Wednesday, June 3, 2015

Economic Impact of the Arts (or...Why the #$%@ should I give you money?)

There is a lot written lately about the economic impact of arts. For instance, I visited Asheville, NC over Memorial Day Weekend, and found this article featuring the Asheville Art Museum while I was there.

As with many things, I approach this discussion more with my corporate hat on than with my violin bow in hand. Why is it that we as arts managers need to prove economic impact? Some would argue so that we can make donors feel good. Well, feeling good is important, but donors (can we call them "investors?") want return. Sometimes the return is a "good feeling," but for most people with lots of money to spend, a return means growth of arts orgs, or really cool innovative art happening, or more audience engagement, and ideally all three of those things.

So forget about the feel good stuff, and let's talk business. Why the $#%@ should I give you money when there are 20 other orgs out there?  To answer this question with credibility and success, let's pretend for a minute that we're in the tech world and look at the following conversation:

     Investor: I believe in your mission and I want to help. What's the one thing you need more of?

     Tech Firm: Money

     Investor: Great, how much do you need?

     Tech Firm: $25,000

     Investor: Okay, if I give you $25,000, what will I see in return?

     Tech Firm: In three years, you'll see an additional $0.50 for every dollar invested based on our growth rate, our product price, and the demand that industry experts have identified. You can see our balance sheet is strong, we've been steadily growing, and demand is still high. So, your $25,00 investment will grow to $37,500 in three years.

     Investor: Who do I make the check out to?

Wasn't that easy? Now what happens if you change the "return" to something that an individual donor to your arts organization might be seeking?

     Arts Donor: I believe in your mission and I want to help. What's the one thing you need more of?

     Dance Company: Money

     Arts Donor: Great, how much do you need?

     Dance Company: $25,000

     Arts Donor: Okay, if I give you $25,000, what will I see in return?

     Dance Company: In year one, we'll use your donation to leverage more new money from other donors, and we'll improve our product by putting more artists on payroll and better visual production value on stage. The improved product will help increase our audience and donor base in year two, which will allow us to re-invest a bit more into the product and our marketing budget. By year three we'll be able to add another production to our season and we will have started a reserve fund for the rainy days with the additional donations that have become routine from the initial match that your gift made possible. Your investment of $25,000 will keep us sustained and help us add a financial cushion for years to come. We'll also throw in a back stage tour.

     Arts Donor: Who do I make the check out to?

Arts donors aren't necessarily looking for the money to come back to them. But if they're savvy, they want to see their money result in growth for an org they care about. Make sure your donors know that their legacy will last for years.

There's another relationship that needs exploring - state and local funding agencies. More and more cities are talking about "economic impact" and city-wide cultural plans that align the arts goals with the overall strategic goals of the city. And let's face it, the overall strategic goal of the city is to raise more money. So when arts orgs apply for state and local grants, you would think that conversation would have some emphasis on the economic impact of the art on the municipal budget. Some agencies do this better than others, and it's true that not all art can show strong impact. Sometimes art needs to happen for art's sake, and that's important! Still, in a money-driven environment we can't be afraid of talking about money. Below is a conversation that I wished happened more.

     Local Arts Agency: I believe in your mission and I want to help. What's the one thing you need more of?

     Performing Arts Org: Money

     Local Arts Agency: Great, how much do you need?

     Performing Arts Org: $25,000

     Local Arts Agency: Okay, if I give you $25,000, what will I see in return?

     Performing Arts Org: On average, each audience member spends $27 additional per ticket on food and drink before or after the performance, resulting in $2.70 in tax revenue to the city (10%). Tax revenue from the parking lot next door is about $1 per performance ticket sold, and we estimate hotel taxes to be about $0.10 per ticket sold. Each performance ticket provides the city with $2.60 in ticket tax revenue on average. So, you will see $3.80 per ticket in tax revenue going back to the city.

In year one, we'll use your grant to leverage more new money from other donors so we can improve the product, as well as spend more money on marketing to bring in new audience right away. With expanded marketing capabilities and the money to produce an additional performance, we project 5,000 tickets sold in the first year. In the second year we anticipate an additional 1,000 tickets sold as we will have more money from year one ticket sales for marketing as well as more word-of-mouth. By the middle of year two, your investment of $25,000 will be paid back in the form of tax revenue surrounding our concerts, and are money-spending audience will have grown. By the end of year three, our concerts will continue attracting new audiences thanks to your investment, and the city will see more tax revenue surrounding our concerts. We hope you'll consider this investment return in future years as we have new projects and needs appear.

     Local Arts Agency: Who do I make the check out to?

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