Culture Benchmark 2010 data sliced by size of arts organisation

It’s been a while since we looked just at the Culture Benchmark data as a whole. This post evaluates the turnover of arts organisations split into different size groups in order to be able to look at how business models change as organisations get bigger.
For links to previous posts about The Culture Benchmark data and the comparison series, scroll to the end of this post.

annual turnover

2010
< £200k
£200-750k £750k – £2m £2-10m
>£10m
Sample Details:
Sample size
Average turnover
21
approx
£130k
44
approx
£345k
15
approx
£1.3m
14
approx
£4.4m
5
approx
£45.3m
Income by type as a % of turnover
Grant Income:
RFO
47.0%
50.1% 27.5%
38.1%
29.4%
Other Arts Council
14.9%
15.0% 14.0% 10.9%
3.3%
Trusts & Foundations
21.4%
8.6%
5.9% 3.7%
4.0%
Local Authorities
23.7%
10.5% 14.5% 7.5%
7.3%
Lottery Funds
9.0%
18.5% 5.3% 0%
1.2%
Grant in Aid
0%
0% 26.9% 0%
37.0%
Other Gov’t grants
47.3%
22.2% 10.4% 2.2%
0%
Other revenue grants
38.0%
9.5% 10.4% 8.8%
11.1%
Total grant funding
78.9%
72.7% 57.4% 52.5%
51.2%
Venue based income:
Ticket Sales
4.7%
17.0% 28.6% 29.1%
25.5%
Shop & Retail
7.5%
9.2% 3.7% 3.0%
13.8%
Café
2.2%
5.9% 8.3% 11.0%
18.5%
Space hire
2.9%
8.7% 4.0% 2.5%
1.9%
Total Venue based income
9.1%
16.0% 33.7% 42.2%
38.8%
Total non-Venue based income
20.5%
18.2% 16.9% 8.4%
9.2%
Although the sample group is quite small for each slice of the data we can see a number of clear linear trends which correlate to the total turnover of the organisation. In particular we see this in the following lines of income data:
    • ACE RFO funding levels (not perfectly linear but definitely a trend)
    • Other ACE funding
    • Trusts and Foundations
    • Local Authority
    • Total grant funding
    • Ticket sales
    • Café and catering
    • Total venue based income
    • Total non-venue based income
We will look at each of these in turn as well as draw out some connections between them:
    • ACE RFO funding levels – the trend here is that the smaller the total turnover of the organisation the higher the proportion of total income ACE funds (RFO or otherwise) represents
    • It is only once organisations get beyond the three quarters of a million mark (total turnover) that RFO funding represents approximately a third of total income (the magic 1/3 ACE, 1/3 other grant, 1/3 earned income that ACE talk about)
    • Though if you were to consider not just RFO funding but other sorts of ACE monies then only the organisations with a turnover of over ten million achieve this split
    • As an organisation increases in total turnover the proportion of their income sourced from private trusts and foundations decreases. The difference between the proportion of income from trusts and foundations in the smallest of organisations vs. the rest of the slices above is particularly noticeable. We have a theory here but it’s a hunch rather than something we’ve explored in detail. We would propose that quite a lot of the work funded by private trusts and foundations covers the additional costs of delivering say an education programme but hasn’t historically had to take account of or cover the core running costs of the organisation. This idea assumes that the smallest of organisations are all delivery and little overheads so therefore the money is a larger chunk of total turnover but that as organisations get larger so the overhead base increases as a proportion of total costs and that assuming these are covered by ACE or Local Authorities then these organisations can use trusts and foundations monies purely for delivery of additional activities. With the cuts in public funding of the arts this situation will need to change because the trust and foundations can no longer assume that the organisations they fund have a stable and sustainable core and more attention will need to be paid to the ability of the organisations to not only deliver the programmes under discussion but also the overall stability to remain in operation for the duration of any programme. This may well require a re-think in the application assessment processes of trusts and foundations. Discuss!
    • The levels of Local Authority funding are one of the rows that surprised us in this slice of data. Given that there are so many smaller organisations which are not funded by their Local Authority (the slice on building vs. non-building based shows this) we were surprised by how high these funding levels are across all sizes of organisation. We will return to the data to see if this is equally true of ACE RFO’s and non-RFO organisations and indeed to see whether there are any similarities in the organisations with high levels of LA funding. Watch this space!
    • We’d expect that only the larger organisations receive Grant in Aid (i.e. direct from the government rather than via a Local Authority or Arts Council) but as there are only a few organisations in our sample with Grant Aid we’d rather be cautious about offering an explanation of the grant aid receipts until we’ve done more work on this
    • The trend in the Total Revenue Grant Income line is therefore as we would expect having analysed the various sources of income that are contributing to it – highest in the smallest organisations (78.9% of total income for organisations <£200k) and lowest in the largest organisations (51.2% for organisations >£10m). There are clearly other income sources that come in to play as organisations grow in size and enable them to reduce dependence on grant sources
    • The most significant of these in terms of percentage of total income contribution is that from ticket sales. Whilst this is only worth 4.7% on average to organisations with a total turnover of less than £200,000 per annum ticket sales income grows steadily as a percentage of total income as organisations increase in size until it is worth an average of 38.8% of the income of the largest organisations (>£10m per annum)
    • The second greatest source of earned income is that derived from café and catering activities. Clearly this income stream is only available to organisations with a public venue but nonetheless it grows from 2.2% in <£200k organisations to 18.5% in >£10m organisations and the trend is a fairly linear one
    • Income from a shop (or other forms of retailing) is much less linear with both the £750k-£2m and £2-10m slices achieving a smaller percentage from these sources than either the smallest or largest organisations. More work is required here if we are to understand the dynamics behind this
    • Income from the hire of space (or indeed collections) is also quite erratic and shows no clear connection to the size of the organisation
    • Income from non-venue based sources such as IP, licensing, sponsorship and donations, commissions and contracts does show a relationship to the size of the organisation in that the smaller organisations (perhaps those without a public venue) have focussed more on these areas. We will take a further look at this in the comparison of venue and non-venue based organisations
    • Is there a ‘sweet spot’ in terms of the size of organisation that has the most sustainable or stable financial model? We’re borrowing a sailing term here because just as there is a set of a sail that generates greatest speed on a boat so there would appear to be a size of organisation which looks to be both financially sustainable without acquiring large or long term liabilities which need to be serviced. We would suggest that the very smallest of organisations (<£200k/annum) offer examples of how, at least in the early years, staying small, leveraging the enthusiasm of a community and staying focussed on a small number of goals can enable you to deliver very effectively on small budgets. However this often leads to burn out of staff and there is a limit as to how much an organisation can be built on volunteers and a transition in to something more stable long term is usually required if the organisation is to get beyond the 3-5 year mark. As organisations get beyond the £750k/annum level we see a different picture emerging as all the slices from £750k upwards show a more diversified income structure balancing grants, tangible assets and intangible assets
    • Is there a size of organisation that is most difficult to make sustainable? Instinctively we’d suggest that the £200-£750k small to mid-sized organisation may be one of the tougher ones in that there is still a high degree of grant dependence but typically quite a small staff base and therefore little opportunity to develop a substantial senior management team or specialist departments. Many organisations at this level do not have a publicly accessible building and therefore cannot diversify their income into café, shop and space hire and ticket income may be sporadic. Income from intangible assets is unlikely to be worth as much as those from a venue either because the organisation doesn’t have the expertise or because the markets for their skills and products are not sufficiently developed. This makes growth very challenging.
Notes on the data:
    • All the data presented above is the average or mean for the sample group. We could also look at minimum, maximum or the best 25% but we’ll leave that for another day
    • Because some of the data held in the Culture Benchmark is drawn from the public report and accounts there are occasions when we simply do not have enough detail to allocate income fully. For this reason we have a section for ‘other grants’ and indeed ‘other income’ so that we can allocate them roughly if not precisely. We won’t therefore offer any analysis of these rows in the data
    • The data above is not from matched samples so any analysis cannot be conclusive at this stage but the data can be used to raise questions for further research.
    • The data is has not been gathered to be representative of either of the RFO portfolios i.e. no attention has been paid to the covering of all sectors in proportion with their inclusion in the RFO portfolio. It is also possible that there is element of regional bias as we have not set up the sample group to ensure that such bias is avoided
    • The data above is not the full data set. There is considerably more detail in the income from intangible assets than is shown above. There is also data on both direct and indirect costs. For an overview of all the lines of data see http://www.primenumbers.co.uk/benchmark/forms/artsbm.htm for an example.
Previous posts on Culture Benchmark data:
Previous topics in the Culture Benchmark comparison series:
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Want to know more about looking at your own Culture Benchmark data? Please read this post.

9 thoughts on “Culture Benchmark 2010 data sliced by size of arts organisation

  1. Here’s a few thoughts:
    1) Organisations with turnovers <£200K earn significantly less income from venue-based sources – presumably most don’t have venues. One result of this is to make them seem significantly more dependent on grant funding than with a turnover greater than £750K. In terms of their business model, this effectively means their key customers are neither audiences or artists but funders. These raises a number of questions. To what extent do/should they design their offer to funder needs? How reliable are those grant schemes and what strategies are in place for replacing funders as they reduce or remove funding?

    2) The figures for non-venue based income suggest this can be proportionately more important to small organisations – utilising their skills and IP assets in the absence of physical ones perhaps? However percantages may be misleading – 20% of £130K is £26K, 10% of £45M is £4.5M, suggesting much of the non-venue based income created in the sample is generated by the largest organisations.

    3) The role of audience in the business models – as represented by the ‘ticket sales’ line – bears further investigation. The smallest organisations could, financially at least, almost get by with no audience, although they do better than some larger organisations on retail – the larger ones must create reliable tickets sales as it is more than a quarter of income.

    4) Organisations with a turnover between £200-750K have the highest percentages of ACE funding, and make up largest proportion of the sample. This slice draws less income from local authorities and other government grants too. Is there a reliance issue or is higher level of grant income needed as these organisations may fall between stools of ‘small and light’ and ‘bigger but with assets’?

    In terms of business models, these figures pose the question, are smaller organisations more focused on creating value for funders (by hitting their targets etc) and larger ones more focused on creating value for audiences that visit their venue?

  2. Thanks for posting this Sarah, its really interesting and adds weight (through measurable data) to what we’ve suspected for sometime about the economic landscape of cultural organisations.

    Mark’s question in relation to business models is also very pertinent, presenting the dilemma which I think many small organisations face when asked to define their business model along traditional management thinking lines. Just who are their customers: their audience (who possibly don’t often ‘pay’ for the work), the funders, or other actors? The major shifts that Arts Council England has gone through in defining its ‘mission’ over the last few years i.e. from funder of last resort (from about 1946-early 2000s), then ‘partnership funder’ (c. early 2000s-2009/10), to its new incarnation as a kind of strategic agency with ‘delivery partners’ (i.e. the new NPOs) all make the process of untangling these issues very hard.

    I also think that this data set presents some early evidence of our society’s chronic under-investment in the small to mid-size organisations that do not have ‘venues’ as assets. From my own experience of running a small organisation in this bracket, ACE’s investment in us has been critical to our growth and enabling of our longer terms plans for greater income diversification. Yet we have struggled to achieve the kind of growth that builds enough critical mass for the kind of sustainability that a certain size of organisation provides. Small is only nimble as long as the core team remains able to sustain the increasing demands on time and energy that running a small business requires.

    I think there are (at least) 2 key issues we can address here:

    1. the need for cultural organisations to be able to better measure their positive impact on society and demonstrate its value to people outside of the sector in terms that they understand (i.e. not just speaking to ourselves about how great we are)

    2. for a capacity building programme (perhaps a bit like the Clore Leadership, but for organisations rather than individuals) to be developed that helps small to mid-size organisations grow up and out of dependence on single revenue streams, such as arts/culture funding.

    In our final year as an ACE RFO, Proboscis is putting considerable time into exploring ideas and solutions to these problems, looking at alternative models of investment and ways of evaluating and measuring our wider social impact in new ways. We’re confident that we can build on the work we’ve been doing in the past decade to find new ways to make artistic practice valued in areas and by people who’ve not perhaps understood its significance before.

  3. I can’t quite see what Mark says about the figures pose the question whether “smaller organisations more focused on creating value for funders (by hitting their targets etc) and larger ones more focused on creating value for audiences that visit their venue.” Smaller agencies (such as ours!) are most certainly not less focused on creating value for audiences. But the issue becomes a blight on relationships with funders, because our audiences are online, and do not pay, or where they are ‘physical’, they are our ‘partners’ audiences.

  4. Fascinating Sarah

    As you say, quite a small sample but shows the potential of slicing and dicing this data to give valuable new insights.

    Is size (of turnover) everything? Has a large gallery got more in common with a large theatre or a medium scale concert hall?

    Seeing the income data immediately makes me want to see the expenditure! Those cafe and retail figures for the biggest organisations are really impressive, but when you net off the expenditure, how much is the trading income contributing to getting better art to more people?

    I can see why it is tempting to use ticket sales income as a proxy for creating value for audiences, but would agree with Gary that they are two very different things. Some of the most valued arts organisations I have known have been working in communities where audiences and participants were able to pay little if at all.

    Great stuff, and good to see such an interesting and informed debate.

  5. Of course turnover is not everything but I do think that there may be more similarities between the business models of larger organisations across sectors than between large and small organisations in the same sector.

    As you know I do have the expenditure data as well and yes the question about what is the cafe contributing to getting better art to more people is a pertinent one. However I might also say that even if the cafe does nothing more than help provide scale of operations and familiarity with the space as a place to hang out then it is making a useful contribution. My concern is when spaces feel like they have to offer a cafe but it runs at a loss because they pay staff to run it but there’s not enough footfall. It would be interesting to look at a number of organisations who run a cafe or similar operation and see what factors are correlated to the sustainability of the cafe and look at what connection there is between a successful cafe and audience levels etc etc

  6. I’m not sure I expressed my point about creating value for fnders well, sorry. Of course some organisations (large and small) create value for non-paying customers. But, what these numbers show is that must also create it for funders if they want income. So – in business model terms – you need to understand who the funders are that want the value you create with those non-paying audiences, and why they would want to give you income for that value. It is part of the difficulty/challenge of course. (For organisations with that model pleasing only ONE of either the funders or the audiences is often fatal: you either become redundant or unfunded…)

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