When we discuss artists, creatives, and arts organizations as businesses, it can often lead to puzzled expressions. Nonetheless, it's a concept that deserves attention.

Profits with Purpose

In this week's "I Hate Numbers" podcast, we delve into the fascinating realm of the arts and creatives as businesses. While their objectives and motivations may differ, they share fundamental characteristics with traditional enterprises.

Valuable Lessons for All Sectors

Consequently, unlike traditional businesses, arts organizations often utilize their profits to fulfil a particular purpose or support their unique "why." These surpluses play a crucial role in sustaining and thriving within the arts and creative sector.

Common Ground and Distinct Differences

Arts and social enterprise organizations provide valuable lessons for the private sector. For example, lessons in budgeting, compliance, tracking, and efficient resource management can benefit all industries.

Navigating Unique Considerations

Moreover, when we turn our attention to the arts and creative sector, we embark on a journey through the intricate landscape of funding streams. Here, we encounter the importance of maintaining impeccable cost transparency. Alongside this, we shed light on the nuanced realm of tax considerations that are distinctly unique to this field.

Understanding the multifaceted aspects of funding, cost management, and taxes becomes increasingly vital. This understanding is pivotal, considering the substantial impact that arts and creative businesses have on not only the economy but society as a whole.

Conclusion

If you're engaged in the arts or creative sector, we invite you to share your thoughts on the distinctions and commonalities compared to the private sector. Your experiences and insights are invaluable to our ongoing discussion. The arts and creative sector encompasses more than just creativity. Likewise, it's about running businesses with unique challenges and objectives that offer valuable lessons for all industries. What are your thoughts on the creative economy? Join the conversation and share your perspective. Share this episode and explore Numbers Know How for online tools and resources. Until, next time, happy creating!

When I talk about artists, creatives and arts organisations as businesses, there sometimes comes a very puzzled look on the people I talk to, and I've never understood that. For me an artist, a creative, a social enterprise organisation, like a theater, is a business. There are differences certainly and the key difference is what I'm going to have a look at in this week's I Hate Numbers Podcast.

The key things that artists, creatives and arts organisations need to do will also be outlined in this podcast. And in future broadcasts, I'm going to be expanding that theme a little bit more.

You are listening to the I Hate Numbers Podcast with Mahmood Reza. The I Hate Numbers podcast mission is to help your business survive and thrive by you better understanding and connecting with your numbers. Number love and care is what it's about. Tune in every week. Now, here's your host, Mahmood Reza.

Hi folks. Welcome to another weekly podcast on I Hate Numbers. This is the podcast that has a mission. That mission is to help you and your business make more money, (who doesn't like that?) save time, be more productive, increase your financial awareness, reduce that stress and anxiety you may have, and have the business you aspire to.

My strapline, plan it, do it, profit, is what I'd love to share with you. Let's crack on with the podcast. Now I said at the very beginning of the podcast that for me an arts organisation an artist, a creative, a social enterprise are businesses just pretty much like all other businesses. Certainly, there are differences and nuances. Organisations, those creases, those artists engage freelancers come together as organisations exchange knowledge value, deliver their why in exchange for financial considerations.

They have staff, they've got budgets, they've got cost pressures, they've got to do things like pricing. I know there are some key differences between the private sector and the creative and social enterprise sector. There is a lot in common. And one of the key differences between those two sectors, if you can call it that, is what happens to the profits and the surpluses that are generated. There may also be a distinction in how that profit is generated but making profits nevertheless is a necessary function. Imagine a local theater company. They've got a set ticket prices just like other businesses do for their price of their products and services. The consideration of the impacts on the consumer, impact on demand, impact on profitability are considerations that have to be factored in.

So arts organisations, social enterprises are businesses. They have structures. They can be constituted as partnerships. They can be constituted as limited by guarantee companies. They can be constituted as companies by shares. They can be constituted as community interest companies, but they are organisations with degrees of compliance to obey.

They have very similar challenges as the private sector, but one of the key differences lies in the objectives and what happens to the funds, those profits that are generated. Typically those profits will be used to help deliver a particular purpose to help deliver their why. Profit doesn't necessarily tend to be the main motivator

behind arts, creative businesses, behind social enterprises, but profit is still a necessary requirement. Reserves need to be built up. Funds need to be consolidated and those organisations, irrespective of what they are, that don't look to at least cover their costs with some surplus on top of it are doomed to failure because they will not be sustainable models.

A social enterprise perhaps that's focusing on supporting underprivileged youth is looking to use those profits to fund educational programs to fund those programs for which the audience, the people they're delivering services to, will not be in a position to pay for those services. I think it's really important to emphasise at this point as well that there are many lessons that the private sector itself can take from arts and creatives, from social enterprise organisations and apply that discipline, apply those lessons in their own businesses.

I'm very fortunate that I've worked for nearly four decades in the private sector, in the arts and creative sector, in the not-for-profit sector. So I've seen the inside track as well as being on the outside and I can see where those organisations can benefit from sharing that knowledge and actually learning lessons.

More of that in a future podcast. Now, if you're thinking, don't be such a spoilsport, give us some lessons. Well, lessons about budgeting, compliance, tracking, managing to be creative and have that talent with very little resources are certainly lessons that can be taken on board. Now, having got an appreciation of some of the key differences, it's also about what happens to the profit that's being generated.

As I said, typically in a private organisation, of which I do own a private business, that money is in my business is obviously used to fund the future growth, but it's also there for me to reward myself for the energies and the risk that I'm taking to pay my staff, pay my suppliers, just like a not-for-profit or social enterprise organisation would do, but typically for a social enterprise, an arts and creative business here, those surpluses, those reserves are used to buffer against headwinds and it's to use to help sustain and thrive. Now, if we come back to what do you do if you are an arts and creative organisation, if you happen to be what you might see yourself as a not-for-profit organisation.

And remember, not for profit doesn't mean you don't make profit. It's saying that is not your driving objective. Well, what do you need to focus on? Well, typically it's the normal things and a little bit more. So one of the key things to do is track. Keep an eye on what those resources are being expensed on, whether it's on a project by project basis, whether it's on particular services, where it's going on internally and understanding where the money is going, where the money is coming from is critical to feed into budgeting, into planning, looking ahead the landscape at least 12 months, if ideally not three to four years into the future. A dance company typically may want to spend money and needs to spend money on costumes, performances, venues and marketing.

It should be tracking what's going on with their resources against those projects, against those different activities. Governance tends to be much stronger in arts and social enterprise organisations. And by governance is things like having regular management meetings, regular meetings with the directors and trustees to give that oversight.

And again, those are certainly lessons that private sector organisations can take on board as well. The discipline of budgeting, allocating resources where it's best needed is something that's very typical and I've met for over 30 plus years of having been involved in the sector as an advisor, as a trustee, as well as a somebody who has got a client base that's enriched by having arts and creative businesses there.

Funding streams tend to be different. So it's a whole combination of funds from generating revenues from things like selling tickets to performances, contributions from things like sponsorships, earned income, running paid workshops. Money will also come from things like grants, donations, very competitive environment.

But again, that will be what's called unearned income and there's a whole blend of those funds, a whole blend of those resources that comes into the pot. The ideal is to move away from reliance on grant funded certainly and actually self generate and adopt that entrepreneurial spirit in running your organisation.

What else is important? Well, cost transparency. Now these are lessons by the way, that should be transferred across into private sector businesses for arts organisations, social enterprises need to be aware of having greater cost transparency, what those costs are, where those costs can be challenged. Having a digital platform like Xero, which is your ecosystem, takes a lot of the heavy lifting and helps manage the organisation when capacity is limited,

when resources are tight, that ecosystem that is embedding that fixes to your ticketing system takes the heavyweight lifting off data entry where there might be problems trying to recruit suitable staff. It's a great thing to do, and we've done that for hundreds of organisations over the years to help them digitise, be more efficient, be more productive, use their resources more wisely and get not only the bookkeeping done correctly, but the information that's provided for governance, for information, for making decisions.

Where else are there common grounds? Well, tax considerations do not pass arts and social enterprise organisations by. They do not bypass the freelancer or the artist. There's still considerations about tax. There's still considerations about VAT. So keep an eye on those numbers. Keep an eye on that situation.

Again, it's really important. So you're going to be aware of how tax, the tax landscape will affect you as an organisation. It should be said by the way, folks, as we come to the roundup, do not underestimate the impact in financial terms, in social terms of the contribution that artists, creatives and social enterprises make to the British economy in terms of direct funds being generated and the spinoff of all the related supply chain that goes there

to get pumped in to the British economy. Imagine a local artist who might be selling their work online, contributes to the global economy by exporting that art to customers outside of the UK, as well as in the UK. Every time an event takes place, you go and visit something, you take part in that creative economy.

Then the value that's tipped into the local economy, the wider economy is very manifest. I have read some statistics that say for every pound spent directly in an event, multiply that by nine or 10 and that's what gets pumped into the related supplies and the supply chain of which the theater, the organisation is part of.

Restaurants, hotels, taxi firms. rates collected, all of those are fed by a vibrant economy. Now folks, I'm just giving you a little bit of a taste about the sector. It's a sector I'm particularly fond of. It's a sector I particularly applied my trading for a long time. Again, I'm fortunate enough to apply my trade, if you can call it that, the plan it, do it, profit, across multiple sectors, working with individuals as well as organisations.

So what are your thoughts? Are you involved in that sector? Did it have a different vibe to you compared to maybe the private sector? What's it like working as a freelancer? What's it like working as an arts organisation, a creative space? Do you see that distinction? I'd love to hear your thoughts. Until next time, folks, happy creating.

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