MyCake Datacast: Turnover vs Arts grant dependency

Presented by Sarah Thelwall, this video datacast takes the approach we pioneered with the Culture Benchmark and uses it to analyse the Arts Council England 2011-12 annual dataset. The video runs for about 10 minutes 🙂

The blog post below looks at five things we think are interesting as a means to starting a conversation about the usefulness and possibilities that the publication of this data set brings to the arts. We’d welcome your comments and contributions!

This dashboard has been developed using the same approach that we use for the Culture Benchmark. The difference is that we are presenting the ACE annual survey data from 2011-12 following its release by ACE earlier this year.

You will see that we have not released all the data. We have purposefully excluded any data which we believe to be either inaccurate or incomplete (about 6 organisations) so that it cannot skew the data we are presenting. In the main we excluded data sets where there was income but no recorded expenditure! This means that there may be a few differences from the ACE aggregated results but within a data set of 790 organisations they should be minor.

The dashboard is designed to enable any organisation to look at the National Average and compare it to a sample of their choice. We’ve set up three types of ways to slice the data – by art form, by geographic region and by turnover range. The art form and geographic region slices are freely available to all. The turnover range slice and the ability to enter your ACE unique reference number and compare a single organisation to the national average and slice is a chargeable service – £50 + VAT. We’ll be releasing both the free and paid for versions of the dashboard soon!

The ‘Selected Group’ box summarises the sample you’ve selected and indicated the number of organisations in the ‘size of selected sample’.

You will see that all the financial data is represented as a percentage of turnover. This enables us to make sensible comparisons across the whole data set much more easily than if we presented the figures in £. Both income and expenditure data are presented as a percentage of total turnover.

There are all sorts of things you can do with this dashboard but to get you started we thought we’d look at five questions you might want to explore the answers to ….

 

1. What insight can i glean from the ‘national average’ income figures?

 

MyCake’s analysis of the data

Which bit of the dashboard do you need to look at?

Click on the Income button and you’ll find that the second column of data has the National AVG (average) in it. Note that this is made up of data from 790 organisations across all art forms and all regions.

You’ll see that all the income data is presented as a percentage of total income.

What does the data tell us?

The ‘National Average’ tells a story that many people will be familiar with – Earned Income – Core is approximately one third of total turnover at 34.9%; ACE regular funding sits at 25.6%. Local Authority funding makes the fourth largest contribution to arts organisations income nationally.

We’re not going to spend time analysing this national average as this ground has been covered pretty thoroughly by ACE in their annual report.

What we would highlight are the national averages for the earned and contributed income lines as they form a useful baseline against which to compare artform, regional and turnover range clusters of arts organisations. In particular:

  • Sponsorship – 2.0%
  • Trusts – 4.1%
  • Donations – 4.9%
  • Local Authority – 7.7%

2. How do business models differ between small and large organisations?

Which bit of the dashboard do you need to look at?

Use the up arrow in the ‘To’ box to set an upper limit for the turnover of organisations in the Selected Sample to £100,000. You’ll find that this creates a Selected Sample of 76 organisations whose data is displayed in the first of the two columns of data to the left of the National AVG and who between them have an average turnover of £73,000 (see the bottom left box marked ‘Selected Group’ and the row described as ‘Avg Total Income (£000)’. Click on the up arrow again to set the limit at £200,000 and you’ll find that the sample now encompasses almost of a third of NPO’s (227 in fact with an average turnover of £125,000).

To look at the largest third of organisations in this data set click on the refresh button to reload the dataset (this will clear the contents of the To and From cells) and then set the ‘From’ turnover level at £700,000 (either by clicking on the up arrow or typing the figure in). This selected sample has an average turnover of £4,386,000.

What does the data tell us?

We know from previous work such as Size Matters that the business models of small arts organisations are very different indeed to those of large organisations. This selected sample demonstrates this difference very starkly.

Across all art forms and geographic regions small arts organisations achieve a far lower percentage of their total income from Earned Core (17.8% for organisations with a turnover of under £100k vs. national average of 34.9%) and are far more dependent on ACE Regular funding (66.0% vs. national average of 36.7%) than their large organisation counterparts. We’re not going make comment upon whether we feel this is too high a level of dependency or alternatively whether it is appropriate given the type of work these organisations undertake; instead we’d simply say that it is important that as a sector we understand the differences between the business models of large and small organisations so that when we are setting targets for income diversification they are set in a manner which is appropriate to both the starting point and the best in class for an appropriate comparison cluster of organisations.

It is interesting to note that small organisations are benefitting from ACE Lottery Development funds (in the <£100k turnover band this is worth an average of 16.4% of turnover in 2011-12) – this makes sense, they are a cohort of organisations who would lack the funds to spend on development unless it was specifically added in to their revenue and activities.

Whilst on a national level the percentage of income achieved from donations, trusts and sponsorship is not terribly high it is particularly low in the small organisations – sponsorship 3.6%, trusts 6.8% and donations 4.7%. This begs the question of how useful are these income routes for small organisations and where are the examples of success that we can analyse to better understand the circumstances under which small organisations can achieve success in these areas? This dashboard has been designed to only show the averages but of course we could pull out the data on the best in class separately if it is of interest. Alternatively you can download the raw data set and look for these examples in it.

In contrast if we look at the largest third of the NPO’s (those with a turnover of over £700k) we see a very different picture. The largest single source of income is Earned Core at 33.5% with ACE Regular funding coming in second at 23.9%. Earned Income – Suppl is the fourth largest source at 11.8% and we would suggest this is a result of organisations with physical venues maximising the earning potential of their spaces (something which of course the small and non-venue based organisations would struggle to do). Local Authorities continue to be important, indeed roughly as important as for small organisations at an average of 12.9% of turnover. We know that there is a London bias in both sponsorship and donations so its interesting to see that even when this is diluted into the average of all the large organisations across the whole of England and across all art forms there is still a significant benefit to being large vs. small when it comes to these income streams.

In summary, there are some very distinct differences in the income models for large vs. small organisations so if you are using this data to set targets for your own organisation it would be well worth your while establishing an appropriate turnover range to compare yourself to rather than simply compare yourself to the national average.

 

3. Who is the best & worst when it comes to donations & sponsorship (and what does this tell me about the goals i might set for my organisation)?

Which bit of the dashboard do you need to look at?

To look at the organisations who achieve the highest percentage of income from donations and sponsorship click on the London region in the second of the two drop down lists. This will create a Selected Sample of 259 organisations with an average turnover of £2.45m in 2011-12.

What does the data tell us?

Previous longitudinal studies by Arts & Business have clearly demonstrated a London bias in both sponsorship and donations income for the arts. This data set is consistent with such findings as we see that the London sample achieves income figures which are greater than the national average for all three income types – sponsorship 5.9% (vs. national average of 3.7%), trusts 12.3% (vs. national average of 10.0%) and donations 5.3% (vs. national average of 3.9%).

The difference becomes even more stark if we look at London’s large visual arts organisations (16 of them). This is where the ‘Best in Class’ folks sit when it comes to sponsorship (8.6%) and donations (8.3%).

So how is this information useful to those organisations based outside of London or who are not in one of the sponsorship and donations sweet spots such as visual arts? We would argue that one of the critical parts of diversifying an organisations’ income is the setting of appropriate targets. There has been a great deal of focus on the development of private giving particularly in the wake of cuts in public funding for the arts. However these figures clearly show that if you were looking to plug a gap of some 15-30% in turnover private giving is not a magic bullet. It can be part of a solution but is not a total solution.

The utility of this data therefore is in setting goals and targets for income diversification which are appropriate to your art form, geographic region and size of organisation.

For contrast, lets look at a couple of the areas where the data shows that current levels of donations and sponsorship are much lower (and we would guess harder to achieve but we’d need to look at some individual case studies to see if that was actually true!).

In truth none of the East Midlands, North East, North West, South West, South East, West Midlands or Yorkshire and Humber (ie everyone except London and East of England) do well in any of the areas of sponsorship, trusts and donations but of all of these the West Midlands does the least well when it comes to private giving with 1.3% sponsorship income and 1.4% from donations. What this really tells us is that the national levels of income from these sources are more accurately represented by these non-London organisations and that the London (and to some extent East of England) organisations are skewing the national average.

It is interesting to note that it is possible to buck the trend of a London focus for sponsorship and donations. Organisations in the North East are achieving it with Trusts & Foundations (13.3% vs. national average of 10.0%). It would be worth looking at the 58 organisations in this sample a little more closely to see how they achieve it!

In summary it is possible to identify particular art forms and regions who have a strength in these types of income and this helps us identify best in class case studies to learn from. Meanwhile we would reiterate the point that it is important to select your benchmark comparison group carefully so that you set realistic targets. The national average is not a wildly useful comparison point as it contains such a wide range and the averages are being skewed by the successes of a small number of (often large) organisations.

 

4. Which art form clusters could you learn from in terms of income diversification?

The national average is a good place to start when comparing your business model but it only goes so far. What you need next is to understand where the examples of best practice can be found so that you can determine whether they have anything to offer you in terms of approach?

To help you do this we’ve combed the data looking for regions, sizes of organisation and art forms who demonstrate particular strengths in their income models. The data alone cannot offer an explanation for why these clusters have particular strengths but it can provide a start point from which you can work to open up conversations with the ‘best in class’ organisations that the data highlights.

Across all levels of income the Combined Arts beat the national average for trusts at 11.4% of turnover (vs. 10.0% national average). Literature organisations also set a good example for successes from trusts at 12.2% (vs. 10.0%) and perhaps unsurprisingly are also strong when it comes to Earned Income – Education (9.8% vs. 7.6%). The Visual Arts organisations at all levels of turnover beat the national average for donations (4.8% vs. 3.9%) and the large visual arts organisations (over £700k) in London trounce it at 8.3%!

It would be easy to cite a set of large organisations as examples of best practice as some things are simply more do-able when you are large. So instead lets first look at a couple of examples of where small organisations are clearly best in class.

The 49 Combined Arts with a turnover of less than £200k show a positive anomaly vs. the rest of the sector when it comes to Earned income from educational activities 7.7% of turnover vs. 2.3% national average. This cluster is also better at leveraging income from trusts and Local Authorities than the national average.

The 20 Music sector organisations with a turnover of less than £200k beat the national average when it comes to income from Trusts (23.2% vs. 10.0%). Small theatre organisations also beat the national average when it comes to income from Trusts (13.3% vs. 10.0%).

In summary when you are setting targets for each of your areas of income it is worth knowing not only what the national average is but where the examples of the best in class are (by region, art form and size) and deciding whether they have something to teach your or not?

 

5. Is there a Local Authority time bomb and if so where?

The arts have had a rough time of it when it comes to cuts in Local Authority funding in the last few years. This data set shows that the levels of LA funding are still extremely variable by region, size and art form. So this begs the question as to whether particular art forms, regions or sizes of organisation are sitting on a Local Authority time bomb that will go off at some point in the near future and decimate arts provision?

Whilst the data doesn’t indicate what the likely behaviour of Local Authorities will be going forward it can indicate areas where the levels of funding are higher than the national average – ie where the loss would be most likely to break an organisation if the funding disappeared.

Across all art forms and regions small sized organisations tend to be slightly more dependent on LA funding than either their medium or large organisation counterparts. When we look at individual art forms then amongst small sized organisations the Combined Arts (18.4%) and Dance (15.2%) organisations have the most to lose if cuts were made in LA funding. Visual arts organisations of all sizes also receive a higher than average percentage of income from LA’s – 15.2% across all sizes and rising to 18.0% in large visual arts organisations.

Geographically some regions have achieved higher levels of income from LA’s than others and in particular the North East (22.2%) and East Midlands (18.5%) are particularly generous. In other regions it is the large organisations who fare better – North East 25.5%, East Midlands 21.2%, West Midlands 18.8% and South East 18.3%. The South East stands out as a region where small organisations do well from LA funding – 22.2%.

If your organisation is based in one of these areas that has benefitted historically from a higher level of funding for the arts from your Local Authority it is worth asking the question of whether you think this will continue? If the answer is no then how long is the window of opportunity for gaining assistance in transitioning to a model which requires less funding from your LA? Ie can you bring your key stakeholders in to a discussion about the period over which you will change your business model?

With luck by this point you’ve played around with the dashboard a little and discovered a few nuggets of insight and a few places you want to explore further. We’d be delighted to talk to you further either here on the blog or by phone about how you can make this data useful to you when writing business plans, setting internal targets or communicating your strengths to stakeholders. If you’ve found this benchmarking of your organisation useful you might also want to consider participating in the Culture Benchmark which offers a more detailed comparison of income and costs than we can provide with the ACE data.

One thought on “MyCake Datacast: Turnover vs Arts grant dependency

  1. Frankly, I think this is brilliant. It’s precisely the kind of analysis that the sector needs in order to develop. It’s really timely. Arts organisations need to understand the relationship between their business models, the levels of public funding that they receive and how they might plan for the future. Understanding how different kinds of organisations operate is part of that. Funders and policy makers stand to benefit from this too. It’s precisely the kind of thing that one might have hoped that ACE would have produced. So thank you, My Cake!

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