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Many of my readers do not know that a large part of my practice is devoted to consulting to museums, performing arts centers and other cultural and nonprofit venues. There is sometimes a disconnect between developers and nonprofits. After all, if you are in the business of making money, why would you include a non-money making business in your project?
I once had a client who hired me to do a museum business plan for his very successful consumer product. When the report was finished and initial schematics presented, he asked, “Why should we build a museum when it won’t return 20% on our investment?”
The arts make good business. They lead many educated and affluent consumers to our projects and they contribute mightily to the programming and animation of public spaces. Nonprofits are good citizens. In a world where developers may be seen as unpopular, including nonprofit spaces in a commercial project is a strong inducement to securing needed entitlements. Still, many commercial developers do not understand that nonprofits face the same planning and marketing issues as commercial entities. Until about 50 years ago, nonprofits figured they didn’t have to do business plans because they were just going to lose money anyway. So why have a plan?
Nonprofits must have a well-articulated carefully planned strategy for capital, operating and future funding or they will not receive ANY funding in the first place – not from friends, government, dispassionate individuals nor foundations! Nonprofits are businesses, just like any other. And the last thing you want as a developer is to have a failing tenant in your center.
So here are 10 steps to look for when evaluating a proposal from a nonprofit. Also, for nonprofits, these are the steps you should take before presenting to a developer or planning an expansion or new facility:
- Have a realistic and defensible business plan.
- Determine the annual operating deficit.
- Project attendance and per capita revenue/expense within normal ranges.
- Study national comparable museums, including your favorite models. Know attendance, operating budget, per capitas, other important metrics.
- Know your market, including the all-important market area demographics and psychographics. There are now reputable services that provide these trade area metrics for very little money.
- Study 990s. These are your best friends. They are the income tax returns that nonprofits must file and they provide you with all financial information for your competitors and comparables. They are public record!
- Take time to study comparables in the local market. Most important for these comparable studies are annual attendance, budget, and resident trade areas.
- Make sure to include changing gallery space in your design. Return visitation is key to your nonprofit and residents will comprise the majority of your attendance.
- Interview executives at the models you envy. They normally will assist if you are outside their market and they can be a wealth of knowledge.
- Finally, get professional help because you are not objective! A good consultant can save you thousands in mistakes!