It is a natural state of being in a nonprofit arts organization to be searching for more and different sources of revenue. Nonprofits are nonprofits, after all, because they produce or present or preserve work that costs more than it can generate in direct revenue. So there’s always a gap between direct revenue and expenses. And that gap yawps constantly, like a hungry pup. Yawp.
But so often when I hear arts groups (boards, staff, artists, whatever) talk about potential revenue sources, they skip a rather essential truth: all revenue comes at a cost. Whether it’s earned or contributed, through direct activity or side venture, as a gift or a grant or a subsidy, every nickel of revenue costs you something to discover and receive. Those costs can come in many forms:
- Time and attention: While you’re chasing revenue, you could have been chasing something else. Sometimes that ‘something else’ is the mission and purposes of your organization.
- Overhead and infrastructure: Every action requires an actor, and over time the search for revenue can change the balance of an organization from artistic to administrative actors. This isn’t necessarily a bad change, just one that alters the cost and shape of doing business.
- Nature of relationships: Financial exchange often defines and refines the relationship between individuals — sometimes harmlessly and in complete alignment with existing relationships, sometimes not. It’s essential to understand how new streams of revenue will alter existing relationships required for healthy operations.
- Promises and purposes: Sometimes new revenue comes with strings attached — with contractual requirements on how, when, and where you can spend it. If those requirements align with your work, your timeline, and your cash flow, hurray for you! If not, you’ve added cost and complexity to your life.
- Actual cost: New streams of revenue generally require new processes, policies, systems, and people, all of which can add financial cost — both fixed and variable.
The key, of course, is finding and developing revenue streams that exceed their total cost. And because you’re in a nonprofit, such streams are necessarily difficult to find. As a first step, it helps to be constantly alert to the obvious and hidden costs of any action, and to bring that awareness into your conversations with artists, staff, board, and constituents. Does that new dollar cost you more than a dollar to receive? And if so, does it at least move you forward on your mission, rather than sending you sideways?