Financial sustainability: setting the right direction

Financial sustainability: setting the right direction

By MyCake


Data insight and strategy agency MyCake assesses the journeys of organisations participating on the Heritage Compass programme. The report uses data to help us reflect upon the financial sustainability of heritage organisations. A useful report to check how your organisation compares against the published benchmarks.

Executive summary

The heritage sector in England

The heritage sector in England was estimated to contribute almost £15 billion to UK GDP in 2019, or nearly 1% of GDP. 206,000 people are estimated to work in the heritage sector, or nearly 1% of the workforce.

About Heritage Compass participants

Heritage organisations participating in Heritage Compass are mostly small in scale. A typical organisation has a yearly income of approximately £130,000. A quarter of the participants have an annual income of less than £45,000 (2018/19).

All Heritage Compass participants are based in England and meet the National Lottery Heritage Fund’s definition of a heritage organisation.

There are differences between heritage sub-sectors in the size of a typical organisation. We have analysed the Heritage Compass group using categories developed by the National Lottery Heritage Fund. Organisations in the Culture and Memories and Historic Buildings sub-sectors report typical incomes above the median for the entire group. Organisations in the Collections, Industrial, Maritime and Transport, and Community Heritage and Land categories all report incomes below the median for the group.

The data is pre-Covid. This report provides a baseline financial assessment of the Heritage Compass participants in 2018/19. This period is before the onset of the Covid-19 pandemic and associated concerns about heritage organisations’ financial health and survival. This was also before the organisations in this group became involved in the Heritage Compass programme.

Income sources

We report three broad categories of income: grants, donations and sponsorship, and commercial and trading income. These three categories summarise individual income lines, such as ticket sales.

Commercial and trading activity is widely reported. Almost nine out of ten organisations earn income from commercial activity and trading. The typical median commercial and trading income is 36% of total revenue. Even the smallest Heritage Compass organisations trade – 70% of organisations with a total revenue below £50k per year, report earned income from commercial and trading activities, such as running a café, shop, or room hire.

Ticket sales are both widespread and valuable. Commercial and trading income includes ticket sales. This type of revenue is included in lists of the ten most valuable and widespread income lines. Ticket sales are valuable, typically worth 18% of total revenue to an organisation. 41% of Heritage Compass organisations report revenue from ticket sales.

Donations and sponsorship are the second most common category of income. Donations and sponsorship from the public are the second most widely reported income category (82% of organisations). This income category is typically worth 13% of total revenue. Organisations are more likely to report receiving income from donations and sponsorship as they grow.

Private donations are reported more often than any other income line. Private donations are a component of the donations and sponsorship category. They are the most widely reported individual income line in any category: 71% of organisations report that they have received private donations. The median
value of private donations to recipient organisations is equivalent to 6% of total revenue – not enough to be included in the ten most valuable income lines.

Grants are the least reported but most valuable income category. Almost three-quarters of organisations (74%) are grant recipients. For organisations that receive grants, it is typically worth nearly half their total revenue (44%). The smallest organisations (those with an income below £50k) are least likely to report grant income. For these recipients, grant income is typically worth over half of their total revenue (53%).

Regular grant funding from an Arms’ Length Body is the most valuable single income line. Fewer than ten organisations are Regularly Funded Organisations receiving annual grants from Arms’ Length Bodies such as Arts Council England and Sport England. However, the typical amounts reported are more significant than any other income stream. Regular funding is typically £115,000 per year. The next most
valuable line is funding from National Lottery distributors, worth almost £56,000 per year. In comparison, the median grant income from private trusts and foundations is £25,000.


Employers typically spend at least one-third of their income on staff costs in all but the smallest organisations. Only a handful of the smallest organisations (incomes below £50k) report spending on staff costs. For the remainder, at least two-thirds of organisations employ staff. Median staff costs range between 35% and 46% of total revenue. Benchmarking shows that Heritage Compass organisations reporting a deficit, spend more than half of their revenue on staff costs.

Staff costs vary significantly between sub-sectors. Over two-thirds of organisations in the Collections group are employers. They typically spend almost half their income (49%) on staff. The same proportion of organisations in the Culture and Memories group are employers, but in contrast, the median expenditure on staff is 30%.

Few Heritage Compass participants report expenditure on fundraising. Only 26% of Heritage Compass organisations report any fundraising expenditure. For organisations that report fundraising expenditure as a line in their profit and loss sheet, the median spend is 2% of total income. We suspect that there are organisations that have fundraising expenditure but simply do not report it as a separate line in their expenditure accounts.

Surplus, deficit and break-even

49% of the Heritage Compass group reported a surplus in 2019. 11% reported a break-even position, while 40% reported a deficit. Organisations most likely to report a surplus were in the £50k-200k income band and the Community Heritage, Land & Nature sub-sectors. Industrial, Maritime and Transport is the group most likely to report a loss in cash terms. A majority of organisations in this group made a loss.

Surpluses are usually small. The typical Heritage Compass organisation made a surplus equivalent to 3% of overall income in 2019.

There is wide variation in levels of surplus and deficit. Almost one-quarter (24%) of the Heritage Compass group reported a surplus of 25% or more of total revenue. A similar proportion (23%) reported a deficit of 25% or more of their total revenue. Some of this can be explained by the small scale of some organisations, where a small cash surplus or deficit can appear large in percentage terms.

Future sustainability

The Heritage Compass group as a whole is well capitalised. Going into the period covered by Covid-19, the group held levels of working capital that might suggest they are resilient. Working capital – a narrower definition than reserves – was equivalent to 49% of income in the typical organisation. This is enough to cover a total loss of revenue for six months. 84% of organisations hold over 10% of total revenue as working capital. We think that working capital equivalent to 20% of total revenue is a helpful minimum benchmark – 69% of organisations hold working capital at this level.

Some sub-sectors are less well capitalised. If there is a concern regarding working capital levels, it is the wide variance by sub-sector. Collections typically hold 66% of income as working capital, but for historic buildings and monuments, this falls to 34%.

Read the full report (PDF) 


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Resource type: Research | Published: 2023