Wednesday, June 13, 2007

Believe it or not, You are a Business-Person

As Director of the Arts Council I have become used to conversations in which someone insists that arts managers and artists are “just as important” to the fabric of a community as business people. I always make the point of disagreeing with these well-meaning folk, but not for the reason you think. You see, I believe that artists and arts managers are important to the fabric of a community because they ARE business people! And many other things besides!

The following was received by us last week in reference to our Arts Calendar:

“Dear Arts Council: I am with [name withheld] from [location withheld] and I am trying to list one of our [events] which has somehow been omitted from your events calendar. When I try to list this I am told that I must be a Vermont business person!? We are a nonprofit summer [discipline withheld] festival, not a business. Will you please list our event for us? We would appreciate it ever so much...”

Let me attempt to use this as an educational moment, and ask a series of questions in return.

1) Does your festival employ anyone?
2) Does your festival sell tickets?
3) Do you, as its manager, engage the services of volunteers?
4) Do you engage the services of contractors (from musicians/artists to lawn-care professionals)?
5) Does it pay any sales taxes?
6) Do its employees pay income taxes?
7) Does it occupy space that needs climate control or lighting, and if so, do you or anyone else pay for it?
8) Do you or anyone else pay for telephone or computer connection services?
9) Do you or anyone else pay for program/brochure design/production/mailing services?
10) Do you report to the IRS using a Form 990 (or any of its variants including the about-to-be-required-of-all-nonprofits-whose-annual-operating-budget-is-under-$25,000 Form 990-N)?
11) Do you, as chief executive officer, report to a Board of Directors?
12) Does your organization have Bylaws?
13) Is your organization registered as a Vermont corporation with the Vermont Secretary of State’s Office?

If the answer to ANY of these questions is “yes,” guess what? You run a business. You are a business-person.

And this isn’t just true for you if you are an arts administrator.

If you are in individual (a so-called “sole proprietor”) who brings a bunch of friends together to create art and showcase it to an audience (who either buys tickets or buys the art), or an individual who creates art in the hopes that someone will buy it, guess what? You, too, run a business. You are a business-person.

A local Chamber of Commerce executive director even referred, just last month in fact, to individual artists as perhaps “the purest form of business person” because (and I paraphrase) “they do it all, from creating the product, taking it to market, selling it, paying taxes (reporting), and thinking long term about what they will do next.”

Isn’t this the essence of running a business? And, since you DO run a business, doesn’t it make sense to take advantage of the same services that are offered (often free of charge) by the State of Vermont and federal government to business people from the private, for-profit sector? Ever logged onto the SBA website? How about USDA’s website? How about the services provided by your local Chamber? Most have pretty good insurance programs for small businesses.

The bottom line is that the essential difference between a for-profit business and a not-for-profit sector business is that: (are you ready?)

The mission of a for-profit business is to maximize net revenues for the owner(s) of the business. The mission of a not-for-profit business is almost always a statement about the public benefits that will accrue as maximized net revenues are plowed back into programs and services designed to achieve the mission-related goals.

That’s it.

Both for-profit and not-for-profit companies maximize net revenue, but for some reason not-for-profits often to do so by, in part, under-compensating employees and skimping severely on marketing and promotion costs. One wonders why?

If you labor under the impression that not-for-profit businesses should not be paying competitive wages because providing service to the constituent is all-important, for goodness’ sake, treat your volunteers well! If you labor under the impression that anything more than 15% for administrative expenses is a waste of donor dollars and you consider marketing and promotion to be an administrative expense, welcome to the slippery slope to insolvency, in which employee burnout is exceeded only by board confusion about where it all went sour.

“But!” you say, “You’re wrong! Our overhead (including marketing and promotion) is 15%, we sell out every year, we have a healthy bottom line, we pay our people well, and we are a community institution with a great and long-standing reputation for artistic excellence.” Bravo! You may be one of those proverbial exceptions that prove the rule.

The fact is that 20% of form 990 filers in Vermont have operated with a deficit for the past three years, and 10% of form 990 filers actually have a negative fund balance. Equally scary, about 15% of form 990 filers have barely enough operating capital to survive a month should a major funding stream disappear.

Remember, the true opposite of “for-profit” is not “not-for-profit.” It’s bankruptcy.

That is the lesson for the day.

So if you believe you don’t run a business (and you are an arts manager or an artist); and/or
If you aren’t making sure that your organization is setting aside a healthy percentage for administrative costs and even MORE for PR and marketing; and/or
If you experiencing what I call “employee churn” (staff stays for a maximum of a year before moving on to higher-paid positions elsewhere); and/or
If operating deficits don’t seem to bother the you because you and your board are totally devoted to your mission to the point where everything and everyone must be sacrificed to it; and/or
If closing up shop (i.e. bankruptcy) simply isn’t an option; then perhaps it’s time to start thinking about another private-sector strategy: mergers and acquisitions.

Is your organization ready for this conversation? If not, be aware of one very interesting cognitive dissonance: more and more, when talking to people in Vermont who enjoy its arts and cultural offerings, I hear “Vermont is terrific! There is so much to do! So much great stuff going on; so many terrific artists doing such great work on any given weekend, we almost don’t know where to go first! Vermont’s in great shape!”

Is it? You tell us…

We have a survey out to artists, arts educators, and arts administrators. If you fall into one of those three categories and you haven’t filled a survey out yet, please do so. I think the results will surprise us all.

No comments: