This is the first video in our series on the 6 metrics that arts leaders should be tracking and managing. View all the videos in this series here>>
Measure What Matters: 6 Metrics Arts Leaders Should Track
Metric #1: Patron-generated revenue
Forget earned and contributed revenue. Thinking about revenue generated by patrons vs. other sources may help your arts organization far more. In this video, Amelia Northrup-Simpson of TRG Arts explains why categorizing revenue only as earned or contributed can create siloes within organizations and how to calculate the amount and percentage of patron-generated revenue.
Why measure patron-generated revenue?
Arts nonprofits get revenue from a variety of sources. Usually when we look at revenue at a nonprofit organization, we think in two buckets: earned and contributed:
- Earned: any capital generated in exchange for services, like ticket revenue, subscriptions, memberships, and classes.
- Contributed: any capital or asset given that is not in exchange for services, like sponsorships, foundation funding, government grants, as well as individual gifts and bequests.
Think about where the money is coming from in each of those categories. Almost all earned income comes directly from patrons. The contributed category takes into account revenue both from individual patrons and from funders.
In this model, revenue from patrons is divided into two categories. This division incentivizes arts leaders to think of donors as this whole different entity from anyone else that has an interaction with our organization. A donation should be considered the crowning achievement of cultivation through the stages of single ticket buyer, multi ticket buyer, and subscriber. When donors are a separate category, marketing and development departments have challenges transitioning patrons from loyal subscriber (or ticket buyer) to donor.
What if we instead thought in terms of revenue generated by patrons vs. revenue not generated by patrons?
How to measure patron-generated revenue:
Patron-generated revenue is any source of revenue that comes from individual patrons. Most organizations can use the simple equation below:
Depending on your organization’s income streams, you may also need to add additional categories of revenue:
- Include: ticket sales, memberships, subscriptions, group sales, classes, concessions and gift shop, individual gifts, special events/ galas, planned giving, board giving, etc.
- Don’t include: any revenue that’s funder-provided, like revenue from foundations, corporations, and government.
You can calculate patron-generated revenue as a dollar amount, or as a percentage of total revenue.
What patron-generated revenue tells you:
Arts organizations know they are heavily reliant on patrons for revenue, but most don’t know exactly how much until they see this integrated number. We see a wide range of percentages—as low as 30%, but usually it is between 70% and 90%. Usually arts organizations know how dependent they are on earned income, but contributed income muddies the waters, since it takes into account both patron and funder money.
The percentage of patron-generated revenue is not necessarily one that you might want move up or down, unless you’re trying to reduce your reliance on government or foundation funding.
But, remember: what gets measured gets managed. When you decide to track a metric and change your work because of what it tells you, you give that metric power. There are a lot of metrics that you could track and work against, each with different outcomes. You have to make choices and set priorities.
In terms of setting priorities for your institution, we can think of no better priority than the patrons who generate the revenue that funds your mission. By measuring your reliance on patrons, you can start to evaluate your activities by how they will impact patrons. Ask yourself where your resources are allocated against that percentage, and what patron-generated revenue sources you’re being held accountable for in your position.
Featured in this video:
Amelia Northrup-Simpson has devoted her career to bringing audiences and artists together. She is currently the Director of Strategic Communications at TRG Arts, a consulting firm which focuses on getting audience development and revenue results from loyalty, pricing, and data strategies. She serves as an editor and writer for the firm’s consulting and research analytics projects, presentations and webinars, case studies, and the TRG blog Analysis from TRG Arts.
Formerly of Carnegie Mellon University’s Center for Arts Management and Technology (now AMTlab), Amelia wrote for the Technology in the Arts blog about social media, mobile, and other arts-related technologies, in addition to authoring white papers and research reports. Amelia holds a Masters of Arts Management degree from Carnegie Mellon University’s Heinz College of Public Policy and Management. She teaches a graduate-level arts marketing class at University of Denver.
Other videos in this series:
Active patrons are the patrons an arts organization serves today. But will they still be there tomorrow? It depends on how YOU cultivate them. In this video, learn how and why to measure active patron participation. More>>
To cultivate an arts patron, you’ve got to know their history with your organization first. That starts with data. In this video, learn why capturing contact information can mean serious revenue gain—or lost opportunity. More>>
Churn. Attrition. Turnover. Call it what you will; the fact is, you’re losing new patrons. In this video, learn why retention matters, how to measure your risk, and a 4-step process to reverse churn at your organization. More>>
Is renewal rate the best measurement of loyalty? In this video, learn why renewal rate can be deceptive—and the metric arts organizations should consider tracking alongside it. More>>
Is your arts organization generating the most revenue it can for each patron? There’s a way to measure that! In this video, learn how to figure out if your pricing strategy is causing you to lose money. More>>