Saturday, June 23, 2012

So where is the money?

I was really pleased by the reaction to my last post, so thank you to everybody who commented on it on Facebook. Only one person has left a comment on the blog so far, so please feel free to leave comments here this time. There were negative comments but I had to search for them and I wish they'd been left on the blog. An interesting conversation could have ensued. One prevailing complaint was that I was just stating the obvious: that we had to look for money somewhere else, but I wasn't saying where we should go to look for that money. I'll try to answer this.

So, now that the Arts Council has fulfilled the logic of numbers set out by John O'Kane in Wexford in 2008 and admitted that it will fund only five clients where does that leave everybody else? (Incidentally at least three of those clients had better start thinking about a succession policy or they too could suffer the cut).

Anyway, on to the business of this blog: where is the money. The simplest model is the commercial one. Calculate your potential box office income. Set your budget at no greater than 50% of that figure. Raise that amount in advance. Raise it from family, friends or friends of family. At 50% of potential income there's a good chance they'll make all or most of their money back. If your box office exceeds 50% of potential income they'll make a profit. You will need to prepare an investment prospectus for them, so check out this link. Remember that these people are investing, not donating. They are underwriting the cost of your production and they expect to be paid back so they have first call on the box office income. However, If you're playing a 100 seat theatre for 2 weeks you can't raise a lot of money (probably about €9,000). Spend it wisely and have a smart marketing plan in place. Remember your choice of show and cast is part of that marketing plan (At the very least make sure you read the Arts Attendance in Ireland report).

However, if you are a charity, you can't look for investment. You can look for donations. Under Irish tax regulations at present if a PAYE worker gives you a donation they get...nothing. You can apply to the revenue and they will top up the donation based on the donors higher rate of tax. A self employed person can apply for a rebate based on their higher rate of tax. Compare this to the US where every donor can reduce their taxable income by the amount donated, or the UK where a theatre investor can write off the gains on one show against the losses on another. Also in Ireland an individual can invest in a start up business and claim 41% back and if the company fails to show a profit after 3 years they can sell their shares back to the company at a discount and claim a capital gains loss. It seems to be that the tax regulations are heavily weighted against charitable donors. Lobbying for change on this would benefit us greatly.

It's also worth thinking about how much you want to raise from donations and how much work you can put into it and - most importantly - who you can ask. Lets say you want to raise €20,000 in donations. You set a target of 40 people at €500 a head. Consider this: a PAYE worker on €100,000 is taking home, after taxes and charges, just over a €1000 per week. Factor in living expenses commensurate with their income (and a little bit of negative equity)  and that person does not have €500 to give to you (They might have it there was some real tax benefit to them). So you could reduce the amount you ask for and increase the number of people you ask but this increases the time and the cost of the fundraising. You could target people  in the €200,000 per anum bracket but do you have ready access to them? Bear this in mind as well: according to The Arts Attendance in Ireland report mentioned above there are only 484,000 arts attendees in Dublin. Your question now is how many of these are sympathetic to theatre and how many are in a relevant income bracket. You'll probably find that the people who could donate to you have already been recruited by the major institutions. Again the market is small and the numbers stacked against us. Without meaningful tax incentives the donation windfall will remain elusive.

So what about sponsorship? The brand managers talk a lot about shared values. This is important. How does your event, your brand support theirs. Remember that what you are selling to the sponsor is your audience. Not your event, your audience. So you need to know your audience and how you intend to reach them. The more focused your demographic and sales channels are the better chance you have.

I've spent a lot of time looking for sponsorship over the years and the big question is how much can i ask for? Usually we ask for too much and that's the end of the conversation. It used to be the case in the US that it was calculated on an 8/10 ratio. That was $8 for every 10 audience members. That works out at about €6.40. So if you're playing a 100 seat theatre for two weeks that gives you an ask of about €760. Which, in my experience is about right. Bear in mind that this is not worth your while or theirs. Also bear in mind that a Dublin festival with a large title sponsor only gets €10,000 in cash so you can see the figures are not far off. There are, of course, exceptions to this rule.  Remember as well that the real value of a sponsor is the marketing support they bring to the sponsorship which will boost your box office making the project more attractive to investors.

There is of course corporate philanthropy which is different from sponsorship (I think a lot of people in Ireland confuse these two).  Corporate philanthropy is a long game built on smart networking and personal relationships.

So, where is the money? What lessons can we learn? On the commercial model we need to ensure that audience capacity is high (about 400 seats minimum), the run is about four weeks and the recurring costs are kept low ( i.e. small cast and crew). Always, always pay back the investor. It doesn't matter if the show is a box office flop and you made no money; if you paid back the investors then you can can ask them to invest again.

On sponsorship, size is also important and we need to remember that what we are selling is our audience so we need as much accurate information on that audience as we can get. Also the real value of sponsorship is the marketing support provided.

On donations we need to remember that the numbers are working against us. Without a change in the tax regulations there is no incentive for small, significant donations. We have to target high net worth individuals and for most of us that's a long game and a lot of networking. How many of us know fifty people willing to give us a grand each?

A final word on crowd funding. It takes a lot of careful planning. To my knowledge the biggest amount for theatre raised on FundIt was €15,000 for Misterman. And that had Cillian Murphy in it. A brilliant marketing decision.

So that's my experience. Think big. Think of the audience. Plan your networking and then work that network. Prepare for a long game. Work out the mix. Demand a change in the tax regime. Always pay back your investors.

What do you think?

There is another aspect to this question of where the money is. Ireland has a population about the same as greater Birmingham. Just over half of the population are  "regular" (not less than once a year) arts attenders; 1.3million people claim to have attended a play not less than once a year, and Dublin has a total of 484,000 regular arts attenders. Its a tiny, tiny market. Whether we're looking to sell tickets, convince a sponsor, or raise donations the numbers are not stacked in our favour.  There needs to be a lot of very creative thinking to make the numbers work. Perhaps that's the real challenge.