Exhibiting Cash Trouble

Months after the Christmas floods in Laguna Beach covered the Art-A-Fair Festival grounds with tons of sticky mud, the $13,000 cleanup tab still looms large on the balance sheet of the artist cooperative.

The bill wiped out the nonprofit organization’s chance to stretch its cash through the lean first half of the year, and meant continuation of the unhappy tradition of board members digging into their own pockets to cover expenses in the final, frenzied weeks before the festival’s July opening.

Cash is tight in part because sales have dropped dramatically in recent years, despite an improving economy. (The cooperative earns a 15% commission on its artists’ festival sales.) Sales last year were off almost 30% from the $838,000 rung up in 1995, the latest year for which the 31-year-old organization has a record of revenue. Aside from the plunge in sales, the lack of financial records is symptomatic of the 150-member group’s deeper issue, according to the treasurer.

“Most artists don’t know how to run a business,” said Treasurer Loretta Alvarado, who left an engineering job at the Jet Propulsion Laboratory in Pasadena to pursue her textile art full time. The fact that sales are down, for instance, “really hasn’t been an issue or even brought up, particularly,” she said.

Artists Sell Original Works and Reproductions

Art-A-Fair features artists selling their own work--watercolors, oil paintings, drawings, prints, photography, sculpture and some jewelry and ceramics. Half the art on the booth walls has to be original, but most artists also sell lower-cost reproductions. The booth rental fees help pay the bills in the months before the show, which runs July 2 through Aug. 30, when sales commissions begin to trickle in.

If the group just had more money to advertise, Alvarado is convinced the Art-A-Fair Festival could boost sales and escape the shadow of its high-profile neighbors in Laguna Canyon: the Sawdust Festival and the Festival of the Arts. The three groups share the same roots, but the path taken by Art-A-Fair, including its decision to remain a traditional juried show with a focus on fine art rather than crafts, has helped to keep it the smallest.

Consultant Robin L. Cornwall met with Alvarado, president and watercolorist Doreen Abegg and another board member to discuss ways to bolster the outdoor show’s profile and strengthen operations.

Cornwall, who has sat on the board of directors at several nonprofits, including the successful Hermosa Beach arts festival, was pleased to see that the Art-A-Fair crew was more open to change than many managers of nonprofits.

“They really want to do something different, they want to make a change, and that’s key,” said Cornwall, a business analyst at USC’s Business Expansion Network, which assists start-ups.

“They need to operate using prudent business practices that make sense for the longevity of the organization, even if that means shaking up some longtime practices,” he said.

Restaurant Sublease a Source of Revenue

The group took a big step in that direction last year, he said, when it subleased space to a special events company that will run a restaurant on site during the show, then use the picturesque grounds for weddings and private parties during the rest of the year. The festival will get 6% of Tivoli Too sales and benefit from the site upgrades the company has made, including a 30-foot waterfall built into the hillside. This year the company built a Mediterranean-style facade and walkway that stretches across the front of the grounds and creates a kind of courtyard for the artist booths, said Cornwall. More important, it serves as a visual drawing card for potential festival visitors as they travel down the street to the competing art fairs.

“The whole atmosphere has changed since we took on the sublease,” said Abegg, who said some members objected to the commercial aspect of the move, but that overall the group was impressed with the company’s professionalism. “Maybe there was a kind of awakening that it’s possible to have fun and conduct yourself professionally.”

To build on that potential, said Cornwall, the group should first nail down its tax-exempt status so it can apply for grants, attract lucrative corporate sponsorships and benefit from charitable gifts from its members. The festival organizers then should take steps to stabilize the overworked board of directors and increase vital commission revenue.

The festival is incorporated as a nonprofit and a board committee has been exploring ways to secure tax-exempt status in California. That’s an importantstep, agreed Cornwall. It would give the festival access to a broad range of outside funds. Companies attracted to the fair’s 50,000 upscale visitors might be willing to underwrite all or part of the operating costs, for example.

To earn tax-exempt status, though, the group needs to refocus and rewrite its mission statement, making clear the public benefit of its efforts. Cornwall suggested the organization commit to furthering art education and providing art scholarships.

“Being nonprofit doesn’t mean ‘doesn’t make money,’ ” said Cornwall. “It means the money goes for public benefit.”

He also suggested the group hire an experienced festival coordinator to help plan and run the show, an idea embraced by Abegg. The coordinator would not do the actual work--Cornwall recommended the festival rely on a corps of new volunteers for that--but would bring lessons learned from other shows, coordinate operations and perhaps supply names of potential sponsors.

Matching Volunteers’ Experience, Duties

Cornwall also would like to see Art-A-Fair make better use of volunteers. Each member is required to work a weekly six-hour shift during the two-month show, greeting visitors, taking tickets, answering office phones. The problem with that system, said Cornwall, is it doesn’t guarantee that the most qualified person is doing a particular job.

“You could end up having the most crotchety person in the organization standing at the [information] kiosk, saying, ‘Grrrrr . . . come on in, I dare ya!’ ” said Cornwall. “I’m a firm believer that these organizations need to manage the experience of the people that are attending the show.”

To make effective use of volunteers, Cornwall suggested the group hire a paid volunteer coordinator. That person would be responsible for volunteer outreach programs, including contacting local senior citizen groups to take advantage of their members’ organizational and people skills. Local high schools might be willing to arrange a work-study program in which students earn credit working in the festival office, he said.

Cornwall also has strong ideas about tapping local businesspeople for help. Too often, nonprofits successfully reel in a businessperson only to fritter away that person’s time in unproductive meetings with no goals in sight, he said.

“The key to dealing with people like that is to use them for a block of time and get the value out of them, and then they can go on with the rest of their lives,” said Cornwall.

A volunteer’s task should have a defined outcome and a set time frame. Ask a public relations expert to give five hours one week to write a press release, for example, he said. Or ask a contractor for 10 hours one month to help figure out how to finance booth renovations. That will leave the volunteer with a feeling of accomplishment, and a willingness to be tapped in the future.

A well-run volunteer corps can free the board of directors to focus on long-range planning and fund-raising. It can also help prevent another typical nonprofit casualty: the burned-out board member. Art-A-Fair board members serve different terms, which means the board is always in a state of flux. Cornwall suggested the organization’s bylaws be changed to standardize all 11 board seats at three-year terms, then stagger the terms so no more than one-third of the seats come up for a vote each year. The six officers elected from among the board members should serve a single year, he said. That may encourage board members to become officers and thus spread the management burden.

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Cornwall also suggested the organization tackle the sensitive issues of artist commissions and volunteer credits. Artists who don’t generate a certain level of commissions should be asked to give up their space in the future or make up the difference out of their own pockets. He also suggested the group end or limit the practice of allowing artists to earn volunteer credits that can be used to make up to seven of the 35 points needed to pass the jury process.

“I think the organization should be raising the bar, not lowering it. . . . Remember, they live and die by the commissions they make,” he said.

Abegg, who is expected to leave the board in the fall, the end of her three-year term as president, was pleased with most of Cornwall’s suggestions, but unsure of the wisdom of his final recommendation.

“Traditionally, it seems like the better artists aren’t the ones that sell, and I don’t know why,” she said. “We kind of walk a fine line there. Are we a fine arts show or is it strictly an economic thing? That’s a hard one.”

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This Week’s Company Make-Over

* Name: Art-A-Fair Festival

* Headquarters: Laguna Beach

* Type of business: Annual outdoor art fair

* Status: Nonprofit artists cooperative

* Owner: 150 member artists

* Founded: 1967

* Financing: Cash flow

* 1997 sales: $595,000 plus member fees of $174,000

* Employees: 18 part-time during festival

* Customers: Tourists and local residents

Main Business Problem

Low profile; artist members lack business savvy Goal

Boost gross sales to more than $1 million in 2000

Recommendations

* Secure tax-exempt status

* Stabilize board of directors

* Hire a qualified festival coordinator

* Use volunteers more effectively

* Set minimum sales levels for artists

* Implement on-site marketing strategy

Meet the Consultant

Robin L. Cornwall is a business analyst at the USC Business Expansion Network, a community and economic development project founded six years ago. Cornwall, who has served on the boards of two nonprofit groups, also spent five years as a private business consultant and 10 years in banking.