Northwest Business Magazine

How Creative Pivoting Saved Raue & ESO

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When arts organizations in Elgin and Crystal Lake faced a do-or-die crisis, it took some creative business strategies and a public plea to turn things around. This is the story of how Elgin Symphony and Raue Center charged back from the brink with a renewed focus on the future.

Elgin Symphony Orchestra’s performances at Hemmens Cultural Center, in Elgin, and Prairie Center for the Arts, in Schaumburg, are just a small part of this organization’s operation. Musicians regularly engage with area students, perform at local hospitals and make public appearances. (James Harvey/ESO photo)

As unusually heavy rains pounded down, rainwater dripped backstage. From the streets outside it seeped into the basement, too. Performers suspended the show for 20 minutes, until the storm had passed.

Those heavy rains couldn’t have come at a worse time. Cash was running short – as it occasionally does when you’re running a nonprofit arts organization. On its own, this was manageable.

But this was late summer, and the busy fall season was yet to begin. Ticket revenue was coming, but could it cover the immediate needs? Major bills were coming due.

That’s when the board of Raue Center for the Arts, in Crystal Lake, decided to make their plight public. If they could engage the right donors and arrange favorable terms with debtors, they figured they could solve their immediate needs and secure a stronger footing for the future.

Over a couple of harrowing months in late 2017 and early 2018, the team at Raue Center made its case, and in March, they declared they had a deal.

“It really wasn’t one person, per se; it was more of a group effort of like-minded civic, business and community leaders working hand-in-hand with each other and striving to build a better community,” says Richard Kuranda, executive director of Raue Center. “The best part is that it does not burden the taxpayer.”

The ink was barely dry on Raue Center’s deal when Elgin Symphony Orchestra (ESO) was asking if it, too, could survive the season.

“We ran into a situation where we anticipated getting some donations that didn’t happen, and we were in a position where we had no other financial options we could take,” explains symphony CEO Dave Bearden.

In a humbling moment, Music Director Andrew Grams stood before a packed house in late March and made his appeal: “Please help us survive.”

Donors quickly stepped up to bridge the gap. But Bearden wasn’t ready to stop there. In the months since, he and the ESO team have been re-evaluating their business model and their approaches to fundraising. Raue Center, too, is re-examining its strategies with an eye on long-term sustainability.

Whether you’re a small business or a nonprofit, cash flow and revenue are a persistent question. Yet, the unique dynamics of a nonprofit organization – especially in the arts – leave it uniquely vulnerable. Creative revenue streams and cost-consciousness are par for the course, but there’s also a somewhat paradoxical value proposition.

“Nonprofits don’t typically make money year to year,” says Kuranda. “It’s the goal to make money, but most nonprofits, by their very existence and charter, are about servicing programs that are for the common good and enhance society.”

In Crystal Lake and Elgin, donors stepped up in many ways to protect their communities’ cultural assets. This is the story of how creative business practices, determined leadership and a loyal donor base rescued Raue Center and ESO from the brink.

Covering Costs

It’s easy to take for granted the many costs involved in running an arts organization.

“People think, ‘I buy a ticket, so that must cover my cost,’” says Kuranda. “Well, that’s not necessarily true. There’s lots of overhead, and it’s a very labor-intensive type of field.”

Not only do you have to pay performers, but you also have to support a large front-of-house and back-of-house team – people who run the box office, people who usher patrons, people who run sound boards, lightboards and backstage needs. And then there’s the marketing, the educational programming and myriad other forms of outreach, including festivals.

For Raue Center, certain legacy costs further complicate the situation. Before it was established in 2001, the former movie house was expected to become a civic center. The City of Crystal Lake, in fact, still owns the building. But due to legal complications, the City found it easier to hand off management to a nonprofit organization. The Raue association was granted a long-term lease and handed the remodeling bill.

“Raue Center then revamped and refurbished the building, and we had substantial debt before that refurbishment,” explains Kuranda. “The $8.8 million debt we had those first 16 years we were able to whittle down to about $2.3 million – no small feat, given that we were surviving and going through the recession and all sorts of other things.”

Throughout the years, Raue Center management has found numerous ways to expand its revenue streams. It established the Williams Street Repertory theater company in 2011. The venue also hosts periodic comedy shows and tribute bands, as well as youth-focused programming and performing arts workshops for youngsters. Educational programming has grown 400 to 500 percent over the past two years, says Kuranda. Raue Center also hosts festivals like the fall Rauetoberfest and a Halloween event, among others.

“Yearly, we’ll have an impact on about 60,000 patrons,” says Kuranda. “And according to Crain’s a couple of years ago, that puts us as the seventh-largest audience draw in the Chicagoland region.”

For all of its draw, just 38 percent of Raue Center’s income originates in the box office. The remainder comes from private and corporate donations, in addition to an annual $180,000 grant.

“That grant takes about a month and a half of research and work to secure every year,” says Kuranda. “That adds up, and it’s not just the small fee that’s paid to the grant writer.”

The venue counts among its supporters numerous local firms, including Stryker (formerly Sage Products), Crystal Lake Bank & Trust and BMO Harris Bank, which together contribute as much as $770,000 a year to the Raue Center’s annual $2.2 million budget.

In return for those generous contributions, Kuranda and his team seek to keep administrative costs low. He says the Better Business Bureau once noted that 93 cents of every dollar received went directly to programming.

“It means more direct support for the artists,” he says.

Navigating the Waters

ESO performances are just one of many ways this regional symphony touches the communities it serves.

“We equate ourselves to an iceberg in that, when you see the symphony at the Hemmens Cultural Center, you’re only seeing the part that’s above the water,” says Bearden. “Elgin Symphony is in the community all the time.”

You’ll find ESO musicians playing in the lobby and wards of Advocate Sherman Hospital and Good Shepherd Hospital. Every spring, nearly 9,000 area elementary and middle school students visit the Hemmens to watch the orchestra live in action.

“In addition, we send ensembles into the schools, so we’ll have an assembly with the brass group or the percussion group or a winds group,” Bearden says. “They’ll explain their instruments and play for the kids.”

ESO guest artists host special master class workshops for student musicians, and this season, Grams leads a new master class for adults. A few days before Classics Series performances, ESO hosts “Listeners Club” events where the music is introduced and explained.

“Those 2,000 people who come on a weekend performance are important – they’re part of our core mission,” says Bearden. “But when you put together all of the other things we do and the other lives we touch, that’s when you start to connect to a more general audience. And it’s important that a more-general audience sees the importance of having an organization like a symphony.”

But funding such a range of programming is a constant question. Like Raue Center, only about a third of ESO’s income originates from ticket sales. The remainder comes from private donors, corporate sponsors, foundations and government grants.

“When I sit in my seat, someone else paid for me to sit there,” says Bearden. “Let’s say our average cost for a performance is $100 per seat. So, if you’re sitting there and you paid $35, someone else paid $65 for you.”

ESO tickets come in three tiers, ranging from $30 to $75. Keeping the symphony affordable and accessible is an important part of building audiences and continuing the mission, says Bearden.

The City of Elgin donates office space, and the Hemmens provides a discount, but in general, “the era of funding by government is over,” says Bearden. Corporate and individual sponsorships have to come from sources that value the arts.
“In general, funds we get come from companies recognize the importance of culture in a community and what it does to the fabric of life for their employees,” he adds.

Bearden estimates about 60 percent of ESO’s $2.3 million budget covers orchestra-related expenses, including musicians’ pay, music rentals, guest artists and facility rentals. About 20 percent covers office personnel while another 20 percent covers administrative costs such as marketing, development and related “business” expenses.

Financial management is a constant challenge.

“We’re a paycheck-to-paycheck family, and just like any family that hits an emergency, if your car breaks down or your roof springs a leak, those are major expenses you don’t budget for,” says Bearden. “What do you do? We’re no different. We don’t have a lot of funds, so we are very cognizant of costs.”

In the six years Bearden has led ESO, cash shortages have come and gone. But nothing quite compared to what happened this past spring.

“We’ve been at this point in the past, and we’d always managed, somehow, some way, to steer through those shoals,” says Bearden. “This time we just had no other options, other than to make the appeal public.”

Raue Center programming includes adult and youth performances, like the annual production of “The Nutcracker,” with youths from Berkshire Ballet Theatre.

Making the Appeal

As those late-summer rains pounded Raue Center, they made a conspicuous impact on the new fiscal year, which had just started July 1.

“We found ourselves in a cash shortage in Q1 and we had to react real-time,” says Kuranda. “So, the board sat down with some community leaders and thought, ‘Well, geez, we need to explain the situation. What’s the best way to communicate that?’”

Taking their plight to the community seemed the most prudent thing to do.

“So, typically when an institution falls on hard times the first impulse is to go to the person with the most money and ask for a gift,” says Kuranda. “We decided against that. We decided we were in this together so we should figure out a way to build a better future.”

For help, the board turned to local marketing expert Susan Dobbe-Leahy, owner of Dobbe Marketing, in Crystal Lake.

“Dobbe Marketing provided public relations strategy focused on fostering and maintaining positive, collaborative relationships throughout the process of retiring their debt,” says Dobbe-Leahy.

She helped Raue Center to sum up its situation – immediate cash needs, long-term debt – while promoting its economic benefits to the community – an impact of about $250,000 in annual tax revenue and nearly $32 million contributed to the local economy, according to a Raue Center press release sent Nov. 28.

At the same time, Raue Center also sought the big ask. In December it petitioned the City of Crystal Lake to provide an annual operations grant of $109,000 in addition to a $140,000 annual building grant that would fund major facility expenses over the next 10 years. But before the request came to City Council, an anonymous donor intervened. For the next few months, conversations continued between Raue Center and several contributors. On March 13, leaders announced they’d reached a deal.

“We ultimately came up with a deal whereby Home State Bank signed onto a 25-year agreement with us that they’ll take care of the capital related to new building expenses, and some private donors stepped up and took care of the $2.3 million debt,” says Kuranda.

Through the process, Raue Center racked up additional support from the community at large.

“We are very proud that we finished last year in the black, for the first time ever,” says Kuranda. “Last year we attracted approximately 700 donors, about 600 of which are brand-spanking new.”

Broadening its Base

Pinpoint ESO patrons on a map, and you’ll find little more than a quarter come straight from Elgin. The rest come from as far as Wheeling, Barrington, Crystal Lake, Aurora and Wheaton. In the same way it draws from a wide geography, ESO also casts a wide net for donors. Bearden believes there’s an inherent strength in broadening the base of donors and patrons.

“Last year, our small donors who gave less than $250 together gave us a total of $105,000,” he says. “It’s not insignificant. It’s a lot doing a little. It’s important for us to have a pyramid of giving that’s as broad as possible at the base, and not too narrow. Narrowness creates danger. If you lose someone who’s a major donor, then it’s very hard to replace that one person. If you have a wide pyramid, then the loss of any one or two donors is less impactful.”

Bearden saw that pyramid expand even broader this spring, as ESO made its public appeal for financial support. Over the course of four days in late March and early April, donors of all stripes pitched in, giving directly to ESO through its office or the crowdfunding website crowdrise.com, where donations can still be made.

“We had increases in every single category, across the board,” says Bearden. “Small donors stepped up and gave more. The board gave more. And so, out of those private donations, we were able to finish the season and have sufficient funds to get us into the new season.”

Since April, Bearden and his team have adjusted their business model to better account for fluctuations in spending. An outside consulting group, with specialties in nonprofit fundraising, has homed in on key strategies, including the pursuit of longer-term commitments.

“That helps your budgeting a lot,” says Bearden. “We’re right now creating the 2019-2020 budget and that will begin next June. But you have about an 18-month lead time when you contract with a soloist, in order to get on their schedule. So, you need to have as good an idea as you can about your expenses.”

Through more frequent discussions, Bearden and his team have netted major five-year commitments from two area corporations – one a first-time donor and another a longtime sponsor upping its commitment. The team is also working to create a reserve fund that can handle interruptions in cash, as happened this past spring.

“Have, as many times as you can, face-to-face opportunities to describe what you do and why you do it,” says Bearden. “I think the challenge is always to get people who appreciate the impact you’re having, who understand the difference you make. The question always is, ‘If our organization didn’t exist, would it matter? Would it matter to the community?’ We sincerely believe that this organization, with its 68-year history, matters very much to the entire region.”

Bearden believes part of ESO’s successful comeback lies in the deep support it enjoys around the Elgin area and in the broader Fox Valley.

“I think the key for us, the ‘magic in our sauce,’ if you will, is having a very proactive board and having a group of supporters who advocate for you,” he says. “Your staff is only going to be able to touch so many people, so you have to multiply that as many ways as you can.”

It falls right in line with ESO’s encouragement to “come as you are” to symphony performances. As the orchestra seeks new patrons and engages with younger generations, it’s doing more to cast away the pretentions of the past. More effort is being placed on being intentionally welcoming and open.

And when you do visit the symphony, don’t come alone, says Bearden. Bring a friend.

“Sometimes peoples’ hesitancy is that we don’t know the rules,” says Bearden. “We don’t want to go to an orchestra or a symphony because we don’t know the rules about applauding or dress code. But Andrew Grams’ rule is this: Please come. That’s his rule: please come.”

Constant Evaluation

The past 12 months have brought a lot of introspection for the team at Raue Center, which Kuranda says is already accustomed to persistently reinventing itself.

In particular, Kuranda notices the board is less interested now in taking on risk. It’s meant hiring fewer big-budget performers, but it’s also meant more careful attention to new programming – the bread and butter of an arts venue.
When Raue Center’s outdoor block party, Williams Street Fest, was nearly rained out two years in a row, board members asked whether it was worth risking a third year.

“They made the decision to pull back and take a year off,” says Kuranda. “I would have loved to chase the income from that and pursue all of the civic engagement it could bring. It’s a great event, but to the board’s credit they said, while it’s part of our mission it’s not worth the value proposition on the risk side.”

Instead, Kuranda and his team are now cultivating more donors, building their base from about 137 donors in fiscal 2017 to nearly 700 a year later.

And given its concerns from a year ago, the board is also re-evaluating its physical plant needs. Kuranda is optimistic about the addition of board member John Green, a real estate developer who’s now creating a long-term strategic plan with Raue Center’s facilities committee.

“John will steer that new strategic plan, once formulated, for the next three to five years,” says Kuranda. “We hope to improve the front of house with renovations to the lobby as well as the bathrooms. Kind of standard cyclical stuff, but this time we can do it with a little more stability.”

A Different Kind of Value

When donors support groups like Raue Center and ESO, they’re proclaiming that they value cultural organizations and their impact on society.

“You’re always challenged to find a donor base that believes in your mission, and that’s the key to any cultural organization,” says Bearden. “Who believes in your mission? Are you doing a job in the community that cannot otherwise be filled and that would not otherwise be filled if you weren’t there?”

And when it comes to business, Bearden, a former executive at Panasonic, finds such cultural organizations are often the differentiator when it comes to business attraction and retention. Not to mention, they’re also economic drivers for many downtowns. Elgin restaurants feel the increased traffic on concert weekends, Bearden says. So do the shops and restaurants in downtown Crystal Lake, which has grown from a largely vacant neighborhood in 2001 to a vibrant economic district.

“According to the Illinois Arts Alliance, we generate, I think, something between $3.5 to $3.7 million in economic impact and tax revenue to the City of Crystal Lake,” says Kuranda.

Much as arts organizations need money, they also require a strong volunteer force, willing to pitch in on everything from event setup to classroom instruction. Raue Center maintains 400 volunteers while ESO maintains more than 100.
“There’s no way to run this organization and pay for all of that work. You couldn’t afford it,” says Bearden. “But every cultural organization is going to have a group of volunteers who are the key to their success.”

Of course, success is measured by many factors. In a nonprofit arts organization, every day is a fight for relevancy.

“I think it was very surprising to people, but I think it was also cathartic and it was important that people realized how fragile cultural organizations are,” says Bearden. “Sometimes they’re taken for granted, in that they’ve been here forever and therefore they will be here forever.”

But for the teams at Elgin Symphony Orchestra and Raue Center for the Arts, forever is just what they have in mind.

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