Business model for small arts organisations 'close to untenable'

As part of research published this week by Arts Professional, in partnership with financial benchmarking company MyCake, arts organisations with an income of under £1m were found to have taken a substantial financial hit in the five years following 2018, with those whose revenue is under £100k experiencing the highest deficits.

The figures indicate small arts organisations are more susceptible to current economic and funding pressures. However, the experience of their leaders over recent years reveals the extent to which these strains have taken their toll on the workforce and are having a knock-on effect on their programmes of work. 

“It's not a surprise at all," said Linda Bloomfield, Artistic Director of RivelinCo, a Sheffield-based arts organisation, in response to the study. "Obviously, things are always challenging when starting a small arts organisation. We've been going for three and a half years now and... these past six to twelve months have been the hardest I have ever known it.” 

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With a turnover of around £150k and five part-time staff, RivelinCo works with artists and communities mainly in a neighbourhood context, where Bloomfield says there is a lack of cultural infrastructure.

“The funding landscape is now at a point where we're competing against even vital services, such as a food bank, for example. I absolutely believe in arts as a human right, but honestly, if I were the grant funder, I know which one I would fund."

'Close to untenable'

Bloomfield says the number of recent funding rejections RivelinCo has received has been "incredibly deflating".

“The majority say ‘This was a really strong application; we really liked it, but we just got too many applications,’ so we're not even getting useful feedback. One funder said that they had a 3,000% increase in applications. 

“And I know that the problem is affecting all sectors, but I think for arts in particular, with the reduced success rate with Arts Council England too, it's getting close to being untenable.

“For small organisations, there are additional challenges - we often have limited core funding, which makes it harder to look to the future. So everything's very short term - premises leases, fixed term staff contracts - while we're trying to make really long-term commitments to our communities."

For small arts organisations with their own building or fundraising team, Bloomfield says there are also fewer prospects for income generation, as they can't raise money from hires and events like a large theatre or a gallery can or run a bar or cafe.

“It's hard when feedback is to diversify your income stream. There are limited opportunities to do that, especially when you're working with communities -  a lot of our delivery needs to be free or low-cost," said Bloomfield.

“We have to come up with these clever ways of earning a bit of money through consultancy or delivering training or doing more expensive chargeable things to cover the cost of losses. Obviously, all those things take time and capacity from what’s often a very small team.”

In her own organisation, Bloomfield, who now spends two days a week generating income by consulting for other organisations, feels they have hit a ceiling on how much more they can diversify and increase income at their current size. 

These pressures inevitably impact artistic output. Since founding RivelinCo during the pandemic, Bloomfield says the ability to take creative risks has felt increasingly unachievable. At the same time, cost-of-living increases have seen the demand for free and low-cost programmes increase significantly while the demand for paid programmes has reduced, something actively affecting opportunities for artists across the board. 

“Commissions are getting smaller and smaller or have disappeared altogether, and certainly there is a trend where bigger organisations are working with more established/known artists with more of a guaranteed reach, so things are getting harder for early career artists - and particularly working-class artists," she said.

'The business model of old ceases to make sense' 

Brian Logan is just a few weeks into his new job at A Play, a Pie and a Pint in Glasgow, but in his previous role as Artistic Director of Camden People’s Theatre (CPT), which most recently reported a total annual income of around £500k, he gained ample experience navigating a business model based on attracting funding, both statutory and from trusts and foundations.

“While that was never something we could take for granted, it - until recently - felt like a viable component of what we were doing,” said Logan. “But with standstill funding from ACE for what will, by the end of this funding period, be a decade... and with a dramatic diminution in available trust and foundations funding, not to mention the difficulty our freelance artists now have in funding the work they bring to CPT; and the increased overheads in a cost-of-living spike, the business model of old ceases to make sense.

“The vulnerabilities in our case at CPT would be we have to shrink as an organisation and make tough decisions about what aspects of our activity we can retain. Can we continue to support artists, financially and in kind, at the same level? How can we continue to resource our activities in the local community? Can we continue to pay London Living Wage? 

“These were the conversations we were having – with, of course, bigger existential questions about the long-term viability of the organisation always looming on the horizon.

"Our ability to plan ahead was certainly affected, primarily in our case, because the artists who populated our programme were repeatedly being turned down for ACE funding – noticeably, for projects we’d have considered near-guarantees a few years previously."

While Logan says he didn’t experience overt pressure to increase profits at CPT, he did feel a need to plug gaps in income and devise new ways of doing so, including individual giving and membership schemes, a new corporate workshop offer and exploring a partnership with a local university to co-run a theatre course. 

"We also felt pressure to, say, raise ticket prices," he added, "but we refused to do so."

“All of that stuff comes at a cost, at least initially, to the organisation. Everyone in small organisations is overstretched and lacks capacity to devise and implement brand new schemes. 

“Those schemes are unlikely to yield income in their first year or two, and so any initial work on them has to happen unresourced and re-deploying existing capacity from elsewhere.

"Another effect, of course, is that, particularly at a leadership and senior team level, you end up spending far more time talking and fretting about income generation than you do about art, ideas and creativity."

With threats to small arts organisations becoming ever more acute, Logan is adamant about the need to support, protect, and preserve them, not least because of the benefits they can bring to the wider sector, from individual artists to large organisations.

“Small organisations are just as important - and much more fun - than big ones. They can take risks big organisations can’t. They’re more limber and responsive and likely to have their finger closer to the pulse.

“They’re part of an ecology with big arts organisations, all parts of which need one another. Without the small arts organisations, new ideas would go un-seeded and early-career artists wouldn’t be found and supported, before being launched - sometimes - into the big-organisation world.

"And marginal, un-commercial, risky ideas, the ideas that might change tomorrow, would struggle to find shelter and a home."

'Nimble and agile'

Appreciation for the advantages of small arts organisations was also expressed by Sanaz Amidi, a cultural leader and consultant who, among her posts, was a trustee of We Are Amal, which recently announced its closure due to fundraising challenges.

With an income of under £40k for the year ending 2023, We are Amal funded and developed UK arts and culture programming that celebrates Muslim artists, stories and contributions to society.

“Having led arts, culture and heritage organisations that serve minority and deprived communities for over 25 years, this research deeply resonates with my experience,” said Amidi. 

“Diverse-led arts organisations thrive on well-placed strategic partnerships, and their relationship to place and neighbourhoods is particularly significant. This necessitates working across various local authority agendas and departments.

"However, with the continued funding cuts local authorities face, the viability and work of these critical arts organisations are significantly affected.”

Amidi was formerly CEO of Rosetta Arts, which delivers creative courses, workshops and experiences for people in east London with an income of around £400k in the last financial year.

“Larger institutions may be less vulnerable to these cuts, yet they often benefit from grassroots and trusted organisations like the one I led for 16 years, Rosetta Arts," said Amidi. "Such organisations are integral to fostering community engagement and ensuring that cultural initiatives are inclusive and reflective of the diverse populations they serve. They provide essential services and opportunities that larger institutions may not be able to offer due to their size and scope. 

“Furthermore, their deep-rooted connections within communities enables them to build trust and effectively mobilise resources to maximise impact. If we lost, for instance, 20% of arts organisations due to the cost-of living-crisis, what impact would that have on access to arts and culture in local areas? We must take action and intervene before they close and we lose something that is so central to our social and economic wellbeing.

“Despite their size, these smaller organisations usually play a pivotal role in their communities. We need to use data like this to identify these organisations, work out how their financial resilience is changing and address the financial inequalities they face, particularly those serving deprived communities."