The Entrepreneurial Career : A Balanced Budget

Budgets. Can you believe this column is two years old and I haven’t tackled budgets yet? Shows you how much I love ’em.
Why are budgets important? Because, if for no other reason, the act of creating a budget forces you to assess your financial realities in black and white. A good budget then serves as a living blueprint for the life of your project. You create categories where you expect to earn and spend, with some leeway for surprises and changes of plans. Then you simply track how the figures add up to your expectations.

But you probably did not get into the music business because you are great at crunching numbers. Yet, do not fear the budget. Second only to your artistic plans, it is the most important tool you have to bring your musical project to life. Understanding a few basic principles and terminology will help you set up a budget that works for you.

Budget Rules

1) Be realistic.

At its most basic, a budget describes what a project’s expenses are and the way these expenses will be met. (By the way, this is also the simplest definition of a business plan—but that’s a topic for another time.) It’s easy to find ways to spend money, but more difficult to estimate where it’s going to come from. Strive to keep your expenses low and think conservatively about your options for generating income. For example, if you have never won a grant before, don’t count on receiving one that will cover most of your budget.

2) Create a budget before you start.

It’s what a budget is for. If you’ve never done this before, it might not be self-evident. I’ve even worked for nonprofits that adjusted their budget as the year went on, because a grant did or did not come in and expenses mounted. But if you start out with a realistic budget, there will be no need to change it as you go along. Believe me, you will drive yourself crazy if you create different versions.

3) Stick to it.

When your production is over, you don’t want to discover that you somehow spent $1,000 on pizza. Ideally, you will check in with your budget every day to monitor how your expenses are lining up with what you planned.

4) Don’t do anything you can’t pay for.

In other words, start small. If you promise high artist fees but have no idea what ticket revenue will be and you’re relying on a grant to come through, you will get yourself into trouble. Start with what you reasonably expect to be able to pay, even if it means that the experience itself is the only payment the artists will receive.

5) Keep expenses low.

Even when you try to keep expenses down, you will be shocked how quickly things add up. Whether this is your first production or your 100th, pick the areas that are most important to spend money on and find ways to cut costs on the rest. If you are committed to paying your artists well (always an admirable goal), then try to find pro bono publicity or arrange a barter in exchange for rehearsal space.

The Nitty Gritty

The sidebar on p. 12 shows a sample budget for a hypothetical opera production. It assumes some choices have been made: a small cast and crew, at least some volunteers and donated space or materials, using lights instead of building a set, and a venue with theatrical lights. Every project is different, so customize the income and expense categories for your plans. There are many resources and other sample budgets available online, with especially good examples from the Lower Manhattan Cultural Council and Fractured Atlas.

Income Categories

Ticket Sales
According to OPERA America, the North American service organization, box office revenue for their member companies (excluding the Met) in 2011 represented nearly 20 percent of their operating income. Try to get everyone involved to sell tickets and spread the word, and then make a big fundraising push to cover the full costs.

Other Earned Income
Here’s your chance to find creative ways to generate more income. Maybe you could sell advertising in your program to local businesses. If you have some good recordings, create CDs and sell them at the show. Spin off a children’s version of your show and sell it to schools. These are somewhat labor-intensive endeavors, but can they support your bottom line.

Individual Contributions
This includes donations made through an online campaign or a fundraising benefit, and it represents your best chance to raise the money you need. At first, your best sources are friends and family of anyone involved in the production who will be most likely to be invested in its success.

Foundation/Government/Corporate Support
A good rule of thumb when budgeting foundation income is to expect to receive about 10 percent of what you apply for. If you send out $10,000 worth of grant proposals (which you can do only if you are incorporated as a nonprofit or, on a more limited basis, if you have fiscal sponsorship), count yourself lucky if you win $1,000. In the aforementioned 2011 OPERA America report, government support accounted for 5 percent of income. This percentage could be higher for smaller projects but, as always, do not count on most of your income to come from any one source.

In-Kind Contributions
Not included on this sample budget are in-kind donations, which are gifts of goods or services instead of cash. In-kind contributions can be very valuable, saving you the expense of having to buy, say, costumes or the services of a professional fundraiser. It is compelling to include in-kind donations in a budget that will be shown to foundations, but I find it useful to keep them out of a budget that tracks cash exchanges.

If you would like to include an in-kind donation in your budget, assign a fair market value to it in both the income and expense categories. Fair market value means how much the goods or services would have cost had you purchased them on the open market. That is, if a corporate lawyer donated what to him was $5,000 worth of work but you would have spent $500 had you hired a lawyer on your own, enter the lesser amount.

Expense Categories

Artist Fees
Paying your artists will be your biggest expense. As we all know, anything goes when it comes to paying singers, from nothing to union scale to charging them for the privilege. You can’t get away with this for your crew or instrumentalists, who will be less likely to back out of the project if they earn a market-rate fee. I believe that everyone should be paid at least something, so do the best you can.

Rehearsal and Performance Space
Ideally, a venue will present your production and let you rehearse in the space for free. Since that so rarely happens, this category might be your second highest expense. If someone on your team is affiliated with a local college or school, see if you can rehearse there for free. Negotiate for low rates with your venue or find the lowest-cost rehearsal spaces that suit your needs. That said, staging and dance rehearsals need adequate space, so don’t be so stingy that artistic quality is compromised.

Costumes/Props/Materials
Here’s where you have some flexibility. Instead of the high costs of building or renting a set, a creative lighting designer can work wonders. A good costume designer can pull off a miracle on a small budget or your director might be able to work with what cast members have in their closets.

Instrument/Equipment Rental/Transportation
These include such costs as a harpsichord rental and a U-Haul to move it or a cab to bring costumes to the venue.

Insurance
This is not technically necessary, but very useful for peace of mind—and sometimes a requirement of the venue. Insurance is available for events or volunteers and will protect you in case an accident happens during the production.

Administrative Personnel (Graphic Designer, Consultants, Etc.)
If you don’t have a volunteer who can create a memorable image for your event or you just don’t have time to write a grant proposal for a likely prospect, budget in something for paid assistance.

Marketing and Publicity
This is where you have to spend money to make money. Can you buy a listing in a newsletter that will reach your audience? Sponsor a Facebook ad (as part of a larger effort)? Even hire someone to write a compelling press release and get it to the right people? Do it. There is no point in going through all this trouble if you don’t get people to come.

Printing and Web
Now that so much Web and design work can be done without technical knowledge, quality designers often have affordable rates. Consider investing in a good visual identity for your production, which can be used on your website, social media, and perhaps a run of postcards. And even if you distribute music via PDF, printing a program booklet for a crowd can be more expensive than you expect.

Photographer/Videographer
It’s 2014 folks. If you don’t have photos and video clips to share after your performances, it might as well not have happened. You can also use them to land the next gig.
Fiscal Sponsorship Fees
If you are working with a fiscal sponsor, remember that they will collect 5 percent or more of the donations they receive on your behalf.

Donor Fulfillment
If you raised money through a Kickstarter campaign or something similar, you probably offered perks to your donors, such as CDs or free tickets. Factoring in the costs of these benefits (which can quickly add up) will help you set a better goal for the campaign.

Contingency
Even the best laid plans have unexpected expenses. Setting aside 3 to 20 percent of your budget (depending on the likelihood that something may go wrong) will also enable you to buy an expensive prop or give a higher stipend to someone who went the extra mile.

In summary, the budget can be whatever you want it to be, and it exists to reassure you and guide you through the life of your production. Don’t know where to start? One way is to make a “pie in the sky budget” with every expense you can think of: good artist fees, set and props, a publicist, and more. Then take a look at that number. Do you expect to be able to raise up to half of it from individual donations, within the time frame you have before the show? If the answer is anything resembling a no or a maybe, see what you can cut and start again.

Amanda Keil

Amanda Keil writes for Classical Singer, OPERA America, and BachTrack.com, and she also runs her Baroque company, Musica Nuova. Find more entrepreneurial ideas on her blog: thousandfoldecho.com.