Business Models in a Down Economy

Recently, I, as Business Manager, and a Board Member were interviewed by a local daily newspaper regarding the Nazareth Center for the Arts (read the article here).

The interview, coupled with a recent post I made (read it here) got me thinking about how fortunate we are to have started in a down economy.

Background.
Five years ago, the Borough Council began discussing moving their municipal and police station to a new location. The notion of moving and proposals of sites caused quite an uproar and as one resident stated, “this has caused the fabric of our community to become undone – we need a better solution.”

Another location was offered for sale to the Borough and it resolved many of the concerns with the other locations. The next question was what to do with the soon to be vacated former building, which had been built in 1902 as the fire station.

The real estate market was in its initial fall. There was a legitimate concern that the building, if sold, would go to a local developer, who would convert it into apartments. We had plenty of apartments. We needed some anchor buildings to draw people into the downtown in order to allow restaurants and shops to grow.

Several individuals and groups called for some form of Arts Center. A theatre group was interested in the space, others saw it for music. It was decided that the Cultural and Arts Commission would oversee the building and its use.

The group decided to scale back plans and convert a portion of the building first, instead of going for a larger theatre and full building restoration. The resulting performance hall doubled as an art gallery and is fully ADA compliant with seating for 60 ‘cafe’ style with tables and 80 auditorium style.

The Call and Situation.
In December of 2009 the renovations were nearly complete. A small group of volunteers conducted fundraisers and did as much of the work as they could to save on costs. Despite the donated labor (and many supplies) the renovations totaled $16,000. Starting the 2010 year, they had about $10,000 on hand and owed $6000 toward the renovations. I was asked in mid-December if I could help get them organized as a non-profit. I was unemployed and had been involved in the early days up to the decision to use the Commission to manage the facility. I said yes, and soon found out all the effort had been invested in the renovation and grand opening. There were no plans looking forward.

Developing a Business Model.
In tough times you have to be more realistic, more conservative, and more aware of the limitations. In the aforementioned article, we were told it was going to be a more economic driven focus, but most of that seemed to not be included.

The Borough itself is comprised of about 2 square miles and 6,000 residents. The surrounding school district area has 24,000 residents including the borough. Of benefit is a very active church and local organizations including service, social, and sports.

This also became our first limitation. With so many groups and organizations and a finite number of businesses, we couldn’t expect to simply get donations and sponsorships to cover our costs.

The second limitation was our desire to offer high value. Our venue was to be accessible to the people, featuring donations or low cost admission – $10 or less; offer a variety of musical genres; and feature high quality performers. Couple this desire with the size of our venue, and we knew we couldn’t rely on ticket revenue.

We decided that our core revenue would be derived from a series of fundraisers held throughout the year. The basis was a holiday house tour that the group held the first two years to raise money for the renovations. In a short time, this tour became very popular and it became the cornerstone of our fundraising effort.

In 2010 we added a Garden Tour, similar to the house tour, received a Martin Guitar to raffle (tickets were sold April through December), held a Collaborative Art Auction, an outdoor summer concert at our borough park (where seating was virtually limitless), and a silent auction at Martin on Main (a festival in the street in front of our Center).

In 2011 we kept all of the 2010 events and are looking to add a ‘Battle of the Bands’ type event, which will run for five weeks and reward weekly winners with an opportunity to perform at Martin on Main and the overall winner studio time and a performance at our summer concert.

I mention the types of fundraising, because I think it is important that is relevant to the venue and our mission. Our Tour’s are unique in that each home features art and a musician and the garden tour also has a musician in the garden performing and an artist painting an original work.

Having a fundraiser roughly every other month provides us with a more even cash-flow and allows our volunteers to organize around these events plus our standing needs.

The End Result.
The fundraisers don’t each bring in equal parts, but together we expect they will account for 60% of our total revenue, with grants and large donations 8-10%, and small donations and shows 30%. This mix works well as it provides for some flexibility and means we are not reliant on one event or item to make or break our organization.

The Future.
In the next post I’m going to discuss how we define ‘success’.

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