Articles

client: The 5th Avenue Theatre
project: Institutional Material

Here is one of the related articles, explaining one of The 5th's commonly-used terms.

Non-Profit Vs. For-Profit
What's the Difference?

The 5th Avenue Theatre Association is a non-profit organization and always has been. We frequently use that term, but we realize that not everyone knows exactly what it means.

Non-profit and for-profit organizations have many things in common. For example, each needs a solid business plan, and each produces goods or services. The main differences involve ownership and profit distribution.

Simply put, a non-profit organization has no owners, and revenue is not given to any of its members for personal benefit; instead, income generated goes back into the organization to support itself and further its mission. A for-profit organization has owners and/or stockholders, to whom profits are ultimately distributed, either directly or through dividends or shares of stock.

These simple distinction leads to an underlying difference of focus that affects all aspects of decision-making and resource expenditure. Non-profits are not conducted for the purpose of making a profit; they certainly want to be successful and operate "in the black," but this is in order to provide services to its community in fulfillment of its mission, not to financially reward its investors or members. Additionally, a non-profit does not have to deal with pressure from stockholders to cut costs or lower standards in order to increase profitability: As long as the mission can be fulfilled, the non-profit is successful.

One other key difference is that most non-profits have a need for community support that goes beyond purchasing the goods or services it produces. Donations, or "unearned income," are almost always an important part of the organization's financial health.

Here at the non-profit 5th Avenue, money raised by ticket sales is spent on productions, overhead expenses and facility maintenance. (It is interesting to note that the highest production expenditures are for labor; sets and costumes maybe expensive, but they are all designed, built and used by artists.) There are no "owners" of the theatre: the property is owned by the University of Washington and the theatre is managed by a Board of Directors and The 5th Avenue Theatre Association.

The 5th Avenue was a self-supporting non-profit for many years, meaning that our programs were funded by ticket sales alone. We have recently opened the door to fundraising in order to meet goals beyond artistic excellence on stage: we wish to expand our education and outreach programs and refurbish our beautiful, but aging, building. As a point of reference, the industry standard for non-profit arts organizations is to derive 60% of operating costs from ticket sales and 40% from grants, sponsorships and donations. Our goal is to raise 10% of our operating budget through contributions.

Non-profit does not mean second-rate or lesser quality. Our work must be top-rate because we compete with all manner of commercial entertainment organizations, be they restaurants, sports franchises or Broadway shows across town. Producing musicals is just as expensive and challenging for us as it is for our for-profit competitors. We draw from the same pool of talented artists and technicians, and — as a union theatre — our professional cast, crew and musicians require the industry standards in salary and compensations.