The ongoing coronavirus pandemic is having a profound effect on the business world – particularly in the art sector. The impact of coronavirus on the art world has been swift and shows no signs of stopping. If you’re an artist, or art dealer then it’s likely that all of your usual face-to-face exhibitions, shows and artwork sales have disappeared overnight – and that’s an extremely scary position to find yourself in.
So, what can you do to safeguard the health of your dealership or art business?
Keith Graham explains the key challenges for the art world, and the importance of taking stock of your situation during this enforced lockdown period.
Dealing in a time of uncertainty
The impact of coronavirus is affecting us all deeply. People are in limbo, in both their business or personal lives. So much of what’s going on is unclear – and there’s not much concrete guidance for dealers and galleries to follow, at present.
Much of what’s been written in the press and media states the obvious – that this is a tough time for the art market, and that’s unquestionably the case. The art market has almost completely dried up since the lockdown rules were enforced, with all art fairs and auctions cancelled and galleries now having to close their doors.
A shift to online viewings and sales
People in the art sector are understandably very nervous, and there’s a distinct lack of supply when it comes to new or secondary artworks. With the lockdown in force, potential clients simply can’t see new paintings or artworks.
Art is a very sociable sector. Sales were traditionally made through your known contacts and long-standing customer relationships, or because you came to a show and liked an artwork.
Suddenly, you have to change your whole model. With no face-to-face routes to promoting your artwork, sales are at an all-time low. Pre-agreed sales are still going ahead, but, increasingly, sales are moving online.
To respond to the lockdown, some in the art sector are making more of their web presence, creating websites and ‘online viewing rooms’ where you can display artworks and move the marketing and sales process to the digital space.
Cloud platforms can provide an all-in-one solution for dealers and artists, allowing you to display your works, market them, raise invoices and replicate your usual sales process.
But not everyone has access to these resources. You might have only a few works photographed, and having high-quality photographs of your artworks will be essential.
Key challenges to focus on in your art business
The art world has rarely experienced such a profound downturn, and there’s a prevailing mood that the fate of the art market is very much hanging in the balance.
Keeping an art business running in these highly testing times will be a challenge. For smaller and medium-sized businesses in the sector in particular, these are going to be a tough few months. But there are ways to track your finances, plan ahead and mitigate the worst of the impact.
Key areas to focus on will include:
Looking at cashflow and projecting it forward
Cashflow is highly volatile in the art sector. Reviewing your cashflow is vital for two reasons: 1) You understand your business what is happening financially, rather than just ticking over day-to-day. 2) Preparing a cashflow forecast helps you look at cost-cutting too, and to chase money that you’re owed.
Keeping the sales pipeline running
If you’re an artist completing one painting every two to three months, you need a lot of sales to keep your head above water, or you need to sell these works for large sums. Getting paintings out to customers at the moment is hard. If you’re popular, and sell prints as well as originals, that may lend itself to online sales, providing you with some passive income.
Embracing online viewings and sales
The emergence of online sales has been a bottom-up phenomenon in the art sector. Online selling was pooh-poohed by the big dealers when it first appeared, but now works are selling online for thousands. If people know your work and you have a pre-existing reputation in the market, customers are much more likely to buy online, purely based on that reputation, without seeing the work.
Cutting your cash outflows
It’s hard, at present, to focus on revenue generation, but there are ways to cut overheads and costs. Talk to your suppliers, landlords and service providers about potential discounts and changing terms. In the current atmosphere, trusted suppliers are far more open to discussions around price and payment terms.
Getting in control of your accounting
When it comes to accounting, most art businesses are not at the cutting edge of financial technology. But by moving your finances, invoicing and tax affairs over to a cloud solution, such as Xero, you give yourself far better access to your important numbers – a benefit that will make cashflow forecasting and financial reporting far easier to do.
Talking to people and nurturing relationships
Staying in touch with your contacts and customers really is vital. You can become isolated very easily, so you need to remain in contact with your network, whether it’s by phone, text or one of the many video conferencing platforms that have become so popular during this crisis.
To get through this crisis effectively, there’s an imperative to readjust how your whole business operates and what your future plans will be. But this is no bad thing.
Taking the best route to financial support
For art businesses that are feeling the cashflow pinch, there are routes to additional funding, grants and financial support that can be explored. However, it’s important to understand the impact of borrowing money and how this could affect the future performance of the business.
Options to consider include:
- Deferring your VAT payment – if you have a VAT payment due between 20 March 2020 and 30 June 2020, you can choose to defer that payment. Remember, this is only a deferral. You will have to make the payment eventually, so don’t rush into this option.
- Deferring all other taxes – it’s also possible that you may be able to defer your PAYE, NI, corporation tax and personal tax payments. However, this will be dealt with on a case-by-case basis and you will have to phone up and reach a deal with HMRC.
- Furloughing your staff – you can choose to use the Coronavirus Job Retention Scheme and ‘furlough’ your staff, essentially sending them home whilst continuing to pay them. The government furlough scheme will cover 80% of an employee’s wages up to a ceiling of £2,500 per month for the next 3 months. But you have to be careful as you’re changing the terms of their contract if you pay anything less than their usual pay. Directors can also be furloughed, but can then only carry out their regulatory duties and can’t carry out any other duties (such as sales or customer service) within the business.
- Taking out business loans – the Coronavirus Business Interruption Loan (CBIL) is available via 40 lenders approved by the British Business Bank. As a small or medium-sized business you can apply for up to £5M, but this is a loan, not a grant. It;s likely, though, that many businesses won’t meet the profitability criteria for the CBIL and won’t get the much-needed financial support they require.
- Applying for rates relief and grants – other options include rates relief for retail, hospitality or leisure businesses and business support grant funding if your art business can meet the necessary criteria for these schemes.
Helping you navigate through this emergency
To apply for financial support, you will need a lot of historic information and detailed forecasts. You’ll also need a clear narrative on where you are as a trading business and what steps you’ve taken to cut costs and overheads.
We specialise in advising art dealers, galleries and artists. We have the combination of art-world knowledge and financial expertise to help you through the challenging times that lay ahead for your business.
We will be able to:
- Run detailed cashflow and business forecasts
- Review your cashflow position and cost-reduction exercises
- Help you review and update your business strategy
- Provide the ongoing support and guidance you need at this time.
Staying productive and taking stock of the situation
We don’t know what the future holds once the coronavirus emergency has receded. And we appreciate that people are concerned and unsure about the future of their business.
There is some pressure to carry on as normal – so artists need to continue producing work. Maybe we’ll see an outpouring in creativity, driven by the impact of this crisis, who can tell.
The key thing is that the art world MUST change and embrace a new way of doing business. Art businesses must move online and will need to get more deeply involved in websites, content marketing and digital viewings.
We also need to look to the future and try to review what our next steps will be. Will you be putting on new shows? Will you reschedule cancelled exhibitions? What artworks will you be producing or selling? What stock do you have in your inventory?
The key is to use this time in lockdown productively, and to come out of this period with a leaner, more organised business – one that’s ready to grasp the opportunities once the crisis is over.
Talk to one of our London art specialists about safeguarding your art business.
Want to know more? Call us on 0207 025 4650 or email email@example.com