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Entrepreneurship, Not-for-profit and Commercial

There seems to be a misunderstanding, an understandable one, that entrepreneurship automatically means the creation of for-profit, or commercial enterprises.  It can also mean the creation of not-for-profit ones.  The key question is, “are they sustainable?”  The reason for the misunderstanding is that so many not-for-profits are unsustainable.  They rely too heavily on contributed revenue.  My experience tells me that in each not-for-profit entity there is a discernible level of contributed revenue that can be estimated.  It generally comes from individual donors.

The percentage of total budget that can be relied on from individual donors depends entirely on the makeup of the entity and the nature of its business, but I can say with certainty that the levels anticipated and budgeted by large symphony orchestras and opera companies are unsustainable, often coming in as high as 55% or more of annual budget.  These organizations have enormous fixed costs.  This is what drives their budgets and need for huge sums of contributed revenue.  One organization to study would the the Philadelphia Chamber Music Society.  They employ a flexible business model that works — low fixed costs, no real estate, small office, and they produce the finest chamber music concert series that I know.  I believe their reliance on contributed revenue is sustainable.



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