This post is one of several stories in our Theatre Facts 2013 package.
“Capitalization is definitely the thing that keeps us up at night,” says Maggie Boland, managing director of Signature Theatre, in Arlington, Va., speaking of a subject that comes up when she chats with her industry peers.
She and her confidants are not alone: As has been the case for many years now, the writers of Theatre Facts are sounding an alarm about the theatre field’s lack of working capital: unrestricted funds that are available to meet an institution’s quotidian obligations and cash needs.
A lack of working capital means that theatres are badly positioned to deal with challenges and unexpected setbacks.
“The joke [in the field] is that, if an air-conditioning unit goes out, you wonder who you need to lay off. We don’t need to be in that place!” observes Scott Nolte, producing artistic director of Seattle’s Taproot Theatre Company.
A lack of working capital can also hamper a company’s growth, and—by forcing theatre leaders to focus on short-term cash-flow issues—crimp artistic vision. While many theatre leaders are keenly aware of the problem, only a few feel they are getting the situation under control.
Ian Tresselt, managing director of Baltimore’s Everyman Theatre, says he considers his company “fortunate” because, when it geared up for a recent capital campaign (the company opened the doors on a new building in 2013), several board members “were adamant that the campaign be inclusive of reserves.” As a result of that trustee vision, he says, the company currently enjoys “working capital funds to help sustain us throughout the year,” so that he and his colleagues can focus on the company’s mission, “rather than living hand-to-mouth.”
Rigorous financial discipline may also be an aid to building working capital. Martin Miller, executive director of TheatreSquared in Fayetteville, Ark., said that the experience of the economic crisis gave him and his colleagues the resolve to create—and sustain—a cash reserve. At the worst part of the recession, he says, cash flow was a constant worry; several staff members even had to temporarily stop taking paychecks. “The week-to-week pressures” of that period “made it palpably clear that we can’t work under that sort of stress,” he says. So, as the theatre’s financial health improved (with the help of a grant from the Walton Family Foundation), he says, “We have managed to put at least three to four months’ worth of our operating budget into the bank” as a cash reserve.
There is a constant temptation to draw down that money: After all, he points out, “Everything could use more resources immediately!” But, in the aftermath of the crisis, he and his colleagues started thinking of cash reserves as a necessity, rather than as a luxury.
“I think that, philosophically, made a difference,” Miller says.