It’s Time for Museums to Start Thinking Less like Nonprofits and More like Businesses

Museums should think more like businesses

As profitable as fundraising can be, it can detract from efforts to grow new audiences — and museum revenue in the long-term.

Much has been made about the digital transformation and the tough times faced in 2020-2021 by arts and culture organizations — we’ve written about it as well — but perhaps an underlying problem isn’t only closures and the lack of digital savvy, but instead the industry’s tendency toward hefty grants and donations.

In a recent survey conducted by the American Alliance of Museums, analysts found that museums face a slow financial recovery — one that will span several years before reaching pre-pandemic levels, despite federal relief programs and significant reductions in operating costs. That’s because 76% of museums saw their revenue decrease by an average of 40% in 2020.

Forty percent is a large amount of any organization’s budget — and more so when its one that’s so dependent on membership and admission. What if museums started to incorporate lessons from the business world to not just break even, but to break the reliance the grant model and to share their mission — on their terms?

Reliance on traditional fundraising puts organizations in a difficult position.

With memberships and general admission as the main sources of independent revenue generation, organizations are often forced to seek large donations and grants to make up deficits. It’s a vicious cycle since so much museum fundraising is correlated to member engagement initiatives and in-person visits by non-members.

Even a successful gala or a #GivingTuesday campaign can still leave organizations with little wiggle room, especially as many donations come as a result of annual drives or in a flurry of end-of-year tax harvesting. Organizations can make projections about the future, but they can’t act. And if the projections don’t match the final donation amounts, budgets, hiring, and programming can be affected.

The fact that many fundraising campaigns are organized around specific dates and events, puts extra emphasis on fundraising performance in a “hit-or-miss” type of way — at a time when many organizations can’t afford to “miss.”

Large grants and donations come with strings attached

Even in the ideal situations in which a museum has a large donor base or has the backing of local tourism boards, the cost of doing business is high and is often disparagingly covered by wealthy philanthropists. Whether it’s a list of rules as to how the money can be spent or “strong” recommendations from donors, large grants and donations come with their own set of limitations — whether written or implied.

For example, the relatively new reliance on technology in the arts and culture sector, which in some cases was a forced digital disruption as a result of COVID, could be argued — not as a result of the lack of innovation in the arts and culture sector — but instead the result of the lack of technology allocations in grants and digital advocacy on boards. Museums may have had grant money, but it was allocated to something else.

Finding New Audiences and New Ways to Generate Income — Independently.

Relying on grants and donations is like putting all your eggs in one basket. What happens if you drop the basket, or worse, someone knocks it out of your hand — like lockdowns did to visitor revenue streams?

One of the bright spots of the pandemic is that revealed the numerous amounts of untapped audiences that arts and culture organizations were able to interact with as a result of digital programming pivots. Conversely it was also a win for arts and culture lovers, no longer limited by geography.

What existing models can be adapted and scaled for new revenue streams in events or digital streaming?

Or better yet, what ways can you use traditional donations and grants to invest in long-term initiatives that allow your organization to create new business lines? Because each new customer, user, and visitor is also a potential member and a potential donor.

These are questions we love to answer. It’s not about completely throwing the old model out, instead it’s about adapting it for a change — and minimizing your organization’s risk in the process.

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How is your organization thinking like a business? We’d love to continue the conversation on social. Connect with us via FacebookLinkedIn and Instagram.

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