Getting Patrons to Invest in Your Studio
As a dance studio owner, you’re always looking for more opportunities to bring in some extra money and to invest in your studio. That investment might be new equipment, new staff, or the resources to host a second recital performance. Most studios rely on classes, costumes, recitals, and possibly studio rentals for their major income. But what if you could get patrons from the community to invest in your studio?
Let’s Use the Right Vocabulary
When you think of the word “invest,” you might think of people giving you money and expecting something in return. In the case of investing in a business, those people are expecting money in return. They will invest capital, and expect you to use that capital to make more money than you could before. Having invested capital, they buy equity in your business, and effectively own a piece of your business. Thinking of it simply, when your business value grows, their wealth grows.
For a dance studio, traditional “investments” are not necessarily the best situation for finding some extra resources. You as a small business owner probably want to keep full ownership of your company, and might only consider a major investment like we mention above in the case of something BIG, like opening an additional studio or something along those lines.
For businesses related to the fine arts, what you’re looking for is patronage from your community. That is, donations or contributions from members of the community who don’t expect something directly in return, but do expect you to use the money to build your fine arts organization.
A great comparison are city or regional ballet companies or symphony orchestras, who receive donations from patrons in the community. Those patrons donate to support the continuation and growth of the arts, and expect the organizations to handle and spend their donations responsibly.
So? Where Does My Studio Come into the Picture?
Dance is powerful. Dance as a fine art exists on every continent, and in the United States there are national and state-based organizations working every day to promote dance.
So, you as a studio owner have a culturally impactful organization at your disposal. Your company teaches young people (or people of all ages) about professionally recognized dance techniques. And, it allows those students to express themselves in a meaningful way.
THAT’S where your value has the potential to extend into the community and provide a valuable resource for the fine arts where it might not exist otherwise.
Here, we do need to take a step back and think about the scope of the project you’re undertaking. If you want to request patronage from the community (donations), you need to be very careful about how you ask for that money, and how you report it on your taxes at the end of the year.
Right now, chances are your company is a for-profit business. As in, you run your company and provide services to customers. They pay your business directly, and that money is reported as income from the year. You aren’t a charity, so people usually don’t donate money outside of their fees.
If you’re going to stay as a for-profit business and ask for donations, there’s two BIG points to be made:
- Patrons will NOT be able to deduct these donations from their taxes, since you won’t be changing your company to a 501(c)(3).
- You’ll need to report these donations as income on your tax return next year.
Having mentioned these two points, now is the time to talk to your lawyer and/or accountant and discuss the idea before moving forward. Tax law is tricky, and it varies state-by-state.
What did they say? Did you get the green light?
Showing Your Commitment to the Community
Let’s say you’ve gotten the go-ahead from the professionals who manage your company’s finances and legal affairs. They’ve said “Yes, with careful preparation and reporting of this income, you’ll be able to receive donations from the community as long as you are clear about your use of the money and follow through with your commitment.”
That commitment needs to be impactful, and extend beyond the short-term donation that you’re hoping patrons will make.
For example, maybe you ask patrons to donate in order to purchase a new barre for your studio. How will you make that purchase translate into a resource for the community?
That’s where this project needs to become bigger than your studio. If you’re asking for extra money, you need to provide extra services to the community. Maybe that means a monthly free ballet basics class for the community, or use of the space for something like physical therapy through dance. Be creative! If you show love to your community, they’ll return the love with donations and support for your organization.
Back to the Nitty Gritty
You’ve got your great idea, you’re out to save the world one dancer at a time, and you’ve got volunteers who like your idea and want to make it happen. What next?
Time to go back to your professionals for a quick meeting. You’ll want to create an easy way for patrons to give you money, and clear language that tells everyone why and how you’ll spend the money you receive.
Some companies, like GoFundMe, exist to provide people an option for crowd-sourcing. Other options might include creating a PayPal account that people can access directly from your studio’s website.
Either way, be sure to have clear descriptions of what any money collected will buy, and a timeframe for the purchase. The last thing you want is confusion about your motives, and possible legal problems down the road.
Let’s go back to our barre purchase, and create some example language:
“My studio is raising money to purchase and install a new barre, in an effort to update the studio and create additional value for the community. As thanks for the community’s support for this equipment, my studio will begin to host monthly classes free to the general public.
In addition, we will make the space available for medical professionals to use for the purposes of physical therapy through dance during non-class hours, to build appreciation for dance in the community and investment in the people of our community.
This fundraiser will last until after our studio’s final recital in May, and we will make a purchasing decision by July 1 of next year. At that time, we’ll let patrons know about the purchase and installation details.
If we have not received enough funding to purchase the barre at that time, we will have a patron meeting about alternate purchases that could fulfill similar goals as the barre. Should we not find a solution at that time, the studio will return the donations to patrons.”
Your accountant should advise you on setting up the donations side of the project, and your lawyer should advise you on the language that you’ll use to describe your project. Don’t make assumptions and take off running: be sure and have your bases covered by professionals who have your best interest in mind!!
And have FUN! This kind of project can introduce you to really great people in the community who are looking to make a difference, and your studio might have the potential to BE that positive influence.