Strategies for Raising Funds and Developing Existing Operations in the Cultural Sector

Canada’s creative economy plays a crucial role in shaping our national identity. They are expected to employ around 670,000 people nationwide and generate $57 billion for the economy in 2019.

However, the creative and cultural industries face significant and unique challenges:

• Challenges in Obtaining Financing
• Cash Flow Uncertainty
• Monetary and reputational risks associated with material
• Over-dependence on discount and bonus plans
• Technological change that causes upheaval

Some challenges these businesses face include tax breaks, federal and provincial support schemes, broadcaster deals, several international contracts, and fluctuating consumer preferences.

Detailed Challenges

Various subsectors within this sector face their unique challenges. The unique business methods and characteristics of companies in the film, television, music, video game, sound recording, and design industries classify them as part of the creative and cultural industries.

• Media content creation and dissemination: Many organizations operate on a project basis, which means that things like the timing of product production can significantly impact annual revenue.
• Riskier businesses include those involved in book distribution and publishing because their success is directly tied to the number of copies sold. They take on significant financial risks because of the unpredictability of a product’s commercial success.
• The gaming industry is expanding at a rapid pace, and businesses that want to keep up will need to focus on scalability, user experience, and talent. Player responses are crucial to a game’s overall success.
• Since many companies in the design and service industries don’t have exclusive contracts with their clients, revenue streams may be less steady and more cyclical.

In the creative and cultural industries, it is typical practice for businesses to spend heavily on research, design, production, and promotion before seeing any return on investment for months or even years after the initial product launch. Their revenue could be more consistent between contracts because they regularly work on large projects.

There’s always the risk that your content won’t resonate with your audience, leading to wasted time and resources.

Because of these challenges and the need for tangible assets typical of firms in this sector, it might be difficult for individuals operating in this industry to secure capital from conventional sources.

Better financial management would be beneficial for businesses in the creative industries.

The capacity to control cash flow is crucial to the health of any business. However, due to the emphasis on project-based revenue and cash flow, managing cash flow and generating budgets and forecasts can be more difficult in the cultural industries.

So, how do you handle the money as the head of a forward-thinking organization?

• Better cash flow management and financial planning will keep operations running smoothly even when money is limited.
• With reliable forecasts, you can run what-if scenarios and prepare for unforeseen events, lowering your vulnerability to industry-wide dangers.
• If you want to catch the eye of investors and lenders, you’ll need to keep precise, up-to-date financial documentation.
• Good internal financial reporting can aid business decision-making by revealing which initiatives to pursue, how to establish prices, and which goals to adopt as part of a company’s overall strategic plan. It can increase your company’s profitability and longevity, allowing you to continue making an impact while expanding your bottom line.

Where do you start? Check out BDC’s website if you’re a business owner in need of helpful publications, tools, and resources to manage your finances better.

You should also include some fiscal experts on your team. Hiring an outside advisor or coach can be helpful if you need assistance with financial management.

An outsider’s view of the inner workings of the company, including but not limited to:

Strategic planning

• Making your company model more competitive
• Resolving long-standing problems inside the company
• Luring and keeping the best talent in place
• Spend money on healthcare.

Businesses in the arts and cultural industries frequently need seed money to fund exploratory work, product development, and marketing. This could require a substantial investment of resources years before the product starts generating a profit.

Short-term financing, also known as production financing or tax credit financing, is available from traditional lenders to bridge the gap between a company’s cash flow demands and the time it may receive government tax credits.

However, with collateral, a higher risk profile, and greater financial volatility, these enterprises may be able to secure longer-term funding. Under-funding a project can cause

• Slowing growth
• Not taking advantage of opportunities to start businesses or grow existing ones
• Strenuous Business Environment Alterations

To help with the growth of Canada’s cultural and artistic companies, BDC has allocated an extra $30 million. Loans (as opposed to grants or subsidies) in the range of $2 million are made available through the scheme to well-established, rapidly expanding businesses for use on one of four projects.

• Changes in a business through time
• New Material Development
• Development of the Business