In the world of small museums, location and audience significantly influence expenses, rendering a one-size-fits-all approach ineffective. However, gaining insight into the various types of expenses museums incur can shed light on common challenges and their causes. The non-profit financial Form 990 categorizes expenses into five areas, providing a framework for understanding spending patterns. Our goal is to simplify the concept of museum spending and guide museums toward prudent budget management by exploring these key expense categories.
Continue readingCategory Archives: Performance measures
Untangling the “Other” Revenue Stream
In the colorful tapestry of history-focused organizations, every thread of revenue has a role to play in the success of the organization. Perhaps the most unique collection of these threads is the “Other” revenue category. This singular “Other” thread houses a miscellany of revenue sources that don’t fit into the categories of “Investment Income”, “Program Service Revenue”, and “Contributions and Grants”. At first glance, this classification may appear insignificant, yet it often proves to be a silent contributor that underpins the fiscal health of History-Focused Organizations [Museums (NTEE A50), History Museums (A54), History Organizations (A80), and Historical Societies & Historic Preservation (A82)].
Understanding this “Other” revenue can be like deciphering an ancient dialect. It is made no easier by the fact that IRS Form 990 at times uses the terms revenue and income interchangeably. While some categories of this revenue such as royalties and inventory sales may be familiar, “miscellaneous” often contains difficult to parse odds and ends such as third-party events, insurance proceeds, ATM fees, and revenue from hosting satellite towers. Most often this miscellaneous revenue is unspecified and simply named “miscellaneous” or “other” which can make it difficult to get the full picture of a particular institution’s revenue sources. We advise limiting the classification of your total revenue as “miscellaneous” to no more than 1%. While judicious use of this category can help define your other revenue streams more clearly, overuse could lead to a lack of clarity about a significant portion of your revenue. It is crucial to maintain a comprehensive understanding of your financial situation.
Continue readingHistoric House Museum Summit This Week
In 2007, I helped organize the Forum on Historic Site Stewardship in the 21st Century, which resulted in an influential issue of Forum Journal that laid out the major challenges and opportunities, including the need for financial sustainability, a willingness to change in response to the needs of the community, and a balance between the needs of buildings, landscapes, collections, and the visiting public. It also recognized that museum standards may not be the best practices for historic sites and that the profession “must develop new measures, beyond attendance, that document the quality of visitor engagement at sites and the extent of community outreach beyond the bounds of historic sites.”
So what has happened in the 16 years that followed? We’ll find out this week as the American Association for State and Local History hosts a virtual summit on the Sustainability, Relevance, and the Future of Historic House Museums on July 11-12. Sessions will address measuring the impact of house museums, broadening interpretation, care of buildings and landscapes, and the evolution of mission statements.
Continue readingImpact, Sustainability, and Non-Profit Programs
For small non-profit organizations operating on less than a million dollars annually, programs are often the beating heart of the operation. The best programs balance mission and financial sustainability to serve their audiences. Program revenue (admissions, events, and membership dues) can be a vital means of maintaining financial stability and growth. For History-Focused Organizations [Museums (NTEE A50), History Museums (A54), History Organizations (A80), and Historical Societies & Historic Preservation (A82)] as overall revenue grows, so does the share of program revenue. This means as your organization grows, so should the prominence of your programs as a true revenue driver (see figure 1 below).
As small history-focused organizations expand, it’s crucial to manage their programs wisely to increase income while keeping the mission in mind. For small groups, program decisions can be very personal, often influenced by board or staff interests. Taking a strategic approach to these decisions can boost the organization’s growth and success.
Continue readingHow can History-Focused Organizations Invest in Stability?
Over the past year, Engaging Places has been looking over individual segments of the museum field. While these segments are unique in specific ways, as demonstrated by the data, several of them do share a common theme and mission: an overall goal to promote history. These four segments are History Museums (A54), History Organizations (A80), Historical Societies & Historic Preservation (A82), as well as the broad Museums (A50) category. By combining these segments we can focus on the history-centric portion of the museum field that makes up close to half of its revenue and consists of a whopping 89% of its institutions (see Figure 1). This block of museums is incredibly dominant within the field and a major focus of Engaging Places’ work. For ease of reference, we will be referring to them as History-Focused Organizations.
It is important to remember that as an aggregate these History-Focused Organizations still trend small. Over 90% operate on less than $1 million in revenue annually, with contributions and grants bringing in over half of that vital revenue. For these smaller museums, financial security is a constant and essential priority. While many of these History-Focused Organizations are unable to achieve large pools of investment to stabilize operations, unlike some of their larger counterparts, they can develop practices to move them in this direction.
Continue readingHLI Seminar Returned in New Format, New Season
The History Leadership Institute, AASLH’s professional development program for mid-career history professionals, introduced its long-running Seminar in a new format in June.
In 1959, the Seminar began as an effort to train newly graduated history students and directors of history museums in the unique skills of managing museums, historic sites, and archives in a six-week program held at Colonial Williamsburg, During the decades that followed, the Seminar has continually changed to meet the needs of the field and explore new and emerging practices.
Continue readingAre Historical Organizations Choosing the Right Heroes?
When your history organization is modeling itself on other museums or historical societies, are you choosing the right ones? Are they doing things that are well within your capacity or are you following an impossible dream? There’s nothing wrong with observing the extraordinary leaders in the field, but if you’re modeling your life on a superhero, you may be destined for an avoidable series of crashes and burns. You would have been much more successful had you devoted your time and energy on more achievable efforts.
For example, Historical Organizations (NTEE Code A80) are “organizations that promote awareness of and appreciation for history and historical artifacts,” which is mostly composed of local historic sites, house museums, and memorials that are not solely history museums or historical societies. A sample of Historical Organizations shows that many focus on local history, support museums, or memorialize people, places, or events (see Table 1). Of the 2,500 Historical Organizations providing IRS Forms 990 in 2017, nearly 40 percent include the words “memorial,” “foundation,” “friends,” or “association” in their names.
Continue readingNearly 50% of History Museums Operate on Less Than $100,000
A financial review of more than 1,300 History Museums in 2017 reveals that nearly 90 percent operate on less than $1 million annually, and nearly half on less than $100,000 (see Figures 1 and 2). History museums are financially fragile, but an annual increase in revenue of $5,000 to $10,000 could have a tremendous impact on their capacity and impact. How might this be achieved? Hints of potential solutions are revealed in the changing revenue patterns of larger museums.
A closer look shows that most History Museums derive about 60-70 percent of their revenue from “unearned” sources (i.e., contributions, grants, investments, fundraising events, membership dues), but the mix changes according to size. Museums with less than $10 million in revenue received 4 to 6 percent of their income from investments, which doubled or tripled in the largest museums to 11 percent. While asking for support from people and foundations (i.e., contributions and grants) remained steady, there seems to be increased attention on making money from money (e.g., interest, dividends, sale of securities, drawing funds from endowments).
Continue readingImproving Museum Financial Performance
Organizing the “Big Tent” of the Museum Field
Imagine taking a road trip to visit Independence Hall. It would be impossible to get there if you don’t know where you are (are you starting in Boston? Chicago? Los Angeles?). Yet most museums and historic sites find themselves in this same predicament—but they don’t know it.
Knowing your museum’s financial position within its larger context can more clearly improve performance. We’ve witnessed how demographic shifts, a global pandemic, and social issues have affected all museums in the last year. Identifying which museums are responding well or poorly is largely based on rumor and anecdote, resulting in an incomplete picture of the field—and potentially misleading if a museum bases its decisions on them. Instead, we are following the advice of Karen Berman and Joe Knight, authors of Financial Intelligence (2013): “The art of accounting and finance is the art of using limited data to come as close as possible to an accurate description of how well a company is performing.”
Continue readingWho Knows How COVID Affected History Organizations? AASLH Will With Your Help.
Visitation at history organizations was flat from 2018 to 2019, according to AASLH’s 2020 National Visitation Report. More than 1,100 institutions across the country found almost no change in visitation from 2018 to 2019. But what will be the impact of COVID-19 on visitation in 2020?
According to AAM and Wilkening Consulting, their “National Snapshot of COVID-19 Impact on United States Museums” in October 2020 survey of museums revealed that nearly one-third of executive directors believed there was a “significant risk” (12%) of closing permanently by fall 2021 or they “didn’t know” (17%) if they would survive. Secondly, it showed that “museums are operating at, on average, 35% of their capacity–an attendance reduction that is unsustainable long-term.”
It’s now nearly six months later and time for the field to share our annual metrics to understand what actually happened, not rely on predictions. AASLH is now collecting data for the 2021 National Visitation Survey—it closes on Wednesday, March 31. It takes ten minutes to complete and all survey respondents will receive free, advance access to the results later this year. You will need on-hand your visitation data for 2019 and 2020, and your institution’s budget and staffing for 2020. More details and the survey are available at https://www.surveymonkey.com/r/Visitation2021.
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