Fiscal health — in (un)expected places

As you may recall from a previous posting, I’ve been doing some research on the fiscal health of nonprofit arts organizations, specifically theatres. Prior research indicated that one could look at several factors (revenue diversification, operating margins, administrative expenses, and access to equity) to predict the viability of a non-profit organization. Well, my research findings (which may or may not ever reach the stage of formal publication) are very surprising- these factors don’t correlate with the fiscal health of theatres! At least not to any extent that seems significant given my random sampling of 10% of the theatres whose tax returns are available through the National Center for Charitable Statistics.

When I talk to people though, people who run theatres, people who work for nonprofit theatres, people who know about theatre management, their mantra is almost 100% in unison: cash flow, cash flow, cash flow. A theatre that can manage its cash flow, whether by maintaining a cash reserve or accurately predicting revenue and expenses — or better yet both — seems more likely to persist. I note that given the current economy, it’s a lot easier to do the former (maintain a cash reserve) than it is to do the latter (accurately predict revenue and expenses) but both are challenging.

I’ve been preoccupied with academic matters recently, but hope to resume more regular postings after the first of the year!

  • Hey Linda.

    I am thrilled to see your post about direct fiscal matters and am excited to see where this research goes.

    There is a topic I am very interested in exploring/giving light to…

    What if we were to teach our aspiring young theatre artists, in their desire to build, run or lead theatres, to avoid the traditional path of the begging cup? What if we taught them to work within the resources that they have and raise funds in unconventional ways? What if we taught them to invent their theatres that focus around an audience in their respective communities, constantly addressing the needs and matters of importance of those community members? Then theatres could pull focus away from the “blue hairs” and take greater risks.

    I think what this would translate to mean is a slew of smaller theatres, which are privately owned and holding for profit status. But my next question leads to “Is that a bad thing”? Is it practical and realistic? Must theatres constantly beg to survive?

    If one were able to do away with the begging cup of a 501c3 status (and believe me that I am not dogging “not for profits”. I see their value), what might the result be?

    I have found that a lot of theatres have to justify the budgets that they do have–to maintain funds for the following year. Such practice, I believe, stifles creativity.

    Interested in beginning a dialog in this direction?

    Thanks for your post and I look forward to hearing back from you.

    Jim Hart

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