What Ecosystem Factors Drive Unrestricted Revenue?

Roughly half of an organization’s expected level of unrestricted revenue can be understood by recognizing norms for its sector and budget size, and the characteristics listed below relate both to the organization and to its community. Most of the remaining variation in an organization’s level of unrestricted revenue is attributable to its expertise, good decision-making, talents, reputation, etc., which are captured in its KIPI. 

What organizational characteristics affect this performance?

• Total unrestricted revenue tends to be higher for organizations that target Hispanics/Latinos or African Americans, and with higher levels of earned revenue and funding at the local, state, and federal level.

• Unrestricted revenue tends to decrease with organizational age, and when an organization is sheltered by a parent organization. 

How do community arts and leisure characteristics affect performance?

• Unrestricted revenue tends to be higher for organizations in communities with higher levels of total arts dollar activity and a large presence of broadcast activity.

• Having more art museums, orchestras, community, music, or performing arts organizations tends to lower the unrestricted revenue for all organizations in this sector. Additionally, other leisure activity competitors tend to drive down arts and cultural organizations’ unrestricted revenue.

How do socio-demographic characteristics of the community affect performance?

• Unrestricted revenue is higher for organizations in communities where individual philanthropy is higher. This is also the case in communities with dense populations.

• As the level of socioeconomic status in a community increases, unrestricted revenue goes down. The fact that there are people in higher income brackets in a market does not necessarily mean that it is being directed to arts and cultural organizations. Unrestricted revenue also tends to be lower in communities with proportionally more Hispanics or Latinos. 

What impact does public funding have on performance?

• Overall state and federal grant activity in the larger local marketplace has a positive effect on an individual organization’s level of unrestricted revenue.

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What Ecosystem Factors Drive Operating Revenue (after depr.)?

Roughly half of an organization’s expected level of total expenses can be understood by recognizing norms for its sector and the characteristics listed below relate both to the organization and to its community. Most of the remaining variation in an organization’s level of expenses is attributable to its expertise in establishing and managing the level of total expenses. (The effects of the factors hold true for total expenses both before and after depreciation unless otherwise noted.)

What organizational characteristics affect this performance?

• Total expenses increase with organizational age and higher spending on marketing or fundraising. They also tend to be higher for organizations that primarily serve either kids or African Americans.

• Organizations that target young adults or Hispanics/Latinos tend to have lower expenses than their counterparts that do not. The same is true for organizations that have higher occupancy expenses.

• Organizations that receive federal funding tend to have higher total expenses when depreciation is included in the calculation. 

How do community arts and leisure characteristics affect performance?

• Total expenses tend to be higher for organizations in communities with higher levels of total arts dollar activity. Having more arts providers and artists in a community tends to raise the budget size for all organizations in these two sectors in the market.

• Having more theatres, opera companies, and community-based or general performing arts organizations competing in a market tend to drive down total expenses for all organizations in these sectors. In other words, more intense competition leads organizations in these sectors to have smaller budgets. The same is true for orchestras when we leave depreciation out of the total.

How do socio-demographic characteristics of the community affect performance?

• Total expenses are higher for organizations in higher socioeconomic communities.

• Total expenses, including depreciation, also tends to increase when the percentage of a population that is Hispanic/Latino, Asian American, or African American is higher.

• Total expenses tends to decrease when the median age in a community is higher.

What impact does public funding have on performance?

• Overall state and federal grant activity in the larger local marketplace has no effect on organizations’ total expenses.

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