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7 Ways Theatres Can Prepare for Another Recession

  • Posted Oct 10, 2019

The longest U.S. economic expansion could come to a grinding halt by the middle of next year and theatre organizations across the nation are particularly vulnerable to its effects.

Wolf Performing Arts Center, Wynnewood, PA. Wolf Performing Arts Center, CATS. Image credit: Londa Salamon Wolf Performing Arts Center, Wynnewood, PA. Wolf Performing Arts Center, CATS. Image credit: Londa Salamon

In a recent report, written by Teresa Eyring from Theatre Communications Group, Manuel Lasaga, and SMU DataArts’ Dr. Zannie Voss, we examine the impact that the last recession had on theatre organizations. Our goal is to provide key insights and formulate ideas on how to prepare for the anticipated recession that could happen as soon as 2020.

Below are the seven recommendations for theatre preparedness found in the report along with tips on how to get started.

Build Working Capital

“It is an excellent time to reduce debt and build working capital. In the event of a recession, strong working capital will help ease the cash flow crunch should earned revenue decrease.”

 

Working capital is basically the backbone of any business. It’s the amount of cash and other assets available minus current liabilities and allows the organization to operate with a certain amount of flexibility.

Building working capital is a process – one that may take time and a focused strategic approach depending on your arts organization’s current situation. To start, you’ll need to have a solid understanding of short-term funding needs (payroll, vendors, rent, credit cards, etc.) Does the timing of these payments correspond with timing of income? If not, look at ways to adjust the timing of your revenue-generating campaigns and align them with monthly bills to avoid any possible late payments.

Organizations will similarly need to address long-term funding needs, such as building ownership or upgrading equipment, by securing funding before finalizing plans to execute large capital campaigns.

Develop a Back-up Plan

“Prepare for a potential downturn with a back-up plan, and look beyond the short term. It may be a good time to cultivate an exciting, mission-aligned project for a future year while the economy is still strong – one that will reinvigorate your artists, staff, audience, and donors.”

 

Even if you already have programming mapped out for 2020, there may be hidden opportunities to collaborate with fellow nonprofits or local businesses and engage the community in a low-cost, high-reward organic way. Start those brainstorm discussions now to get a head start on building your back-up plan.

Stem the Ebb Tide of Individual Engagement

“Focus on audience retention strategies and deepening relationships with individual donors, the giving source of highest growth post-recession. The investment in personal relationships and development of loyalty will be particularly important if the Tax Cuts and Jobs Act of 2017 discourages mid-level donors from continuing their annual philanthropy.”

 

We hear it a lot – board members and development staff chanting at every strategic meeting, “We need to attract new donors.” While this is certainly something to keep in mind as an on-going long-term goal, it has been shown that hyper-focused strategies to acquire new supporters are expensive and oftentimes come with little reward.

During these times of uncertainty, it might be wise to turn attention toward those that you already know support your mission. At every level, continue to build those relationships through personal outreach, low-cost donor-cultivating events, positive onsite experiences, and an easy donation process online, in-person, or via mail.

Don’t give reason for your supporters to complain and eliminate any hurdles: streamline your website, use data-driven knowledge to develop engaging social content, and create a positive and helpful culture within your workforce.

Your patrons will have experiences with your organization outside of direct contact with the development department, and those experiences can have an impact on how much they decide to give as well as an impact on how they talk about your organization with friends and family. Your current supporters are your greatest asset to organically expand your donor base, so give them something good to talk about!

Re-Evaluate Marketing Strategy

“Examine single ticket marketing plans and pricing, as well as the relationship between subscription declines and pricing. Some organizations are finding success with smaller ticket packages, thematically oriented and priced appropriately. Opportunities offered through strategic social media and online marketing allow theatres to reach and engage audiences at a much lower cost than a decade ago. Make sure your plans are up to date and that you are tracking analytics in order to make the best decisions.”

 

Use website and social analytics to determine not only how people are engaging with you in the digital atmosphere but also who is engaging with you. Once you have a solid understanding of your current audiences, you may be surprised to discover how your online audience differs from your in-person patrons.

Reduce Expenses

“Evaluate and, if possible, reduce expenses while taking care not to compromise in areas that are central to your mission and purpose, such as the artistry itself and the ability to draw people to it. As Michael Kaiser purports in The Art of the Turnaround to be his mantra for running successful organizations, ‘Good art, well marketed.’”

 

Our research shows that theatre’s expenses continue to rise, outpacing earned and contributed revenue growth combined and worsening theatre’s financial performance from 2004 to 2017. We also found that the two areas of expenses that grew the most were production (non-payroll) and administrative payroll. Artistic payroll and marketing expenses grew the least over time. Providing decent wages for both administrative and artistic staff is extremely important for workforce retention and the overall health of the organization, financially and programmatically. In order to reduce expenses without negatively impacting staff, you may look at ways to be more resourceful to keep production expenses and other costs down.

Start a Financial Scenario Planning Team

“Engage your staff and board in financial scenario planning. Test options and forecast when and how you will respond if the economy declines.”

 

Bringing together a group of staff and board can be beneficial in myriad ways. Transparency about the situation may help develop a conscious effort in reducing costs throughout the organization and may prompt board members to play a more active role in finding innovative solutions.

Collaborate with Peers

“Engage with your peers to share solutions, lessons learned, and possible collaborative opportunities.”

 

As we’ve seen in several of our reports, including the recent Arts Vibrancy Index Report V, arts communities thrive when there is an active support system, including arts organizations supporting other arts organizations. Take the time to reach out to old, current, and new connections and inquire about reciprocal benefits or partnerships that you can provide for the community to keep people engaged during times of economic slowdown.

Theatres at the Crossroads

As America faces another possible economic decline, SMU DataArts and Theatre Communications Group examine the data to provide insights and recommendations on how to be best positioned for the future.

Read the Full Report

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