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!