By David Maggs, Metcalf Fellow on Arts and Society

Myths of Revenue Diversification and the Exhausted Newfoundlander

My previous essay on grant dependence wonders whether the challenge facing cultural nonprofits is not a lack of revenue per se, but the way those revenue models shape the organizational culture of our sector.

“We need a mindset change, we know that.”

Michael Trent and I heard this consistently in our consultations with arts leaders over the last year. While lobbying and advocacy can keep working to maintain and increase available funding, Arts & Social Finance aims to complement those efforts with a program designed to help cultural nonprofits adapt and thrive within present conditions.

Diversifying revenue can open new resources and strategic horizons for organizations that find themselves stuck in cycles of deepening precarity. However, it can just as easily pull energy away from purpose, community, and craft without delivering on that larger promise.

I grew up in a province with an economy overly dependent on a precarious fishery, making revenue diversification a constant preoccupation. Go to Newfoundland with a business idea that doesn’t involve a codfish and you’re five-fifths of the way to a government loan — from shady post-war Germans and their leaky rubber boot factory, to linerboard plants, hockey stick factories, cucumber greenhouses that still haunt economic development policy today, and a 1960s deal with Hydro Quebec known as the worst economic deal in Canadian history. Newfoundland offers our cultural sector a cautionary tale. If you’re going broke on theatre, music, and dance, revenue diversification can be a way to go broke on theatre, music, dance, plus a wine bar you never really learned how to run.

This is the corruption myth of revenue diversification, where efforts to open new revenue channels either fail to successfully access new resources and lead to mission drift, strained capacity, and deeper precarity; or they succeed in doing so, yet not enough, and so all that drift, strain, and precarity come anyway. The opposite of the corruption myth is the liberation myth, where activating new revenue channels relieves financial pressures, builds new capacity, and heightens an organization’s ability to serve their mission. Both scenarios have enough evidence behind them to require that we go into this with our eyes open, unseduced by easy promises of quick wins and immediate relief yet unwilling to let our pessimism insist it’s corruption all the way down.

What Arts & Social Finance is trying to figure out is how do we do liberation instead of corruption? Just luck? Or can we set conditions around revenue diversification that steer us towards better outcomes?

Thriving Non-Profits: The Broad(er) Horizon of Revenue Diversification?

Through their work building capacity in Canada’s nonprofit sector, Thriving Non-Profits has created a framework separating revenue into nine types: donations, grants, events, fee-for-service, social enterprise, assets, partnerships, leverage, and contracts.

While not all nine types serve cultural nonprofits equally well, the expansive framework helps broaden our horizons in considering what revenue diversification means for us. Donations and grants are foundational in our world, yet shifts in corporate and private giving, plus weakening public funding are why we’re here, exploring other ways to remain solvent. Thriving Non-Profits encourages us to view grants and donations as stabilizers or risk capital rather than the foundations of operational resilience. This works, providing we manage to diversify resources beyond them as well.

For many nonprofits, events are quite the swerve from daily operations (e.g. food banks running a gala), but here, cultural nonprofits are at home given our producing and entertaining capacity. Fee-for-service models — performances, classes, workshops, memberships, ticketing, educational programs — are among our most viable options, as they sit close to artistic purpose, organizational capacity, and audience relationships. But when a fee-for-service activity expands and shifts into a full blown social enterprise is not always clear, and represents a risk of mission drift to be navigated. Does the social enterprise support what we do, or become what we do? And how do we decide if and when to worry about that difference?

Assets, such as space and intellectual property, are promising avenues. However, generating revenue from physical assets often involves balancing artist needs for the space with stronger market opportunities. Better conversion of IP assets is critical and underdeveloped in our world. We generate so much creative IP, but need an incubator to build the instincts, producing capacities, and infrastructure to capture wider revenue potential from the brilliance that burns too briefly within our current business models.

Partnerships can be as simple as buses, restaurants, accommodations, and other providers supporting our activity, or more elaborate collaborations connecting the arts to broader social roles in education, community-engagement, well-being, etc. Leverage offers cost-savings potential in shared services and spaces. Finally, contracts can provide scale and predictability around specific impact or services, and our sector’s growing interest in social prescribing may find a revenue line here. Through Thriving Non-Profit’s expanded revenue framework, we are invited into a mindset shift around revenue, imagining a strategy to nurture and integrate different streams into a blend of resource lines, capitalizing on the basic virtues of diversity — adaptive, resilient, and robust.

A Spectrum of Use for Repayable Capital

Arts & Social Finance is designed to support revenue diversification. It does so, however, by bringing additional resources to the sector in the form of low-interest lending, repayable capital requiring eligible projects to be investible. That is, to generate more revenue than they cost to produce. When considering where and how social finance might bolster our sector, some initial resistance comes when organizations picture investible activity purely in terms of their creative pursuits. Indeed, not all our creative activity should carry pressures of profitability (hence the market failure consideration in the previous essay).

But that’s not all we do. When imagining how low-interest loans might support and strengthen our sector, it helps to think in terms of a spectrum. At one end are capital projects where social finance provides support and lending conditions unavailable from commercial banks. Next is bridge financing, where loans can smooth cashflow when activity and expenses arrive before committed revenues come in. Mission-agnostic activities — such as cafés, parking, or retail — generate unrestricted income but sit furthest from artistic purpose, requiring managerial capacity to run alongside core work. Mission-adjacent activities, including education, training, or arts-in-health programs, take what we know how to do as artists and situate it within new applications and markets. Finally, mission-aligned activities, such as commercializing creative IP, sit closest to artistic purpose while demanding significant learning and risk tolerance.

To see this spectrum more concretely, consider the following examples from the UK and Canada (and for more, and especially more mission-aligned examples, see Figurative case studies):

Capital Projects: Creative Land Trust
(source: Figurative)

• Loan size: £1.3M
• Use of capital: acquisition and renovation of sites for affordable artist studios
• Impact: studios kept out of the private market; equity and accessibility lens applied to the project

Bridge Financing: Theatre Centre
(source: Metcalf Foundation / More Than Money)

• Loan size: $1M
• Use of capital: addressing cashflow shortages during a capital campaign (90% of campaign secured, but deferred pledges halted progress)
• Impact: completed renovations; early start to programming and revenue generation

Mission-Agnostic: Migration Museum Project
(source: Figurative)

• Loan/grant mix: £78,000 loan; £28,000 grant
• Use of capital: development of an online gift shop
• Impact: growth in earned income; strengthened public education programs

Mission-Adjacent: Fuse Art Space
(source: Figurative)

• Loan size: £280,000
• Use of capital: following loss of other funding, Fuse developed CAMP, a residential arts facility offering courses led by practitioners
• Impact: increased Fuse Art’s ability to offer paid artist residencies to professional artists and subsidized programming for communities in need

Mission-Aligned: Can’t Sit Still Theatre
(source: Figurative)

• Loan/grant mix: £50,000 loan; £20,000 grant
• Use of capital: touring and digital adaptation of existing work (Oh No George)
• Impact: reduced reliance on grant funding; development of long-term organizational strategy and monitoring and evaluation practice

Support, Not Inspiration

Sharing these illustrations with cultural nonprofits from across Canada, Michael Trent and I were inspired by the range of ideas for diversifying revenue and relieving financial pressures within our sector. Artist accommodations, classroom capacity, leadership training, retreat centres, commercial touring opportunities, even an organization with a proven business model who just needed better financing to help them buy their second fire truck.

“We don’t need ideas,” a participant told us, “we need support.”

While Arts & Social Finance is designed to invest in our sector’s ideas across the country, organizations are identifying the need for readiness first. In other words, a program to help organizations mature, test, refine, and de-risk their visions. Ideally, this readiness program helps steer revenue diversification strategies away from potentially corrupting effects and towards the liberating impacts our cultural nonprofits envision. (We will explore the readiness program more closely in a separate essay to come).

Mission Drift or Mission Shift?

Cultural sectors are in a tough spot. As our worlds grow increasingly brittle, belief in the importance of culture to society is spiking. Yet at this moment of recognition, cultural organizations find themselves struggling to survive, let alone deliver on their anticipated impacts. Declining box office, oversubscribed grant programs, and desperate funding appeals — these are not signs of failed leadership. They are symptoms of fundamental shifts in how the world now works. If not addressed in broader systemic terms, our interventions will prove insufficient.

Which raises an uncomfortable question for us as a cultural sector: how is it that the world around us has changed so dramatically, while we have changed so little? And why have we been such passionate advocates for transformation everywhere else — economic, political, environmental — while remaining so wary of it ourselves?

Much of this hesitation gathers around a single anxiety: mission drift — the fear that in adapting and evolving, we betray our origins, our mandates, our histories, and our communities. Far from a trivial concern, this worry cuts to the heart of why culture matters. As German researcher Joerg Fingerhut shows, our aesthetic judgments — the art we love — are as fundamental to our sense of who we are as our moral convictions, our basic sense of right and wrong. Hanging on to the arts we love, is one of the most fundamental ways of hanging on to ourselves.

Anxiety around mission drift makes sense, especially when the world beyond the stage feels so inhumane and hostile. Yet if this insight rescopes the question, it doesn’t excuse us from answering it: can we adapt to the seismic changes going on around us without losing ourselves and the fundamental value we hold? Can we tell the difference between mission drift — and something more deliberate, and potentially necessary?

Mission drift haunts our dreams of revenue diversification. In some of our workshops, participants insisted that Arts & Social Finance will inevitably lead to populist programming. While I will take this up in a future essay on risk and transformation, the fear is justified. Drift happens when change is driven by desperation rather than design — when organizations chase revenue without the clarity, capacity, time, or support to understand how new pursuits and underlying purposes interact. Drift is risk imposed, not chosen.

Mission shift is the harder path. It is the willingness to let form and structure change so that essence and purpose endure. It is the practice of choosing risk, under supportive conditions that allow learning rather than punishment. It is an attempt to find the lines between freezing ourselves in place, and surrendering to whatever it is we think our markets demand. Lines pulsing with enough memory, craft, and meaning that when the chatbotbarians arrive at the gates, we know precisely what we are fighting for.