Red Flags to Look Out for Before Joining a Start-up Ballet Company
I want to paint you a picture of an unfortunate, but all too real problem in the world of professional dance:
You audition for a brand new ballet company. They love you, you love them. They offer you a contract and you excitedly accept. Everything feels absolutely aligned.
You pack up all your worldly possessions, stuff them in your car, and head off to the new city—your new home, at least for the upcoming season or two. You find an apartment, sign a one-year lease, get a new state driver's license - the whole shebang.
The season kicks off and you’re thrilled to be embarking on a new adventure as a professional dancer. It’s all good stuff on your Instagram feed—nothing but positive vibes.
Then, at some point, maybe a week or two, a month, a couple of months into the season, you don’t get paid (or the pay is late, or short). All of a sudden, the marley gets pulled out from under your feet (metaphorically and literally).
You find out the company is out of funding and just like that the season is canceled and all the dancers are laid off.
You just upended your life, and probably spent a lot of your personal funds, to embark on this new adventure. Now your season is suddenly done, and it’s probably way too late to find a suitable alternative place to dance this season.
Phew - that's a lot to take in. But the unfortunate truth is this scenario is based on real-life events.
In the May-June 2021 issue of the Harvard Business Review, Tom Eisenmann wrote in Why Start-ups Fail that most start-ups don’t succeed. In fact, more than two-thirds of them never even break even. There is no evidence to suggest ballet companies enjoy a higher success rate.
The point of this blog post is not to delve into why start-up ballet companies fail. The point is to help you understand and navigate your risk before you commit to joining a start-up ballet company. Much of the information shared here will also apply to managing your risk even when joining a long-established company. A dance company’s longevity is no guarantee of its current or future financial posture.
You need to do your personal due diligence before accepting an offer from any ballet company, but especially a start-up ballet company.
A career in dance is exhilarating, fulfilling, and for many the culmination of a life-long dream. As with many careers, it can also be risky. For many aspiring dancers (and their parents!) it can be difficult to navigate the inherent risk vs. reward that comes with pursuing a performing career.
While nothing in life is ever sure, here are three red flags to look out for before you sign on the dotted line:
🚩 The company is not willing to share their financial statements
The vast majority of dance companies operate as 501(c)(3) nonprofits. As a nonprofit, their financial records are required to be public record. If we taxpayers are going to exempt them from paying federal taxes, they have to be totally open about what they are doing with their money, and how they are being governed. You should be easily able to find a copy of their Form 990 on their website or on a website such as Guidestar. If you are not able to obtain a copy either of these ways, you are well within your rights to ask to see the financials. A brand new company in its first year may not yet have filed a Form 990 - however, they still need to be transparent with their finances. If the company is unwilling to share this information with you (which, a reminder, is required to be public record), that is a huge red flag.
🚩 The Board of Directors is too biased to effectively govern
The board of a 501(c)(3) nonprofit has a fiduciary duty to the organization to make sure it operates effectively, ethically, follows the stated mission and bylaws, and acts in accordance with laws and regulations. A well-informed, qualified, and fully-engaged board of directors has an obligation to speak up if the fundamentals are not sound, if the financial math doesn’t work out, or if the risks have not been effectively addressed.
It can be difficult for a brand-new ballet company to compile a really solid board. Serving on a nonprofit board requires many hours of volunteer labor. There is also a fear of risk and liability, making it tough for a company to find highly qualified board members.
Board members need to have a variety of qualifications and be incredibly objective. Be wary of a board that looks like the Founder as president, and a few other members who are the Founder’s best friends and some dancers’ parents.
🚩 The upcoming season revenue projections just don’t add up
Nonprofit ballet company revenue comes from just a few basic sources: earned and contributed.
Earned revenue comes almost entirely from performance box office receipts and school and education program tuition. Does the company have a fully fleshed-out performance season? Do they have an education program in place? Typically, this will account for less than half of a company’s total revenue.
The remaining revenue must come from contributed revenue, or donations. This can be in the form of grants, sponsorships, corporate gifts, and individual contributions.
You need to be very discerning here between confirmed and aspirational funding. Does the company have a detailed, conservative action plan that allows for a 90 percent rejection rate, or are they just assuming every dollar they ask for is coming to their bank account? A $600K per year company better be asking for $6M. They should have evidence of this and be happy to share it with you. If any of these numbers don’t line up, this is another red flag to be wary of.
This is a whole lot for any dancer to digest. But think about what is at stake. You are about to sign a contract, upend your personal life, pack up all your stuff, and go start a new chapter of your dance adventure in a new city. You owe it to yourself to understand exactly the risk you are taking. You need to invest the time.
You absolutely may find the company is doing everything exactly right. They will welcome your questions because they have their act together and they are proud of it. That kind of operation will succeed because they put the work in long before they ever thought about involving you. They cared enough about dancers to give them every shot at success.
Are you going to be part of an exciting, well-planned, well-executed startup that’s going to rock the ballet world with a grand entrance? Or are you going to be caught up in a poorly planned debacle that will cost you a precious season and some serious personal financial penalties?
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