Our Observations

How art galleries make money

22 April 2019

How art galleries make money

No-one ever comes out and asks me directly how (or whether) my gallery makes money, but ‘how do galleries make money’ is the number one search term by far on my website Ask A Curator, where I answer artists’ questions about life and work as an artist. There are five times more people searching for how galleries make money than searching for how artists make money. So, either there’s a great deal of budding gallery owners out there desperate for information, or people are just curious, and too polite to ask me in person.

My gallery is in a little cluster of four galleries, and we get together regularly to share business information, woes and successes. Most recently we’re begun working on a collaborative marketing campaign, to market this little part of town as the gallery precinct to locals and tourists alike. It’s a lot of work, but having fellow gallery owners to talk to, who understand what a hard business this is, helps lessen the load. I’m a big believer in sharing, being transparent and collaborating with other businesses whenever it makes sense to, and so I’m going to share some of that same information with you here.

Whether you’re thinking about opening a gallery, you’re an artist wondering why the hell galleries take so much commission, or you’re just curious, here’s some insight into how art galleries make (or don’t make) money. The most important thing is to have a diversity of income streams, which include both fixed and variable income. For me, this is sales commissions from my gallery and shop, exhibition fees, the occasional workshop and my consulting work. For you this could be different, which is fine, as long as you don’t have all your eggs in one basket.

Sales commission

This is the main form of income for most galleries. Commission is the percentage of the art sale price that a gallery keeps, with the remainder being paid to the artist. It can vary wildly from gallery to gallery, but around 40–50% is average, although I have seen commission as low as 10%, and heard about commission as high as 70%. Commission is variable depending on the gallery’s expenses, what level of service the gallery offers, and the reputation of both the artist and the gallery. For example, some galleries charge artists an exhibition fee, and thus take a lower commission, while others charge no upfront costs but have a higher commission structure. Some galleries cover costs like marketing and opening night catering, while other galleries split those costs with the artist, or the artist covers the whole thing. Some galleries have bigger lists of buyers and collectors than others, so artists might be better off going with a higher commission gallery in order to have a better chance of making sales.

Exhibition fees

I mentioned fees above, and this is a growing trend for galleries. For the last two years I have been the only gallery owner in my local area to not charge exhibition fees, but I have just changed my business model to bring it more in line with the other galleries, meaning I now charge artists an upfront fee, but take less commission than I was previously. Essentially this shares the risk and costs across both artist and gallery, rather than the gallery taking all the risk, as I was previously doing. When a gallery is solely dependent on sales, and has no form of fixed income, it can be highly precarious, particularly if you have a couple of exhibitions in a row that don’t sell well.

If you are thinking about starting a gallery, this is definitely something to consider when you are designing your business model — a mix of fixed and variable income is essential for long term sustainability. If you are an artist, you should be wary of galleries that charge a lot upfront, and very low or no commission, as it means the gallery has less incentive to sell. If you are charging or paying exhibition fees that are in line with the rest of the market in your local area, you should probably be looking at a commission of around 20–30%. Also if you are an artist who is paying exhibition fees, make sure you know about any additional costs the gallery intends to charge you, such as marketing or catering, before you sign your contract.

Events

Have you ever attended a book launch, concert or workshop in a gallery? Or do you know an artist who has a studio above or behind a gallery? Hiring out space to others is a way for galleries to generate income, whether through workshop fees paid by the participants, or room hire fees paid by the event organiser. Free events can also be part of a gallery’s marketing strategy, by bringing new audiences into the gallery that might otherwise not have come. My gallery has a mix of free and participant-pays events, including a monthly feminist book club, author talks and artist-run workshops, and for me it’s much more about supporting the community than being a source of revenue, but for other galleries event hire can be a significant part of their income strategy.

Gallery shop and café

A lot of galleries have a shop as part of the gallery, selling things like prints and cards from their exhibiting artists, or handmade objects such as ceramics and jewellery, or they have a café so you can enjoy lunch or coffee after your browse in the gallery. When I was a uni student, art galleries were my favourite place to go book shopping, with their amazing range of art theory, artist biographies and how-to books (sadly these days I mostly read on my kindle, but I’m not adverse to bringing back the art gallery bookshop!) In my gallery I have a shop that sells handmade jewellery and textiles from local artists, and the shop currently accounts for 50% of my sales, with art making up the rest.

Services

Galleries can offer a range of services, such as home installation services, providing advice about art as investment, providing advice to help you choose art for your home or office, and buying and selling in the secondary art market. For some galleries this can make up a significant proportion of their income.

Expenses

Finally, we can’t have a discussion about how galleries make money without talking about what their expenses are. Paying artists and suppliers for sales is often the largest expense, depending on what level of commission a gallery takes. If a gallery takes 50% commission, that means 50% of all sales revenue goes back out to the artist, and the remaining 50% is what a gallery has left to pay its expenses. These include rent, staff wages and other benefits, insurance, shipping, marketing, utilities and tax. Unless you own the building, rent is likely to be a gallery’s next biggest expense, and this can vary wildly from location to location.

A year ago I was forced to relocate my gallery because of unfixable building issues, and the cost of moving, combined with the higher rent I now pay, has been really hard on my business. It pays to take your time in finding the right spot for your gallery, from looking at foot traffic and visibility, to rent and outgoings. Rent is a fixed expense, and I have learnt the hard way that you really need a fixed income to cover it. Commission is of course a variable expense, and how much you pay your artists depends on how much you sell.

Wages are likely your next biggest expense. If you’re designing your gallery business model, have a think about how much time you plan to spend there, versus having staff. The part of my job that I love is visiting artist studios, installing exhibitions and hosting opening night soirees. I even quite like the administration, marketing and book keeping side of things. What I don’t like is being in the gallery five days a week, where my day-to-day looks a lot like being a retail assistant, if not a high end one. This is not where I shine, and it shows. However, my business is not at the point yet where I can have staff there every day, or even most days. I currently have staff only on Saturdays, so I can spend the day with my wife who works a normal Monday-Friday job, otherwise we would never see each other. If you’re thinking about opening a gallery, really think about what your day-to-day will look like, and if that’s for you.

Then you have tax, marketing, insurance, utilities and all the other little things that can add up. All these gallery expenses leave very little left over, if anything at all.

This tends to suggest that owning a gallery is not a profit-making business. Most gallery owners I know consider themselves lucky to break even, although of course there are always exceptions. If you’re thinking about opening a gallery to make money, my advice would be: don’t. However, if you’re thinking about opening a gallery because you love art, love working with artists, and have another source of reliable income, my advice would be: maybe, after you sit down and really look at the figures. Running a gallery is not for the feint-hearted, but on the other hand, it can be nourishing soul work and highly rewarding in other ways, from knowing you’re supporting artists, to promoting issues you care about, to building a lovely community.

It’s a big risk, and as we know, most small businesses fail within the first five years. I’m just about to hit the two-year mark, and I’ve already had several pivots in my business model and strategy, in order to keep going. But if you can find a way to make it work, it can be a satisfying thing to do. Galleries can and do make money, but there are also much easier ways out there to make money if that’s your main concern.