Many arts organisations are striving to diversify their fundraising income, but there are dangers in this approach, warns Michelle Wright.
We hear regularly from arts funders and opinion formers about the need to diversify funding streams within the arts to protect future sustainability. And this is absolutely true. Any arts organisation that finds itself over-reliant on government or statutory sources, or one single income stream that then dries up, can find itself in trouble.
However, we also need to be aware of the opposite trend – in that by setting the expectation that we need to diversify, we create a climate that ends up developing weak fundraising on all fronts. A strong diversified portfolio is made up of traded income, statutory income and private-sector giving, but we don’t necessarily have to diversify private-sector giving within this mix to such an extent that it ends up completely fragmented, with a limited return.
the most effective fundraising organisations do one thing well – they match their most likely fundraising opportunities to their resources
Increasingly, it seems that those responsible for fundraising feel they are failing if they are not undertaking activity across the whole spectrum – trusts, individual donors (major gifts and memberships), corporates, statutory fundraising, crowdfunding, digital and community fundraising. The list is endless, but more worryingly, often this huge portfolio of activity might be the remit of a sole fundraiser or project manager who cannot possibly magic up success on all fronts.
I have come to the conclusion that the most effective fundraising organisations do one thing well – they match their most likely fundraising opportunities to their resources. That might be stating the obvious, but I don’t often see this in practice. Often areas of fundraising that are not making a return, such as membership schemes or crowdfunding, are still left to limp on as it seems too difficult psychologically to cut them.
So if we first take the area of fundraising opportunity, how do we best decide on the approach for each organisation?
The most obvious starting point is benchmarking. In the most recent Arts Council England figures and the Private Investment in Culture survey we see an overwhelming emphasis on the fact that the majority of income from private-sector sources (over 50%) comes from individual donors. Trust and foundation fundraising is becoming increasingly competitive, and more so for fundraising from corporates which is seeing a downward trend.
Additionally, there are clear trends in terms of artform. While trust-giving and individual donations might be strong in dance at about 8%, there is currently not much return from corporate sources. So does it make sense for dance organisations to focus on corporate fundraising, or is it better to add depth to trust and individual work?
It would be madness to take these average statistics as the holy grail. The nuances in creating a fundraising strategy are more complex, but we also shouldn’t ignore them. If there are clear trends then it simply doesn’t make sense for an organisation that is most likely to raise the majority of its funds from individuals to invest its limited resources in trust fundraising.
In my experience, each organisation will have a maximum of two or three areas of fundraising where they can demonstrate real strength. The focus will depend on a mixture of activities, track record, geographic location and artform. This forms the bedrock of fundraising strategy and other areas of focus can emerge when time and resource permits.
In terms of people, organisational and financial resources, how do we best make decisions about how to invest in fundraising?
Rather than really assess what skills are needed, arts organisations often look to their peer organisations and try to match accordingly. This often means that they are trying to recruit traditional skills when what might be needed is something completely different. It doesn’t make sense for an organisation to recruit the skills to launch a membership scheme just because their nearest competitor has one. The evaluation of the opportunity against the resources needed to implement it needs to be far more robust than that.
Similarly, if key areas of fundraising focus are individual giving and statutory fundraising, it doesn’t make sense to hire a corporate fundraiser who can’t achieve on any front. Often we see inertia in terms of recruitment based on the fact that sticking with what we know, coupled with the risk of it not performing, is more compelling than taking the plunge to invest in a skillset better suited to our particular areas of fundraising opportunity.
Hold your nerve
It’s not a simple picture, but arts organisations do need to hold their nerve and invest in the areas most likely to get results and then put the rest on hold, at least until time and resources allow.
And trustees also need to understand this strategy. More often than not, it’s at board meetings where the anxiety starts. “Why are we not doing this?”, “Our competitor organisation is doing well in this area of fundraising so why are we not trying it?” or “We should be looking at crowdfunding.” It’s very easy for trustees to say these things in a well-intentioned way and then for the organisation to be locked into shallow fundraising across too many fronts that has no clear measurement or return.
It’s well known that the majority of start-up enterprises fail because they diversify too quickly. I think the same could be said of fundraising strategies.
The hunt for diversified revenue streams comes with its own list of dangers and the most obvious caution is this: don’t lose the plot. Don’t spread your activities so wide, generalise your position so much or shift your emphasis so far from where you’ve been that you lose credibility, authority or distinction in the minds of your donors, audiences or – even more worryingly – the funders themselves.
Michelle Wright is the Founder and CEO of fundraising and development enterprise Cause4 and Programme Director for Arts Fundraising and Philanthropy.
This article is part of a series of articles on the theme Fundraising for the future, sponsored and contributed by Arts Fundraising & Philanthropy.
Arts Fundraising and Philanthropy runs one-day training courses on essential fundraising skills, trustee leadership half-day courses, bespoke and tailored training, and a number of one-day courses are offered on demand.