Southwind

[SkyRyderFMM]

That "is" my logic; and that "is" one of the, if not the major factor for the money grab G7 proposal. The top corps' have been using the same fiscal philosophy as our Federal Congress for a number of years instead of running their organizations like a viable business. When corps' dues are upwards of $3000 per person and that still cannot support the tour then something is really amiss with the way corps' are ran.

I'm sorry, but your logic is flawed. Corps depend on a variety of revenue streams to operate, including member dues and performance fees. Corps are not, and never have been, able to generate sufficient revenue to operate without considering these revenue streams. Almost all corps operate at the margin. This has always been the case. Most corps today are running themselves like a business. To be eligible to join World Class, a corps must undergo a review, which includes administrative operation. All corps must submit copies of business documents to prove they are complying with the various state and federal requirements. Some corps operations are more successful than others. But when you operate at the margin, it doesn't take much to put you behind, which can send you into a downward spiral fast.

For example, if you are a finalist getting paid finalist performance fees, receiving endorsement deals that finalist receive, have the higher souvenir sales that finalists enjoy, and attract more prospective members at auditions, and you miss finals, there will be many negative consequences to a variety of revenue streams. To make up for these losses, corps have to work extra hard to compensate, or shrink. If they shrink, the likelihood of returning to finalist status will decline significantly. If you are charging $3,000 and you cannot operate, perhaps it's because donations are down, performance fees are down, souvenir sales are down, a corps didn't land a grant they had planned on, etc. It's far more complicated than you make it out to be.

As I said, there are 2 finalists where this is not presently the case, but these two might be counting themselves among the rest if they do not diversify their revenue streams and prepare for change (which will come, like it or not). There are only a handful of corps operating like our "Federal Congress" (i.e., operating with significant deficits). They were not the corps leading the G-7 charge. Read the corps financial statements. They are available for free on Guidestar. You might want to spend a little bit of time reading them, and you will be much better informed about the motivations of certain organizations.

[Stu]

I'm sorry, but your logic is flawed. Corps depend on a variety of revenue streams to operate, including member dues and performance fees. Corps are not, and never have been, able to generate sufficient revenue to operate without considering these revenue streams. Almost all corps operate at the margin. This has always been the case. Most corps today are running themselves like a business. To be eligible to join World Class, a corps must undergo a review, which includes administrative operation. All corps must submit copies of business documents to prove they are complying with the various state and federal requirements. Some corps operations are more successful than others. But when you operate at the margin, it doesn't take much to put you behind, which can send you into a downward spiral fast.

For example, if you are a finalist getting paid finalist performance fees, receiving endorsement deals that finalist receive, have the higher souvenir sales that finalists enjoy, and attract more prospective members at auditions, and you miss finals, there will be many negative consequences to a variety of revenue streams. To make up for these losses, corps have to work extra hard to compensate, or shrink. If they shrink, the likelihood of returning to finalist status will decline significantly. If you are charging $3,000 and you cannot operate, perhaps it's because donations are down, performance fees are down, souvenir sales are down, a corps didn't land a grant they had planned on, etc. It's far more complicated than you make it out to be.

As I said, there are 2 finalists where this is not presently the case, but these two might be counting themselves among the rest if they do not diversify their revenue streams and prepare for change (which will come, like it or not). There are only a handful of corps operating like our "Federal Congress" (i.e., operating with significant deficits). They were not the corps leading the G-7 charge. Read the corps financial statements. They are available for free on Guidestar. You might want to spend a little bit of time reading them, and you will be much better informed about the motivations of certain organizations.

The only corps in the history of DCI that was ever ran like a real business was Star of Indiana. Read the history written by Cook and you will find that they had guaranteed non-related business income (like an airport fueling station) financially supporting the corps. And my logic is not flawed. Most all corps' rely on "projected" revenues from various donation sources instead of budgeting off of real capital revenue-reserves and continuously put themselves into positions of deficit spending (just like Federal Congress). While this is becoming an eye opener for many corps', this willingness to exist on projected donation income along with ever increasing performer dues is not a way to run a viable business. A viable business practice would be to look at real capital revenue, real capital reserves, as well as real liquid assets and adjust yearly operation outlay budgets accordingly. If a corps has little capital in reserve and does not have guaranteed revenue outside of performer dues, then it would be prudent to stay local, travel less, and run in the black. That is a viable business practice. However, that is not how many corps are ran. They allow their grandiose desire to go to CA, then TX, then to CO, then to MN, then to FL, then to PA, then to IN along with producing Huge production outlays to dictate their operation budgets. Then what do they do when they are in danger getting into the red so much that they might fold? Back off on the extravaganza? Nope; they raise the dues of the performers just like the congress raises taxes on the public, and then when they can take a breath they go back to increasing outlays just like the congress does, and thus they exist in this dangerous spiral of deficit spending.

[SkyRyderFMM]

The only corps in the history of DCI that was ever ran like a real business was Star of Indiana. Read the history written by Cook and you will find that they had guaranteed non-related business income (like an airport fueling station) financially supporting the corps. And my logic is not flawed. Most all corps' rely on "projected" revenues from various donation sources instead of budgeting off of real capital revenue-reserves and continuously put themselves into positions of deficit spending (just like Federal Congress). While this is becoming an eye opener for many corps', this willingness to exist on projected donation income along with ever increasing performer dues is not a way to run a viable business. A viable business practice would be to look at real capital revenue, real capital reserves, as well as real liquid assets and adjust yearly operation outlay budgets accordingly. If a corps has little capital in reserve and does not have guaranteed revenue outside of performer dues, then it would be prudent to stay local, travel less, and run in the black. That is a viable business practice. However, that is not how many corps are ran. They allow their grandiose desire to go to CA, then TX, then to CO, then to MN, then to FL, then to PA, then to IN along with producing Huge production outlays to dictate their operation budgets. Then what do they do when they are in danger getting into the red so much that they might fold? Back off on the extravaganza? Nope; they raise the dues of the performers just like the congress raises taxes on the public, and then when they can take a breath they go back to increasing outlays just like the congress does, and thus they exist in this dangerous spiral of deficit spending.

I am fully aware of the SOI situation, but even that analogy shows how flawed your logic is. Whether the revenue comes from a business activity or from performance fees, in both situations you are projecting what future revenues, and based planned expenses off these future revenues. The revenue stream is just different. Operating based on projected future revenues is how it has always been done (and was done in the case of SOI as well), and as I said, few corps operate based on deficit spending. If you would take my advice and read the corps financial statements (available for free on Guidestar), you would see this is true.

I do not think you understand the business and tax implications to a non-profit organization of running unrelated businesses. Perhaps you should figure this out before stating this is how it should be done. Further, the stay local routine doesn't work from an economic standpoint either. If you are staying local, you are not generating as much revenue, yet there are little if any cost savings. The cost side of the equation is fairly fixed. Fuel cost is the primary variable. Once the season begins, it is in the best interest of every corps to perform in as many revenue producing events as possible to offset the relatively fixed costs. Further, staying local increases many costs and introduces many logistical challenges that can be very difficult to overcome (the number one being housing).

The DCI budget used to be heavily dependent on ticket sales at Championships. The current model of hosting major events each weekend around the country has reduce the dependence on Championships, and increased revenues. Some of the weekend regionals are as profitable, or close to as profitable, as Championships. This is a very smart business move. It has it's drawbacks from a fan perspective (corps all go head to head each week, so there is little surprise on where placing end up at the end of the season, vs. the old model where everyone went head to head only once before Championships). And the corps must travel to these events. The touring cost is offset by the additional revenues earned. But to earn these revenues, you must tour.

The old "regionally focused" tour didn't do much to cut down on mileage. Corps still traveled all over the country, but to smaller regionals (there were often two regionals in different parts of the country on the same day) that were less profitable.

Why do dues increase? Again, look at the financial statements and you will see why. The cost side of the equation keeps increasing (food, fuel, insurance, regulatory costs, travel costs for staff, personnel costs, payroll taxes, etc.). Your explanation makes it sound like corps are spending with wild reckless abandon on frivolous things. Look at the drivers of cost increases (food, fuel, transportation, insurance, etc.) - the costs of running the business - and tell me where all this waste is?

Look at member dues as a percentage of total revenues, and see whether it's increased, remained the same, or decreased. That is a better indication of whether corps are doing everything they can to manage revenues and expenses.

And if you are familiar with the SOI situation, you should also be familiar with the fact that many of the businesses they set up to support the corps barely turned a profit before the corps ceased to exist. You need to seperate the fantasy from reality.

[Stu]

I am fully aware of the SOI situation, but even that analogy shows how flawed your logic is. Whether the revenue comes from a business activity or from performance fees, in both situations you are projecting what future revenues, and based planned expenses off these future revenues. The revenue stream is just different. Operating based on projected future revenues is how it has always been done (and was done in the case of SOI as well), and as I said, few corps operate based on deficit spending. If you would take my advice and read the corps financial statements (available for free on Guidestar), you would see this is true.

I do not think you understand the business and tax implications to a non-profit organization of running unrelated businesses. Perhaps you should figure this out before stating this is how it should be done. Further, the stay local routine doesn't work from an economic standpoint either. If you are staying local, you are not generating as much revenue, yet there are little if any cost savings. The cost side of the equation is fairly fixed. Fuel cost is the primary variable. Once the season begins, it is in the best interest of every corps to perform in as many revenue producing events as possible to offset the relatively fixed costs. Further, staying local increases many costs and introduces many logistical challenges that can be very difficult to overcome (the number one being housing).

The DCI budget used to be heavily dependent on ticket sales at Championships. The current model of hosting major events each weekend around the country has reduce the dependence on Championships, and increased revenues. Some of the weekend regionals are as profitable, or close to as profitable, as Championships. This is a very smart business move. It has it's drawbacks from a fan perspective (corps all go head to head each week, so there is little surprise on where placing end up at the end of the season, vs. the old model where everyone went head to head only once before Championships). And the corps must travel to these events. The touring cost is offset by the additional revenues earned. But to earn these revenues, you must tour.

The old "regionally focused" tour didn't do much to cut down on mileage. Corps still traveled all over the country, but to smaller regionals (there were often two regionals in different parts of the country on the same day) that were less profitable.

Why do dues increase? Again, look at the financial statements and you will see why. The cost side of the equation keeps increasing (food, fuel, insurance, regulatory costs, travel costs for staff, personnel costs, payroll taxes, etc.). Your explanation makes it sound like corps are spending with wild reckless abandon on frivolous things. Look at the drivers of cost increases (food, fuel, transportation, insurance, etc.) - the costs of running the business - and tell me where all this waste is?

Look at member dues as a percentage of total revenues, and see whether it's increased, remained the same, or decreased. That is a better indication of whether corps are doing everything they can to manage revenues and expenses.

And if you are familiar with the SOI situation, you should also be familiar with the fact that many of the businesses they set up to support the corps barely turned a profit before the corps ceased to exist. You need to seperate the fantasy from reality.

Lets make this simple

No matter how the revenue is collected, it is a poor and dangerous business practice to get into contracting outlays "then" go about collecting revenue to cover those contracted outlays; which if you look at most corps' business practices as well as their 990's you will discover that is exactly what most of them do. While it is good to create a future budget "plan", that plan helps to see what revenue is needed, a viable business practice is to bring in $500k worth of reserve revenue "before" allocating $490k worth of outlays. That gives the business enough reserve to spend for the upcoming expenses as well as leaves it with a $10k reserve to start building up another $500k reserve before contracting the next $490k worth of outlays. It is a misnomer that non-profits must run "at the margins" and a misnomer that non-profits cannot build up reserves (ie profit) to cover future outlays. This is where most corps' get caught; they contract outlays before they collect revenue; and when they cannot collect that revenue they must fold because they cannot cover their contracted outlays Also, any non-profit can maintain a non-business related income outlet, they just have to pay corporate taxes on that income. This is where Cook was very smart and very savvy as a business person for Star.

Edited March 27, 2011 by Stu

[dcifanforlife]

The real heroes of the activity today are board of directors of the corps today that work tirelessly to keep their corps solvent. I serve on the board of a top twelve corps and spend on average $450 to attend board meetings. I voted to approve just the type of budget that everyone here is protesting against. Majority of costs occur before the season starts and the majority of revenue comes in after the corps is on tour. Based on previous years performance I have supreme confidence in the Executive Director, Corps Director and the entire tour staff in executing the plan to meet the budgeted goals and we have a distasteful backup plan in place to cover a deficit.

Executive Director's today have to deal the hand they are dealt. They sit around a table at DCI headquarters holding their cards close to their chest waiting for someone to ante up first. Then they pounce on the one with the lowest card. Everyone is in agreement that the current business model sucks but it is what it is. I would go as far as saying that one corps failure every five years is acceptable in this type of environment.

If we want to see the corps on the field entertaining us we have to work within the present system.

[SkyRyder_FMM]

Lets make this simple

No matter how the revenue is collected, it is a poor and dangerous business practice to get into contracting outlays "then" go about collecting revenue to cover those contracted outlays; which if you look at most corps' business practices as well as their 990's you will discover that is exactly what most of them do. While it is good to create a future budget "plan", that plan helps to see what revenue is needed, a viable business practice is to bring in $500k worth of reserve revenue "before" allocating $490k worth of outlays. That gives the business enough reserve to spend for the upcoming expenses as well as leaves it with a $10k reserve to start building up another $500k reserve before contracting the next $490k worth of outlays. It is a misnomer that non-profits must run "at the margins" and a misnomer that non-profits cannot build up reserves (ie profit) to cover future outlays. This is where most corps' get caught; they contract outlays before they collect revenue; and when they cannot collect that revenue they must fold because they cannot cover their contracted outlays Also, any non-profit can maintain a non-business related income outlet, they just have to pay corporate taxes on that income. This is where Cook was very smart and very savvy as a business person for Star.

Show me a non-profit thats the size of a typical drum corps that has start up cash of $500K based on business revenues alone, and I'll sell you a planet. Maybe two. As I said before, there are exactly two corps that come close to fitting what you believe is require to field a drum corps. Two. And the revenue stream that puts these two corps in this position will not last much longer. So I suppose you believe there should be only two drum corps in existence, eh? Let's be thankful you are not running DCI, or this activity would no longer exist.

[Stu]

The real heroes of the activity today are board of directors of the corps today that work tirelessly to keep their corps solvent. I serve on the board of a top twelve corps and spend on average $450 to attend board meetings. I voted to approve just the type of budget that everyone here is protesting against. Majority of costs occur before the season starts and the majority of revenue comes in after the corps is on tour. Based on previous years performance I have supreme confidence in the Executive Director, Corps Director and the entire tour staff in executing the plan to meet the budgeted goals and we have a distasteful backup plan in place to cover a deficit.

Executive Director's today have to deal the hand they are dealt. They sit around a table at DCI headquarters holding their cards close to their chest waiting for someone to ante up first. Then they pounce on the one with the lowest card. Everyone is in agreement that the current business model sucks but it is what it is. I would go as far as saying that one corps failure every five years is acceptable in this type of environment.

If we want to see the corps on the field entertaining us we have to work within the present system.

You just proved my point that the way most corps' are ran are very unstable in a viable business sense. Approving expenditures without having reserves to cover them, or approving expenditures before collection of revenue is akin to playing Russian Roulette with half the bullets still in the gun!. Try proposing those things at a stock-holder meeting of any major corporation and you would be escorted out of the room very quickly. And what exactly is that distasteful back-up plan to cover deficits? Also, and sorry for being so blunt, but if what you said is true: a) that the big corps sit around ready to pounce on the smaller corps for their own survival instead of cutting back on their own extravagance; and b) that one corps failure every five years is "acceptable" because that flies right in the face of the mission of any 501c3 corporation agreement, that in of itself is distasteful.

[Stu]

Show me a non-profit thats the size of a typical drum corps that has start up cash of $500K based on business revenues alone, and I'll sell you a planet. Maybe two. As I said before, there are exactly two corps that come close to fitting what you believe is require to field a drum corps. Two. And the revenue stream that puts these two corps in this position will not last much longer. So I suppose you believe there should be only two drum corps in existence, eh? Let's be thankful you are not running DCI, or this activity would no longer exist.

My contention is that: a) start-up non-profit corps should not be the size of a typical drum corps unless they have that up-front cash in reserve (see Music City); b) new corps' without much seed money should be built small from the start, only allocate expenditures based on previously collected reserves, and only grow in conjunction with and equal to revenue growth thus always maintaining their books in the black; c) all current corps with financial concerns need to cut back their extravagant expenditures to match their current revenue income stream even if it means cutting back on national touring or even not fielding at all. The books for any corps' should always be in the black and never fall into a situation where projected income is required to cover allocated expenditures; even if it means just performing at the local chamber of commerce brunch meeting and forget about a national tour; and d) the only number of corps' I care about seeing perform are those who are financially stable, whether that be 2 or 200.

Edited March 28, 2011 by Stu

[Stu]

For those of you giving me red negatives just be aware that the poor business practice within the drum corps community of creating more and more extravagant expenditures without first having enough real revenue in reserve to cover those expenses is exactly how our Federal Government has gotten us into a 14 trillion dollar debt. The government answer, increase taxes and print more money (at the same time continue increasing entitlements and expenditures). It appears that those responding to my objections of this practice for drum corps want to continue receiving their cake (national tour, extravagant shows) and continue to try to figure out ways to pay for it after the commitment to spend (increase performer dues and hope souvie sales increase). It sometimes works; however at some point that process "always" breaks down placing the entity in a very bad financial situation, then the dog eat dog situation gets real ugly. A responsible CEO would look at the corporation books and say, "No commitments to any outlays beyond what we have in capital reserve to cover any expenses. And if you want to commit to more spending, first bring in the revenue then we will commit to more expenditures". A responsible Board would also want their CEO to look out for the best financial interest of the corporation in that manner.

[Cainan]

Competitive success is not nearly as important as financial "responsibility". If more corps' were ran like the Troopers nobody would be complaining about how few corps' there are in DCI today.

I would agree with you to a point. But, it can be argued that success breeds success. Over the years how many current Finalists have folded (Star of Indiana does not count)?