The state of the current cultural sector

When considering that art and culture are at a turning point, we immediately tend to look for solutions and focus on discussions about funding. However, when such serious developments as the ones we are seeing nowadays affect the financing of art and culture, it seems to me a good idea to take two steps back before we answer these questions. The first step is to establish the mission and ambition. Only then can we define the financing question.

Step 1 – What is your mission?

In the summer of 2011 I attended the Summer Intensive Program in Arts Administration at New York University. The impressive thing about this programme was not so much that we learned all sorts of techniques for acquiring money in different ways, but the focus there was on non-profit organisations’ missions. How does your institution give added value to your community? What is its role in society? This mission points you in a direction: your ambition.

If it is the mission of an organisation to provide society with a particular service, this ambition must also be able to be financed in the medium and long term. It is all about sustainable financial entrepreneurship.

Step 2 – Define your financing question

Urban Art Festival. Foto (c) Michiel Wijnbergh
Urban Art Festival. Foto (c) Michiel Wijnbergh

Once your mission and goal are known, another question needs to be answered before you start looking for sources of funding. This is the financing question: what do you need the money for?

It strikes me that the cultural sector mainly concentrates on the short term: financing its operations. And that’s no surprise, since that is the greatest concern at present: how are salaries, productions, exhibitions, gas, water and electricity to be paid? The financing question for the medium term relates to investments. Which investments are needed to fundamentally improve operations in the medium term? Which investments can I make that will lead to sustained higher income and/or lower costs in my operations? The long-term financing question is that of building up reserves. These reserves will ensure continuity for the longer term.

If it is the mission of an organisation to provide society with a particular service, this ambition must also be able to be financed in the medium and long term.
Eric Holterhues

Step 3 – Specify which source of funding is for which financing question

Once the ambition has been expressed and the consequences it has for the short, medium and long term have been identified in a business plan, it is time to look for operational funding, for buffer equity and for investments, in that order.

Operations

It is important that operational funding does not become dependent on one dominant source of income. Sound operations are built on several sources of funding. A whole range of sources of funding is possible for financing operations. This might include the institution’s own income from ticket sales, sponsoring by industry, gifts from private foundations, or gifts from friends.

Equity

To guarantee continuity for the longer term, it is wise to build up sound buffer capital or an endowment.  The dominant sources of funding for equity are therefore wealthy parties such as patrons and sponsors: parties who are prepared to commit themselves to an organisation for a period longer than a few years.

Investments

Investments are essential to be able to fundamentally improve your operations in the medium term. A theatre might want to renovate to become more attractive to the public, a museum might invest in a new museum shop to give it an additional source of income, or a musician might invest in a musical instrument that will help him to make better music. In other words, investments that lead to systematically better operations in the medium term because they provide for an increase in income. Investments that lead to structurally lower costs could be, for example, investments in a new heating installation that is more energy-efficient than the old one, or investments in a new security system so that savings can be made on gallery attendants.

Investments are essential to be able to fundamentally improve your operations in the medium term.

Step 4 – How can ambition, financing questions and sources of funding be integrated?

The various money issues and the sources of funding that play a dominant role in them may be separate pathways, but they reinforce each other too: one can serve to drive the other. Stable operations funded from several sources give banks confidence to finance your investments over many years because there is less likelihood that you will run into trouble when the next spending cuts occur.

The broad basis for financing the things you want to do – your operational budget as well as your investments and your buffer capital – does much more than just bring money in. It brings more commitment; it ensures a much broader support base in society, more involvement and more engagement.

Your mission has to be the touchstone when you integrate these different perspectives: what is your purpose as an institution, what are you on this earth to do, now that art is at a turning point?

Arts & Culture

Eric Holterhues
Eric Holterhues

Triodos Cultuurfonds invests in cultural projects that stimulate the development and preservation of culture. The fund is the only listed cultural fund in the Netherlands. Triodos Cultuurfonds offers investors the ability to directly stimulate cultural projects, such as theaters, artists, and museums, while also achieving attractive financial returns.

For an overview of Triodos Cultuurfonds, please visit the Arts and Culture investment strategy page.

The above is a shortened version of an article in Boekman 89; Kunst op een keerpunt (Art at a turning point).

Literature
Kaiser, M.M. (2008) The Art of the Turnaround. Creating and Maintaining healthy Arts Organizations. Hannover (etc.): University Press of New England.