Sarah Thelwall on a new benchmarking system for smaller arts organisations, and why the sector needs it
Over the past six months, I’ve been working with a group called Common Practice – a mixture of venue- and non-venue-based exhibition and publishing organisations in the visual arts. Because they are small (less than £1m turnover) and the standard sector-wide comparisons are skewed towards the models of very large organisations, existing benchmarks don’t offer useful insights. Instead, they need to compare themselves to other small visual arts organisations. As part of the pilot for what is now the Culture Benchmark we compared these nine organisations, both individually and as a cluster, to the wider cohort of 23 pilot participants across three years of data from 2007 to 2010. For the income comparisons we took the model (below) as the starting point, so that we could distinguish between traditional grant and funding income, income from tangible assets and income from intangible assets.
This has provided, for the first time, concrete evidence that the members of Common Practice operate financial models which are significantly different from those of large institutions. We’ve shown that the average level of Arts Council England (ACE) funding to small visual arts organisations is often over 50% of turnover and reaches its zenith at 78% in 2009, a notably higher figure than the often quoted figure of a third. The results also demonstrate how hard it is for smaller institutions to generate substantial income from their tangible assets via a café, shop or space hire. Whilst many have a strong portfolio of intangible assets few (in Common Practice or elsewhere) have achieved substantial income from these sources, and they are not yet an equal alternative to tangible asset-based income in large institutions. This is an area that requires investment if we are to improve the financial sustainability of these non-venue based organisations as we have improved the models of building-based organisations via capital programmes over the past decade.
RELEVANT COMPARISON GROUP = RELEVANT HEADLINES
If you could determine the profile of a relevant comparison group yourself and filter the data accordingly, then you could not only see what ‘best’ looks like for this crowd but you could also see how you compare. This means that instead of setting financial goals based on covering costs, meeting funders’ demands and inflation, you could see how the best in class do things and set your goals accordingly. Data in the Culture Benchmark shows that the difference between the ‘best in class’ organisation and the ‘average’ organisation, for any key income or cost type on a Profit & Loss (P&L) sheet, is in the region of 15% of total turnover. How much more stable would you be and how much more could you deliver if you could increase your income or decrease your key costs by 15%?
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Once you’ve identified the profile against which you’d like to be compared, then the detail of the P&L starts to make much more sense. If you don’t have a set of tangible assets (a venue, collection etc.) then there is no point being compared to venue-based business models. But there is a lot of value in seeing how organisations with an intangible asset base are exploiting their earned income activities. Furthermore, the general advice around sponsorship, membership and donations can be turned into an analysis of the level of income that is actually being achieved from these sources amongst organisations like yours. Knowing what not to spend time on is as useful as knowing what to aim for.
Benchmarking is equally good at helping to manage your cost base, as Culture Benchmark participant Ruth Catlow of Furtherfield put it: “We discovered that our building is expensive (we thought it was cheap), that our artistic programme and marketing need accounting differently, and that we really could be raising more money from trusts, foundations and corporate sponsors. This last thing was something we already knew abstractly but seeing the disparity between our own and other organisations’ figures was quite chastening. We had assumed that there was not really much money out there for the arts at the moment. We are acting on this more vigorously now.”
In summary, benchmarks now enable you to make detailed specifications of the group you’d like to be compared to – by region, size, sector – so that you can use the results to set internal goals, and to handle the impact of funding cuts as well as communicate your strengths and successes to your stakeholders in ways which quantitatively support your assertions of best practice. So where should you look if you want to start benchmarking your organisation? Well, the Culture Benchmark is the home for financial benchmarking: for venues with large volumes of audiences see the work of Audiences UK and for data on philanthropy see the new interface to the annual data collected by Arts & Business. Folly and Culture 24 are both exploring benchmarking of digital and online data.