Out of the Blue has weathered the storm of arts funding cuts in Scotland thanks to its social enterprise model and the support of ethical finance providers. Rob Hoon shares the story.
Diversifying income streams can be a thorny issue for arts organisations. Sponsorship, loan finance, trading income and other income streams are typically hard to come by for those working on projects that encourage participation from people who have the least disposable income. Meanwhile, many organisations with the potential to diversify their income have a long history of public funding and therefore cannot imagine it any other way.
There is a pressing need for the development of organisations whose long-term existence does not rely on grant income alone
The impact of undiversified funding has been that cuts have hit the jugular of organisations that now cease to exist. Society has lost their social value.
Out of the Blue Arts and Education Trust was a social enterprise from its creation in Edinburgh in 1994. It was formed by a group of intrepid young people who were determined to satisfy the need for studio space for artists in a city renowned for its arts institutions and festivals but less likely to provide affordable production space.
From the beginning, Out of the Blue created income by charging artists for studio space, obtained grant funding for educational creative projects, ran a café and started the Bongo Club as a performance venue and club. It has enjoyed steady growth throughout this period because of the sustainable financial and social operating model.
Supportive financial providers
What has been absolutely key has also been the right kind of relationship with supportive finance providers Triodos Bank and Social Investment Scotland.
This model has developed over 23 years and now underpins our development strategy at a time when cuts to public expenditure are extremely challenging for the cultural sector. As testing as this time is proving to be, it will also offer opportunities for Scottish arts organisations through the growth of creative industries, an increasingly important segment in both the local and Scottish economy.
In order for Scotland’s creative industries to reach their full potential, there is a pressing need for the development of organisations whose long-term existence does not rely on grant income alone. While initiatives such as the Community Right to Buy provide exciting opportunities for arts centres and maker spaces to be established across all of Scotland’s communities, they cannot flourish if their business model is not robust.
In 2002, when it was time for us to move from a crumbling rented building owned by a property developer, it made complete sense to ensure our sustainability through the purchase of a building using loan finance.
So, diversifying finance also includes diversifying expenditure. Owning your own building and having loans to repay sharpens the focus of costing spaces in order to generate the income required to cover organisational costs, interest and capital repayments.
We need funders and policy makers to appreciate the reality of running a social enterprise. That means thinking about budgets differently to enable organisational costs to be recovered. It means funders realising that rather than giving hundreds of thousands of pounds to an organisation to spend on a project, a comparatively small investment in an arts social enterprise can create an infrastructure that enables income to be generated for organisational sustainability.
This is asset-based development that relies on the support of organisations such as social banks, Creative Scotland, the Scottish government and local councils. Triodos Bank is unique in the banking sector in that it really understands the value arts and culture projects contribute to our quality of life – connecting ideas and people, and provoking and encouraging positive change.
Out of the Blue has gained some of this support but we still find a lack of understanding of the impact that our operation and sustainability has on the local community, the local economy and the creative industries.
The ripple effect is more of a reality than the trickle-down effect. It brings with it social impacts conducive with an organisation in tune with its community, and makes us aware of how creative enterprise can be an integral part of all public policy.
Arts organisations themselves should realise that social enterprise is not a magic bullet for generating cash, but it is a way of operating using the tools of business alongside an understanding of social policy and value. To this end, we are partnering with Creative Scotland’s Creative Industries department and the Development Trust Association Scotland to offer an intensive peer support course where arts and other organisations can gain from our experience of developing a sustainable business model.
Watch the Triodos film about Out of the Blue.