Ian David Moss
On Friday afternoon, I sat in on one of the AFTA Summit's Visionary Panels, "New and Emerging Business Models." Moderated by Adrian Ellis of Jazz at Lincoln Center and AEA Consulting, the high-powered panel also featured Adam Huttler of Fractured Atlas (aka my boss), Clara Miller of Nonprofit Finance Fund, and Terence McFarland of LA Stage Alliance. (Ben Cameron and Shay Wafer were originally scheduled to appear, but could not make it; McFarland sat in for them instead.)
The panelists each brought a somewhat different perspective to the concept of “new models.” Ellis emphasized a separation between means and ends, defining a new model as an alternative way to accomplish one’s core mission (which presumably remains the same). Nonprofit Finance Fund’s Miller cited high fixed costs as the bane of many nonprofits’ existence and drew a laugh from the audience when she defined a new business model – the only one, in fact – as “reliable revenue that is greater than expenses. Any questions?” Huttler quoted the University of Wisconsin’s Andrew Taylor in describing Fractured Atlas’s model as “mission-oriented around sunk costs, profit-oriented around marginal costs.” Put another way, Fractured Atlas will seek grant funds and other contributed revenue to help pay for one-time expenses such as start-up capital, but always with the expectation that any new program or activity will eventually be able to sustain itself through earned income. McFarland described his organization’s historical reliance on earned income, noting that when he took the leadership reins the proportion of revenue that fell into that category was an astonishing 95%. While that percentage has since fallen somewhat, LA Stage Alliance still employs novel strategies such as marketing its connections with member theaters to interested parties in the private sector (such as newspapers). Despite the economy, LA Stage ended last year with a six-figure surplus.
Sparks began to fly a bit during the next exchange, when Huttler pointed to the contributed-income model (in which the people using the product or service – the customers – are not the same as the people paying for the product or service – the donors) as being inherently problematic. In his view, though the sector is likely stuck with it to some extent, this arrangement can distort programming because those holding the financial cards have a disproportionate amount of power to direct outcomes. Ellis responded that this is in fact what distinguishes the nonprofit sector from the private sector -- why would we change our mission in response to the market instead of changing how we accomplish our mission?
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