Would DCI allow a For-Profit corps?

[VOReason]

You beat me by minutes to mention Star.

Hey, I mentioned "Blast" a few postings ago. Doesn't that count??

[Dave]

Sure, somebody could start a for-profit corps (a la World Gone Mad) but they couldn't participate in DCI or DCA. Both bodies' governing documents require 501©3 status for participation as competing corps. There is also a lot of confusion about terms; "non-profit" doesn't mean "doesn't make a profit," it means "doesn't exist for the purpose of making a profit." Likewise, "for profit" doesn't mean that it does make a profit or is therefore allowed to, it simply means that profit is the purpose of that business' existence. Considering what kind of a money hole even the best corps are, I don't see why anyone would possibly want to have a DCI touring corps set up as a for-profit business.

[matye]

When you give a contribution to a non-profit organization(501©(3), your contribution is tax-deductible. That is not the case with a not-for-profit organization. The tax-exempt rules are very specific.

[sky]

Sure, somebody could start a for-profit corps (a la World Gone Mad) but they couldn't participate in DCI or DCA. Both bodies' governing documents require 501©3 status for participation as competing corps. There is also a lot of confusion about terms; "non-profit" doesn't mean "doesn't make a profit," it means "doesn't exist for the purpose of making a profit." Likewise, "for profit" doesn't mean that it does make a profit or is therefore allowed to, it simply means that profit is the purpose of that business' existence. Considering what kind of a money hole even the best corps are, I don't see why anyone would possibly want to have a DCI touring corps set up as a for-profit business.

Dave,

I agree with your comments but would add that the basic tenet and distinction for a "not-for-profit" is that a "director" or "trustee" of the governing board may not profit from his or her involvement or participation. (They may, however, be reimbursed for their organization-related "expenses.) This refers, specifically and only, to the policy and governance level, the "Board" of the organization, but not to the employees, contractors, volunteer staff or performers (if someone chose to pay them).

And, from experience in the non-profit sector, the term / status does NOT mean that the organization cannot or should not make a profit. Indeed, if a corps is to survive, it had better end most years with a solid "profit-able" bottom line because I doubt that (m)any have endowments to help them through lean years.

Steve

Edited December 20, 2008 by sky

[Dave]

Dave,

I agree with your comments but would add that the basic tenet and distinction for a "not-for-profit" is that a "director" or "trustee" of the governing board may not profit from his or her involvement or participation. (They may, however, be reimbursed for their organization-related "expenses.) This refers, specifically and only, to the policy and governance level, the "Board" of the organization, but not to the employees, contractors, volunteer staff or performers (if someone chose to pay them).

And, from experience in the non-profit sector, the term / status does NOT mean that the organization cannot or should not make a profit. Indeed, if a corps is to survive, it had better end most years with a solid "profit-able" bottom line because I doubt that (m)any have endowments to help them through lean years.

Steve

Well, that's what I mean. The business entity doesn't exist to make a profit--but that doesn't mean they don't pay employees, or even that they don't or can't turn a profit. It simply means that profit is not the business' purpose. There are plenty of non-profits that turn a profit (although I wouldn't venture a guess as to what percentage of all non-profits that would be). I'm addressing the same thing you are, the misconception that "non-profit" equals "no profits allowed."

[drumno5]

No. A corps like that goes counter to what DCI is supposed to be for. Besides, they'd probably get little to no fan support anyways because they're basically buying the championship.

Two questions (not necessarily from the same train of thought, but I'll ask them both anyway):

1. What does fan support have to do with it?

2. What makes you certain they would win?

Just sayin',

Fred O.

P.S. I don't think DCI would buy it, either.

[silvertrombone]

DCI is irrelevant in this discussion...it would be impossible to show a profit in any DCI scenario. I'm assuming by the way OP asked this question that they don't have a great deal of understanding of accounting. I'm not flaming in saying that, just making an assumption...correct me if wrong.

Again, basic accounting...revenues minus expenses equals profit. In other words, cash inflow minus cash outflow equals cash left over (profit). Not exactly accurate terminology, but it gives you an idea of what I mean.

Say a corps plays 30 shows, about average. A for-profit corps would most likely not require dues from members...it could be set up that way, but if you're going to be for-profit, you're more than likely going to be paying your members, not charging them. That would be considered abuse...to require people to pay for the privilege of doing what DC's do...for a company to make a profit. But for argument's sake, lets assume no dues. That's conservatively $300,000 (150 x's $2,000) you've got to find elsewhere.

Then there's the issue of sleeping quarters...again, ulikely you'd have performers sleeping on gym floors in a professional ensemble. Hotels are much more expensive than gymnasiums. But for argument's sake lets assume no added expense here.

It's a for-profit group...so staff is probably going to require more salary, since its profitable, after all. But again, let's assume for argument's sake no increased expense for staff services. Remember, you're also depending on a LOT of volunteer effort that would probably go away under a for-profit setup.

That's an increase in expenses in the area of staff salaries, hotel (& probably per diem for everyone), and paying those who are presently volunteers. But we are saying zero added expense for argument's sake.

That means we are ONLY talking about making up for AT LEAST $300k in member dues. That's assuming NO FUNDRAISING and only $2,500 dues per person.

At present, and I'm only guessing on this one, let's assume the WC top 12 make $3,000 per show. That's $90,000 in performance fee income. Simply removing members dues from the revenue bucket means that performance fees would have to go from $3,000 to over $10,000 per show if they increase their tour schedule to 35 shows. Now, someone was making a comment about $7,500 performance fees and how likely it would be that we would see that.

Now, if performance fees are accurately at $3,000 and they were to move to, say, $12,000, what do you think that might do to ticket prices?

Yes, a professional corps in DCI is possible if you don't mind paying finals ticket prices at local shows and you think DCI wouldn't mind sharing those revenues. Cuz you see, DCI operates by the same revenue - expenses = profit equation. It just doesn't pay taxes on it because it is a...not-for profit organization. For and not-for profit are just designations that deal with what happens to profits after they're made.

Sorry for being an accounting geek.

Now, would a for-profit corps work independent of DCI? Perhaps. But it would take some serious backing to get started. A bunch of other issues to deal with, too.

[silvertrombone]

And, from experience in the non-profit sector, the term / status does NOT mean that the organization cannot or should not make a profit. Indeed, if a corps is to survive, it had better end most years with a solid "profit-able" bottom line because I doubt that (m)any have endowments to help them through lean years.

In fact, one of the most lucrative "non profit's" in the world, assuming they didn't invest significantly with Madoff (a topic unto itself), is...

...Harvard University. I forget how many billions of dollars they and Stanford U. have in their funds. Tuition is kind of a joke at these institutions since they could pretty much live off of interest and never charge tuition again and their fund still gain value year over year over time, not taking into account the high's and low's.

[Dave]

DCI is irrelevant in this discussion...it would be impossible to show a profit in any DCI scenario. I'm assuming by the way OP asked this question that they don't have a great deal of understanding of accounting. I'm not flaming in saying that, just making an assumption...correct me if wrong.

Again, basic accounting...revenues minus expenses equals profit. In other words, cash inflow minus cash outflow equals cash left over (profit). Not exactly accurate terminology, but it gives you an idea of what I mean.

Say a corps plays 30 shows, about average. A for-profit corps would most likely not require dues from members...it could be set up that way, but if you're going to be for-profit, you're more than likely going to be paying your members, not charging them. That would be considered abuse...to require people to pay for the privilege of doing what DC's do...for a company to make a profit. But for argument's sake, lets assume no dues. That's conservatively $300,000 (150 x's $2,000) you've got to find elsewhere.

Then there's the issue of sleeping quarters...again, ulikely you'd have performers sleeping on gym floors in a professional ensemble. Hotels are much more expensive than gymnasiums. But for argument's sake lets assume no added expense here.

It's a for-profit group...so staff is probably going to require more salary, since its profitable, after all. But again, let's assume for argument's sake no increased expense for staff services. Remember, you're also depending on a LOT of volunteer effort that would probably go away under a for-profit setup.

That's an increase in expenses in the area of staff salaries, hotel (& probably per diem for everyone), and paying those who are presently volunteers. But we are saying zero added expense for argument's sake.

That means we are ONLY talking about making up for AT LEAST $300k in member dues. That's assuming NO FUNDRAISING and only $2,500 dues per person.

At present, and I'm only guessing on this one, let's assume the WC top 12 make $3,000 per show. That's $90,000 in performance fee income. Simply removing members dues from the revenue bucket means that performance fees would have to go from $3,000 to over $10,000 per show if they increase their tour schedule to 35 shows. Now, someone was making a comment about $7,500 performance fees and how likely it would be that we would see that.

Now, if performance fees are accurately at $3,000 and they were to move to, say, $12,000, what do you think that might do to ticket prices?

Yes, a professional corps in DCI is possible if you don't mind paying finals ticket prices at local shows and you think DCI wouldn't mind sharing those revenues. Cuz you see, DCI operates by the same revenue - expenses = profit equation. It just doesn't pay taxes on it because it is a...not-for profit organization. For and not-for profit are just designations that deal with what happens to profits after they're made.

Sorry for being an accounting geek.

Now, would a for-profit corps work independent of DCI? Perhaps. But it would take some serious backing to get started. A bunch of other issues to deal with, too.

The question is, "Would DCI allow a for-profit corps?" The answer is no, because a corps that was operated as a legally for-profit business would not be allowed to participate as a member (and I'm using member in the loosest possible sense, not the "made the top whatever" sense) of DCI the non-profit entity. For-profit or non-profit has nothing to do with how much money is taken in or paid out, it's the legal definition of the business. Now, DCI could probably hire such a group if it were so inclined to do so for whatever reason, but they couldn't allow them to be the same level of participant that the other 501©3 groups in DCI are because of the legalities involved. This is what I was originally addressing on the subject of people answering the wrong question. It's not "can a corps turn a profit," which has both a practical and a legal answer (both of which are "yes").

[DrumCorpsFan27]

No. A corps like that goes counter to what DCI is supposed to be for. Besides, they'd probably get little to no fan support anyways because they're basically buying the championship.

Kind of like the NY Yankees.