closer to the achievement of our mission. However, we can also think of them as the elements of what will compel people, companies, foundations and the government to give us money.
My consultancy colleagues and I are currently working in a community on the development of a new arts center. As the largest nonprofit arts organization in the area, they do some presenting, offer some educational programming, and provide some community access, but their dominant activity is producing plays and musicals. They are having a tough time increasing their annual fundraising and attracting capital funds.
My position is that, in order to drive fundraising, the organization must develop the three other legs of their figurative stool: community access, education and presenting. Each has the potential to deliver significant value to the community; each represent reasons to support the organization. Each program is also different in terms of its value and constituency; different types of individuals are likely interested in each program type. That’s a great thing, because each program gives them something different to sell to potential supporters. And sell they must.
Every person in the organization is a fundraiser.
A smarter approach to fundraising is that every person in the organization is a fundraiser; every performance is a fundraising event. It’s all about building a fundraising culture from top to bottom. This is really the board of directors’ job, but it also takes a strong management team to teach, motivate and manage the organization in this new way.
Every performance is a fundraising event
This new approach is risky — why let money become so important? Sadly, it’s because we have to remain viable and sustainable. This is the world we live in. Nobody is going to start writing us checks just because we’re nice and do good work.
The good news is that mission remains critical to all of this; it binds us to our core purpose and ensures that we don’t head off in strange directions in pursuit of the next grant. Our mission keeps us honest and, if it’s good enough, will be the thing that inspires hard work by staff, strong engagement by the board, and generous support from the community.