Looking for a nonprofit recording studio business plan? You're in the right place.
A studio that sells sliding-scale hours and lives partly on grants gets read by two kinds of people. A funder asks who the money helps and what it costs per hour. A lender asks whether the rooms will be booked on a Tuesday. What legal form fits a studio that members use but do not own? How many hours can the rooms sell, and when? What does the budget look like in the months between grant installments? A blank template won't show what a workable answer looks like.
This article walks through a complete sample plan for a nonprofit recording studio and rehearsal space in Portland, Oregon, section by section: the legal form, the market, who books the rooms, the equipment, the staffing and the five-year financials, ending with a downside case.
What each part gives you:
- The legal form: see how to weigh a nonprofit corporation against a member-owned cooperative, and what the IRS tests before it recognizes a 501(c)(3), so you can describe your own structure honestly
- Sliding-scale pricing: a worked rate card with community, standard and supporter tiers, and how the blend turns into revenue per hour
- Utilization by time of day: a table of bookable and booked hours that shows why evenings carry the business and mornings do not
- Grants against earned income: how a first-year budget splits between the two, and what share of costs the rooms pay for
- Equipment lives and replacement: when the gear wears out, what the budget sets aside and what it does not
- Net assets: how the plan's balance sheet maps onto restricted and unrestricted money, so a board treasurer can follow it
- The downside case: an answer to what happens when bookings fall 20% short, with the steps the board takes
If you're drafting a plan for an arts nonprofit or a member-run space, borrow the structure. The organization is fictional, so keep what fits and change the rest.
In this plan
To turn this example into your own nonprofit recording co-op business plan, use the nonprofit recording co-op business plan template.
The Case for Ridge Mead
Ridge Mead is a nonprofit recording studio and rehearsal space that opens on January 1, 2027, in a leased 5,000-square-foot light-industrial unit in inner southeast Portland, Oregon. It has four rehearsal rooms, a tracking studio with an engineer (Studio A) and a self-serve edit and voice booth (Studio B). Musicians pay on a sliding scale, and every booking needs a membership. Imani Brooks is executive director. Luis Ferreira is studio manager and chief engineer.
Ridge Mead is organized as an Oregon nonprofit corporation that is applying to the IRS for recognition under section 501(c)(3). Members do not own it. The mission is access: a working room and a working studio for local musicians who cannot pay a commercial rate for either.
The raise is $785,500: $390,000 of capital grants restricted to the build-out and equipment, $335,500 from founding donors without restrictions, and a $60,000 community lender loan. Of that, $320,000 builds the rooms, $146,000 buys equipment, $77,000 pays pre-opening payroll, legal, filing and launch costs, and $242,500 stays in the bank as the operating reserve.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Revenue | $485,425 | $698,685 | $824,792 |
| Net income after start-up costs | ($217,312) | ($85,328) | $5,911 |
| Closing cash | $141,143 | $93,462 | $137,779 |
Earned income (room hours, sessions, dues, workshops and teaching-room leases) is 46% of Year 1 revenue and 56% of Year 3. Grants and gifts supply the rest. The change in net assets turns positive in Year 3 at $5,911, after $45,276 of depreciation on assets that grants paid for, and grows to $44,360 in Year 4 and $69,710 in Year 5. Year 3 is thin. The funding section explains how net assets are mapped.
If earned income runs 20% short and the board holds hiring, desk hours and repair spend back, cash still ends every year positive, though the Year 2 balance falls to $84,502. If a $55,000 foundation award is lost from Year 2 with no response, cash stays positive but drops to $30,311 in Year 3, under the board's 45-day floor.
Two features set the studio apart by design: a published sliding scale with a community rate on every product, and a youth and education program run in the same building.
How Ridge Mead Is Set Up
Legal name: Ridge Mead, an Oregon nonprofit corporation. Exempt status: application for recognition under section 501(c)(3) filed in November 2026; the determination will still be pending at opening. Founders: Imani Brooks and Luis Ferreira. Site: 5,000 square feet of leased space; a fifteen-year lease signed in August 2026 with three months of free rent for the build-out. Opening: January 1, 2027.
Why a nonprofit corporation and not a cooperative
The word "co-op" in the studio's day-to-day name means members shape it and book at member rates. It is not the legal form. The choice was between four structures.
| Structure | How it works | Why it was chosen or set aside |
|---|---|---|
| Oregon nonprofit corporation seeking 501(c)(3) status | No owners; the board holds the assets for the purpose; foundations and arts councils can fund it | Chosen. Most of the money the studio needs comes from funders that give to charities |
| Member-owned cooperative corporation | Members hold equity and share in surplus | Set aside. Sharing surplus with owners runs against the rule that a 501(c)(3) must not benefit private individuals, so counsel advises that grants and tax-deductible gifts would be closed off |
| For-profit LLC | Owners keep the profit | Set aside. The studio's price scale only works with grants behind it |
| Project under a fiscal sponsor | Another nonprofit receives the gifts | Possible as a bridge until the IRS decides, if a sponsor agrees; not the plan's base case |
The IRS says an organization seeking 501(c)(3) status must not be organized or operated for the benefit of private interests, and that none of its net earnings may benefit a private shareholder or individual. The honest risk is that a studio used mainly by its own paying members looks like a private benefit. Three features address it. The youth and education program and the workshops are open to non-members. No member holds equity, takes a payout or gets a share of assets on closing; the articles direct remaining assets to another exempt organization. And the community rate is open to anyone who declares they cannot pay the standard rate. Counsel drafts the articles and the application against the IRS tests, and the IRS decides; no outcome can be promised.
Exempt purpose
Ridge Mead's stated purpose is educational: music education and access to the arts. It is not relief of the poor. The community rate rests on a self-declaration with no documents asked, so it works as an access feature and not as a means test, and the application does not claim a charitable class defined by income. Counsel confirms that framing before the Form 1023 is filed.
Pre-opening schedule
| When | Step |
|---|---|
| July 2026 | Incorporation; counsel engaged; fiscal sponsor agreement signed for gifts received before the IRS decides |
| August 2026 | Zoning check passes; fifteen-year lease signed with five-year renewal option and three months of free rent from October 1 |
| September 2026 | Acoustic design and permit applications; fixed-price contractor bid; capital grant agreements signed |
| October 1, 2026 | Build-out starts; executive director and studio manager go on payroll ($41,500 for three months, in the budget); free rent period starts |
| November 2026 | Form 1023 filed; booking site built |
| December 2026 | Inspections; equipment installed; founding-member drive; open house |
| January 1, 2027 | Doors open; rent starts |
Capital grants are paid to the fiscal sponsor, which releases the money to Ridge Mead against build-out invoices, because the IRS decision will not have arrived. The model books the 2026 spending and receipts in month 1.
The lease
The lease is signed before the build-out because the rooms cannot be moved. Terms still to be negotiated: the length of the term (fifteen years, so the build-out can be written off over it), no personal guarantee (the landlord may ask for a security deposit of about two months' rent, $18,800, which is not in the model), whether the isolated rooms must be removed at the end of the term, and a five-year renewal option. The build-out is depreciated over the fifteen-year term. If the lease is not renewed in 2041, the $320,000 build-out stays with the landlord.
Unrelated income
Hours sold to working bands at the supporter rate look like an ordinary commercial service. Using the proceeds for the community rate and the education program does not by itself make the activity related to the exempt purpose. The board's position, which counsel confirms, rests on the activity: studio access for local musicians at published sliding rates, alongside teaching, is itself educational, and the supporter-tier sessions for working bands are the likeliest slice to be treated as unrelated. The IRS requires Form 990-T from an exempt organization with $1,000 or more of gross income from an unrelated business. The model charges no income tax; any slice found to be unrelated would be taxed.
Oversight and filings
The Oregon Department of Justice Charitable Activities Section lists registration and annual reports for Oregon charities. Ridge Mead expects to register before it solicits gifts, and counsel confirms the timing, the fees and the annual filings, along with any financial-statement review thresholds that depend on size, before the first budget is adopted. The corporation also files the annual IRS information return.
Targets for the first two years
- 330 members by December 2027, up from 70 founding members at opening.
- Rehearsal bookings at 92% of their mature level by December 2027, before the seasonal dip.
- Studio A booked for about 20 hours a week by September 2027, the point at which the staff engineer starts.
- Earned income at 57% of revenue by 2028.
- Cash from operations positive in 2029, the third year, and a first positive change in net assets in 2029.
Portland's Music Rooms and the Musicians Who Need Them
The gap this studio fills
A rehearsal room in a city with a working music scene is both an expense and a gatekeeper. On this plan's rate card, an hour in Studio A with an engineer costs about three times an evening rehearsal hour. Musicians with day jobs and no room at home give up or record on a laptop, where the room acoustics cap what the recording can sound like.
No regional count of musicians or local price survey is quoted, because no primary source covering Portland could be retrieved when this plan was prepared. Demand is tested another way: the 330 members and 6,824 booked room-hours at maturity are targets, and the 70 founding members who enrolled before opening are the first evidence.
What a musician could use instead
| Alternative | What it offers | Why a musician might pick it | How Ridge Mead differs by design |
|---|---|---|---|
| Commercial rehearsal rooms | Rooms by the hour | Choice of locations and times | A published community rate on every hour and a staffed desk on evenings and weekends |
| Commercial recording studios | Engineer-led sessions | Established rooms and reputations | A sliding scale with an engineer from $50 an hour, and a community education program |
| Home recording | A laptop, an interface and a room | Low cost and always available | A treated live room, a control room and a mic locker |
| Community music programs and venues | Lessons, open mics, shows | A scene and a teacher | Rooms and a studio that people use between shows |
The table describes general categories, not a ranking, and none was checked against Portland providers. No competitor is named: rates, hours and rooms change often, and no price could be retrieved from a primary page.
Strengths and exposures
| Strengths | Weaknesses |
|---|---|
| Sliding scale published on the booking page | 54% of Year 1 revenue is grants and gifts |
| Four rooms plus a studio under one membership | One site; a lease or fire-code problem stops everything |
| 70 founding members and a signed first foundation award | Early staff run both the room and the fundraising |
| Openings | Threats |
|---|---|
| Foundations and arts councils that fund access to the arts | A grant installment that arrives late or does not renew |
| Cultural Trust giving, if Ridge Mead qualifies | Commercial rooms cutting prices to win the evening slots |
| Schools and youth programs with no music rooms | Noise complaints or a landlord dispute |
The Oregon Cultural Trust's site describes a state tax credit for taxpayers who give to an eligible cultural nonprofit and match the gift to the Trust. This summary draws on a search listing of the Trust's site and not a full read, so the current rules and Ridge Mead's eligibility need confirming there. The board applies once the IRS decision is in and counts no money from it.
Who Books the Rooms
The band that rehearses
Three to five people with day jobs, two hours a week, mostly evenings. Rehearsal revenue is built on them. At the mature level of 6,824 booked room-hours a year, about 68 bands at 100 hours each fill the rooms, which is a membership of roughly 240 musicians.
The solo artist and the project recorder
One to three people recording a demo, an EP or a podcast. They use Studio A when they need an engineer and Studio B when they can work alone.
The student and the beginner
Teens and adults with no band. They come through workshops and the youth program, and many join on the $10 community rate.
The paying professional
Working bands, producers and small labels that need a booked room with an engineer and will pay the top of the scale. About a fifth of studio hours are expected at that rate, and they carry the community rate on the rest.
What members expect
A room that is clean and loud enough, a booking system that works at midnight, a fair price and a person at the desk. Members also expect a say, which is why two of the seven board seats are elected by the membership.
Sliding scale
The three tiers are open to anyone. Community tier users declare that they cannot pay the standard rate, with no documents asked. The supporter tier is a choice to pay more so that others can pay less, and it is not tied to income.
| Product (Year 1 prices) | Community | Standard | Supporter | Mix | Blended |
|---|---|---|---|---|---|
| Rehearsal, weekday daytime | $11 | $15 | $21 | 30 / 50 / 20 | $15.00 |
| Rehearsal, evenings and weekends | $17 | $23 | $32 | 30 / 50 / 20 | $23.00 |
| Studio A with engineer, per hour | $50 | $75 | $105 | 30 / 50 / 20 | $73.50 |
| Studio B self-serve, per hour | $14 | $22 | $34 | 30 / 50 / 20 | $22.00 |
| Membership dues, per month | $10 | $16 | $30 | 40 / 40 / 20 | $16.40 |
Prices rise 3% a year from Year 2. The board reviews the mix every quarter. If the community tier passes 40% of hours, the reserve takes the hit before prices are raised.
Filling the Rooms
How a booking happens
A member picks a slot on the booking site, pays by card, and gets a keypad code. Daytime rehearsal slots are unstaffed. Evenings and weekends have a desk attendant. Studio A sessions are confirmed by the studio manager within a day, because an engineer has to be available.
What the rooms can hold
Rehearsal capacity is 4 rooms × 91 hours × 51 weeks, or 18,564 room-hours a year. At maturity 36.8% of them are booked. The share is lowest in the daytime and highest on weekday evenings.
| Time of day | Bookable room-hours | Share booked | Booked room-hours | Blended rate | Revenue at Year 1 prices |
|---|---|---|---|---|---|
| Weekday daytime, 10:00 to 17:00 | 7,140 | 15% | 1,071 | $15 | $16,065 |
| Weekday evening, 17:00 to 23:00 | 6,120 | 55% | 3,366 | $23 | $77,418 |
| Weekend, 10:00 to 23:00 | 5,304 | 45% | 2,387 | $23 | $54,901 |
| All hours | 18,564 | 36.8% | 6,824 | $148,379 |
Revenue is worked from unrounded hours, so the rows differ from the totals by a few dollars. Weekday evenings are 52% of rehearsal revenue and weekday daytime is 11%. A 55% evening rate means Friday and Saturday nights fill and some Tuesdays stay empty. The daytime price is lower to attract students, shift workers and the lunchtime podcast crowd.
Studio A is open the same 91 hours a week and follows the same day-job pattern, with fewer evening and weekend slots filled because each booked hour needs an engineer.
| Time of day | Bookable hours | Share booked | Booked hours |
|---|---|---|---|
| Weekday daytime, 10:00 to 18:00 | 2,040 | 22% | 449 |
| Weekday evening, 18:00 to 23:00 | 1,275 | 40% | 510 |
| Weekend, 10:00 to 23:00 | 1,326 | 45% | 597 |
| All hours | 4,641 | 33.5% | 1,556 |
At the blended $73.50 an hour, Studio A earns $114,329 a year at maturity. Studio B, at 25 hours a week and $22 an hour, adds $28,050. Together they come to $142,379 at Year 1 prices. A 33.5% load is a planning figure for a community studio, and it is not benchmarked. Volumes then move to 90% of the Year 3 level in Year 2, 106% in Year 4 and 110% in Year 5 (36.9% of Studio A hours), when the staff engineer has settled in.
Teaching-room leases
Music teachers lease a weekday daytime slot in one of the two small rooms: 12 hours a week for $500 a month, about $9.60 an hour. Two teachers lease from May 2027 and three from September, then four from Year 3. The lines for workshops, lockers, backline and these leases total $31,062 in Year 1 and $59,462 in Year 3. The slots use daytime hours that rehearsal bookings leave empty: four leases take 48 of the 140 weekday daytime room-hours a week, beside the 21 hours rehearsal bookings use. Whether lesson rentals count as related income is another question for counsel, with the unrelated-income position above.
How a membership is sold
Founding members enroll before opening, at a discount on the first year's dues. After that, the front desk signs people up at the first visit. A member who refers a friend gets two free rehearsal hours when the friend books their first session.
Fundraising pipeline
Year 1 contributed income is $260,000, 54% of revenue.
| Source | Year 1 | Share of revenue | Status at the plan date |
|---|---|---|---|
| Arts council and public grants | $65,000 | 13% | Application in review; two installments, $31,000 in March and $34,000 in September |
| Foundation grants | $150,000 | 31% | One $55,000 award signed for February; $50,000 for May and $45,000 for August in review |
| Individuals and businesses | $45,000 | 9% | Founding list of 31 households |
Start-up funding has the same mix of signed, pledged and in-review money.
| Source | Amount | Status at the plan date |
|---|---|---|
| Capital grants (restricted) | $390,000 | $200,000 signed, conditional on the exemption application or a fiscal sponsor; $120,000 pledged by letter of intent; $70,000 in review |
| Founding donors | $335,500 | $200,000 pledged in writing by 11 households; $135,500 verbally committed by 20 more |
| Community lender loan | $90,000 | Term sheet received; subject to board approval and a lien on the equipment |
The $45,000 of Year 1 gifts is built from monthly sustainers (35 donors on average, at about $16.70 a month: $7,000), six major gifts averaging $2,500 ($15,000), a year-end appeal (280 gifts averaging $50: $14,000) and nine business sponsors at $600 plus a benefit show netting $3,600 ($9,000). The last three months of the year bring in 46% of the total, or $20,700. The same four sources carry the later years.
| Gift source | Year 1 | Year 3 | Year 5 |
|---|---|---|---|
| Monthly sustainers | 35 donors on average, $7,000 | 100 at $18 a month, $21,600 | 150 at $20 a month, $36,000 |
| Major gifts | 6 at $2,500, $15,000 | 9 at $2,800, $25,200 | 12 at $3,000, $36,000 |
| Year-end appeal | 280 gifts at $50, $14,000 | 380 gifts at $50, $19,000 | 480 gifts at $50, $24,000 |
| Business sponsors and benefit | $9,000 | $19,200 | $14,000 |
| Total | $45,000 | $85,000 | $110,000 |
Giving rises 144% over four years, from $45,000 to $110,000. It rests on one development coordinator, the executive director and the board. Year 5 needs about 150 sustainers and a dozen major donors, which is a stretch, and the foundation and arts lines renew in full every year of the forecast. No funding is guaranteed: every grant above is an application, a pledge or an award letter, and amounts still in review are targets.
Reaching Musicians and Funders
What the budget buys
Year 1 marketing is $33,000: $12,000 of launch costs paid from the start-up money and $21,000 of running costs. That is 6.8% of Year 1 revenue, and the share falls to 2.2% by Year 3 and 2.1% by Year 5 as referrals and returning members carry the load. Net membership grows from 70 to 330. With about 25% of members leaving each year, the studio needs roughly 310 gross joins. Charged against all of them, the $33,000 comes to about $106 a join, about six and a half months of blended dues. Counting only the four recruitment rows in the table, it is about $53.
| Item | Year 1 spend | Expected gross joins |
|---|---|---|
| Member referral credits (two free rehearsal hours, budgeted at about $33) | $3,500 | 105 |
| Venue partnerships, flyers and open-mic nights | $3,000 | 70 |
| Online ads, social posts and community calendars | $6,000 | 55 |
| Founding-member drive and open house (launch) | $4,000 | 40 |
| Workshops and school partners (cost sits in the program line) | $0 | 40 |
| Donor events and appeal printing | $6,000 | – |
| Website, booking site and signage (launch and upkeep) | $10,500 | – |
| Total | $33,000 | 310 |
What fundraising costs
The development and membership coordinator costs about $49,500 in Year 1 for nine months. Add $6,000 of donor events and the total is about $55,500, or 21 cents for every dollar of the $260,000 contributed.
Milestones
- January 2027: doors open, 70 members, first Studio A session booked.
- March 2027: 130 members; arts council installment of $31,000 arrives.
- August 2027: 245 members; third foundation installment arrives.
- September 2027: staff engineer starts; 268 members.
- December 2027: 330 members; November and December gifts close the year.
Running the Building
The unit
About 5,000 square feet at roughly $22.56 a square foot a year, all in ($112,800 in Year 1), under a fifteen-year lease with 3% annual steps and three months of free rent during the build-out. The board signed once the city's zoning check confirmed that rehearsal and recording are allowed at the address. The unit is in a light-industrial building with no homes in the same structure.
| Space | Approx. size |
|---|---|
| Four rehearsal rooms (two of about 200, two of about 320 square feet) | 1,040 |
| Studio A live room and control room | 910 |
| Studio B edit and voice booth | 140 |
| Lobby, desk and lounge, set up for workshops | 700 |
| Gear lockers | 320 |
| Sound locks, halls, restrooms, storage and mechanical | 1,890 |
Isolation and air
The $320,000 build-out pays for the isolated rooms, quiet ventilation and the electrical upgrade. That is about $64 a square foot across the unit and about $153 a square foot of the 2,090 square feet of isolated rooms. It is the largest cost and the one with the widest range, and the risk is upward. An acoustic designer and a contractor price it with a fixed bid before the lease is signed, and the designer confirms the figure.
The desk
Evenings and weekends need a staffed desk for 56 hours a week: 30 weekday evening hours and 26 weekend hours. Three part-time attendants work 19 hours each, which is 57 hours, and volunteer door shifts cover absences. Weekday daytime is keypad access with the studio manager or engineer on site. The attendants earn $19.23 an hour against a Portland-metro minimum wage of $16.80 from July 1, 2026, set by the Bureau of Labor and Industries. Part-time on-costs are modeled at 15%, a planning figure for payroll taxes, Paid Leave Oregon contributions and workers' compensation with no health cover; a payroll provider confirms it.
Engineering time
An hour in Studio A takes 1.25 engineer-hours with setup and teardown. The studio manager gives 24 hours a week to engineering and the staff engineer 32. Booked Studio A time is 30.5 hours a week at maturity, so the need is 38 hours a week in Year 3 and 42 in Year 5, within the 56 hours available. The manager alone covers the first months; the staff engineer starts in month 9, when bookings reach about 20 hours a week and the need passes 24. No second engineer is planned inside the forecast, and the spare capacity is what lets the staff engineer teach.
Equipment lives and replacement
| Item | Cost | Life | Replacement year |
|---|---|---|---|
| Rehearsal backline and PA | $27,000 | 5 years | 2032 |
| Computers, Studio B and front desk | $27,000 | 5 years | 2032 |
| Studio A console, microphones, monitors, outboard | $92,000 | 7 years | 2034 |
| Acoustic build-out | $320,000 | 15 years (the lease term) | 2042 |
Depreciation is $45,276 a year. The budget line for equipment repair and replacement ($14,000 in Year 2, $28,000 in Year 5) covers failures, not the replacement of whole kits. The first large replacements ($54,000 of backline and computers) fall in 2032, after the forecast ends. No replacement reserve is funded in these numbers. The board intends to designate part of the Year 4 and Year 5 cash to one.
Insurance and safety
General liability, property with equipment cover, hired and non-owned liability, directors and officers cover, cyber cover and abuse-and-molestation cover for the youth program are budgeted at $17,500 in Year 1 as a planning figure. Workers' compensation sits inside the payroll load. Staff and volunteers who work with minors are background-checked, at about $1,500 in the Year 1 program line, and two adults are always present. The youth program starts as two summer workshops in Year 1, run by Luis and trained volunteers, and grows into a full program when the education coordinator starts in month 13. Earplugs are sold at cost at the desk, and each room has a posted volume guide.
Software
Booking and payments, donor and membership records, accounting, and recording software licenses cost $11,000 in Year 1.
Staff and Board
Imani Brooks, executive director
Imani ran booking and operations for an all-ages venue for nine years and wrote the grant applications for it. She is not an audio engineer. She runs funders, the board and the front of house, and the executive director's salary is $70,000.
Luis Ferreira, studio manager and chief engineer
Luis has engineered sessions for local bands for fourteen years and taught recording workshops at community events. He runs Studio A, sets the studio standards and trains the volunteers.
Where the team is thin
Neither founder has run a capital build-out. An acoustic designer, a contractor, a board member who has managed construction and a fixed-price bid cover that gap.
Board
Seven members: a treasurer who is a CPA, a secretary who is an attorney, an arts funder, a working musician, a youth educator, and two members elected by the membership. The executive director does not vote. The board adopts conflict-of-interest, whistleblower and document-retention policies and approves the budget each year. The board's reserve policy limits draws on the $242,500 designated reserve to the amounts in the annual budget, and any other draw needs a board vote.
If a founder leaves
Imani's role has a documented handover to the board chair and the development coordinator. The staff engineer from month 9 gives the studio a second person who can run sessions, so the studio does not depend on Luis alone.
Ownership and the lender
Nobody owns Ridge Mead. The lender's loan is secured on the studio equipment, with no personal guarantees from staff or board members, and the covenant requires quarterly accounts. Year 3 debt service cover of 1.2x leaves little room, and the board intends to prepay the loan from unrestricted surplus once Year 4 closes.
Money: Funding, Budget and the Five-Year Forecast
The tables below come from one model: twelve months of detail for 2027, then one line a year through 2031. Ridge Mead is a nonprofit, so the equity rows are net assets and the surplus rows are a change in net assets; the funding note explains the mapping. Grants and gifts are counted in the month the money arrives. The model puts the 2026 build-out, pre-opening payroll and funding receipts into month 1, so the 2026 timing is in the pre-opening schedule in the sections above.
Build-out, equipment and the reserve
| Use of funds | Amount |
|---|---|
| Acoustic build-out: four rehearsal rooms, Studio A live and control rooms, Studio B, HVAC and electrical | $320,000 |
| Rehearsal backline and PA for four rooms | $27,000 |
| Studio A console, microphones, monitors, outboard and piano | $92,000 |
| Studio B, computers, door access and front desk | $27,000 |
| Legal and accounting: incorporation, exemption application, lease review, policies | $14,500 |
| IRS and state filing fees, city building permits, fire inspection | $9,000 |
| Pre-opening payroll: executive director and studio manager from October 1, 2026 | $41,500 |
| Launch: website with booking, signage, founding-member drive, open house | $12,000 |
| Operating reserve (Year 1 deficit and the gap between grant installments) | $242,500 |
| Total uses | $785,500 |
| Source of funds | Amount |
|---|---|
| Capital grants (restricted to build-out and equipment) | $390,000 |
| Founding donors (without donor restrictions, board-designated reserve) | $335,500 |
| Community lender term loan | $60,000 |
| Total sources | $785,500 |
The $785,500 raise has three parts. Capital grants of $390,000 (50%) are restricted by the funders to the build-out and equipment, which cost $466,000 together. Founding donors give $335,500 (43%) without restrictions, and the board designates $242,500 of it as the operating reserve. A community lender advances $60,000 (8%) at 7.5% over ten years, interest-only for the first twelve months, secured on the studio equipment. The rate is a planning figure, not a quoted rate. The loan exists because the capital grants cover 84% of the build-out and equipment and $76,000 is not pledged; the loan covers $60,000 of that gap and unrestricted gifts cover the rest. Debt service cover is comfortable from Year 3. In nonprofit accounting terms the capital grants start as net assets with donor restrictions and move to net assets without donor restrictions as the build-out and equipment are paid for and placed in service; the board's accounting policy and the auditor settle the timing. The founding gifts are without donor restrictions from the start, and a board designation does not change that. The model's balance sheet does not split the two classes. Its "Paid-in capital" row is the $725,500 of contributions received at opening, and "Retained earnings" is the running total of the change in net assets, so the two rows together equal total net assets. Depreciation on the grant-funded assets is charged in full against the surplus each year; the capital grants were counted as contributions when they arrived, so they are not credited again. The reserve is sized to the 2027 deficit and the gaps between grant installments. It is drawn on a written policy: draws that the board's annual budget shows are allowed; any other draw needs a board vote; and if forecast cash falls below 45 days of costs (about $90,000 in Year 2), the board puts the downside steps in place.
Figures the forecast runs on
- Rehearsal: four rooms, each bookable 91 hours a week for 51 weeks. At maturity 15% of weekday daytime hours, 55% of weekday evening hours and 45% of weekend hours are booked, which is 33.45 hours per room-week, a 36.8% utilization and 6,824 booked room-hours a year. Use starts at 22% of that level in January 2027 and reaches 92% in December, with a summer dip and an autumn lift.
- Rehearsal pricing is a sliding scale. Daytime hours blend to $15 and evening and weekend hours to $23, so a booked hour earns $21.75 at the mature mix. Prices rise 3% a year from Year 2. Volumes in Years 2 to 5 are 93%, 100%, 105% and 107% of the mature level.
- Studio A is open 91 hours a week, the same hours as the rehearsal rooms, and its bookings follow the same day-job pattern: 22% of weekday daytime hours, 40% of weekday evening hours and 45% of weekend hours. That is 30.5 booked hours a week, a 33.5% utilization and 1,556 hours a year at a blended $73.50 an hour with an engineer. Studio B, a self-serve edit and voice booth, is used 25 hours a week at a blended $22, or 1,275 hours. Session volumes in Years 2 to 5 are 90%, 100%, 106% and 110% of the Year 3 level. These utilization figures are planning figures for a community studio and are not benchmarked.
- Membership dues are a sliding scale of $10, $16 or $30 a month taken by 40%, 40% and 20% of members, which blends to $16.40. Members at month end climb from 70 in January 2027 to 330 in December. Average members in Years 2 to 5 are 380, 440, 460 and 480. Every booking needs a current membership.
- Workshops, lockers, backline and teaching-room leases add $31,062 in Year 1: lockers rise from 24 to 36 at $28 a month, workshops run twice a month in the main season with 12 seats at $42, backline hire brings $150 a month from April, and music teachers lease weekday daytime slots in the two small rooms (12 hours a week for $500 a month, about $9.60 an hour). Two teachers lease from May and three from September 2027, then three on average in Year 2 and four from Year 3. Lease income is billed monthly and is not counted in the room-hour bookings.
- Contributed income in Year 1 is $65,000 from arts council and public grants in two installments, $150,000 from foundations in three, and $45,000 from individuals and businesses, with 46% of the giving arriving in October to December. Every foundation and arts award renews in full each year of the forecast; the funder-loss test in the sections above shows what happens if one does not. Gifts are built from donor counts in the fundraising section.
- Payroll adds 27% to wages for payroll taxes, health cover, Paid Leave Oregon contributions, workers' compensation and a retirement match, and 15% for part-time posts. The 15% is a planning figure for employer payroll taxes, Paid Leave Oregon contributions and workers' compensation with no health cover, and a payroll provider would confirm it. The three front desk attendants each work 19 hours a week for $19,000, or $19.23 an hour, against a Portland-metro minimum of $16.80 from July 1, 2026. Wages in the staff table are launch rates and 3% pay raises are charged as a separate line from Year 2.
- Rent is $112,800 in Year 1 for 5,000 square feet, about $22.56 a square foot a year all in, with 3% steps under a fifteen-year lease and three months of free rent while the build-out is done. Utilities are $34,800 for power-hungry rooms, cooling and ventilation.
- The build-out is $320,000, about $64 a square foot across the unit and about $153 a square foot of the 2,090 square feet of isolated rooms. It is a planning figure; an acoustic designer and a fixed-price contractor bid confirm it before the lease is signed, and the risk is upward.
- Insurance includes $2,000 a year for abuse-and-molestation cover for the youth program. The Year 1 program line of $7,500 includes about $1,500 for background checks on staff and volunteers who work with minors.
- Equipment repair and replacement is a budget line from Year 2, rising from $14,000 to $28,000. No replacement reserve is funded. The five-year items (backline, computers and front desk kit) reach the end of their depreciation lives in 2032, after the forecast ends.
- Card and booking-platform fees and session supplies run at about 1.6% of revenue. Only invoiced work, about a third of earned income (band accounts, sponsors and school workshops), is billed on 15-day terms. Card bookings and dues are paid at booking and grants arrive on receipt, so receivables are modeled at 5 days of total revenue. Suppliers are paid in 15 days.
- No income tax is charged. That holds only if the IRS recognizes the exemption and the income is related to the exempt purpose; any slice found to be unrelated would be taxed.
Income by source
| Revenue stream | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Rehearsal room hours (sliding scale) | $89,971 | $142,132 | $157,415 | $170,245 | $178,692 |
| Studio A and B session hours (sliding scale) | $63,064 | $131,985 | $151,050 | $164,916 | $176,274 |
| Membership dues (sliding scale) | $41,328 | $77,028 | $91,865 | $98,922 | $106,320 |
| Workshops, lockers, backline and teaching-room leases | $31,062 | $45,540 | $59,462 | $64,226 | $68,013 |
| Arts council and public grants (mostly restricted) | $65,000 | $90,000 | $105,000 | $108,000 | $112,000 |
| Foundation grants (restricted and operating) | $150,000 | $150,000 | $175,000 | $188,000 | $196,000 |
| Individual and business giving (without restrictions) | $45,000 | $62,000 | $85,000 | $98,000 | $110,000 |
| Total revenue | $485,425 | $698,685 | $824,792 | $892,309 | $947,299 |
| Growth on prior year | – | 44% | 18% | 8% | 6% |
Earned income is 46% of 2027 revenue and between 56% and 57% in every year after, so contributed income falls from 54% of revenue in Year 1 to between 43% and 44% from Year 2. Rehearsal is the largest earned line in every year; session hours close the gap and almost match it by Year 5. Foundation grants are the largest single line in Year 1 at $150,000 (31%) and stay flat in Year 2 while the rooms fill. Dues are the smallest of the three main earned lines, but they decide who is allowed to book. Teaching-room leases add $25,000 to $27,000 a year from Year 3 from daytime hours that rehearsal bookings leave empty.
Month by month in 2027
| Month | Rehearsal room hours (sliding scale) | Studio A and B session hours (sliding scale) | Membership dues (sliding scale) | Workshops, lockers, backline and teaching-room leases | Arts council and public grants (mostly restricted) | Foundation grants (restricted and operating) | Individual and business giving (without restrictions) | Total revenue | EBITDA |
|---|---|---|---|---|---|---|---|---|---|
| Jan 2027 | $2,773 | $919 | $1,148 | $672 | $0 | $0 | $2,700 | $8,212 | ($39,252) |
| Feb 2027 | $3,643 | $1,529 | $1,640 | $672 | $0 | $55,000 | $2,250 | $64,734 | $16,336 |
| Mar 2027 | $5,293 | $2,419 | $2,132 | $728 | $31,000 | $0 | $2,700 | $44,272 | ($3,788) |
| Apr 2027 | $5,976 | $3,160 | $2,624 | $1,942 | $0 | $0 | $2,700 | $16,402 | ($31,198) |
| May 2027 | $6,824 | $4,112 | $3,034 | $2,942 | $0 | $50,000 | $2,700 | $69,612 | $21,134 |
| Jun 2027 | $6,915 | $4,558 | $3,362 | $2,998 | $0 | $0 | $2,700 | $20,533 | ($27,135) |
| Jul 2027 | $7,284 | $5,224 | $3,690 | $2,494 | $0 | $0 | $2,700 | $21,392 | ($26,290) |
| Aug 2027 | $7,820 | $6,119 | $4,018 | $2,550 | $0 | $45,000 | $2,700 | $68,207 | $19,752 |
| Sep 2027 | $9,635 | $7,619 | $4,395 | $4,114 | $34,000 | $0 | $3,150 | $62,913 | $14,545 |
| Oct 2027 | $11,433 | $9,046 | $4,756 | $4,114 | $0 | $0 | $4,500 | $33,849 | ($14,039) |
| Nov 2027 | $11,940 | $9,398 | $5,117 | $4,170 | $0 | $0 | $6,300 | $36,925 | ($11,014) |
| Dec 2027 | $10,435 | $8,961 | $5,412 | $3,666 | $0 | $0 | $9,900 | $38,374 | ($9,588) |
January brings in $8,212 because no installment has landed yet. EBITDA is positive in four months, February, May, August and September, the months a foundation or arts council installment arrives. March also carries an installment but stays slightly negative. In rehearsal income the summer factor flattens growth between June and August rather than reversing it, and November is the strongest month at $11,940. The lowest month-end balance of 2027 falls at the year end (Dec), at about $141,000 once receivables are counted.
Staff plan
| Role | Annual wage | Starts | Year 1 end | Year 2 end | Year 3 end | Year 4 end | Year 5 end |
|---|---|---|---|---|---|---|---|
| Executive Director | $70,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Studio manager and chief engineer | $60,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Front desk attendant A (part time) | $19,000 | Month 1 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Front desk attendant B (part time) | $19,000 | Month 1 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Front desk attendant C (part time) | $19,000 | Month 1 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Bookkeeper (part time) | $24,000 | Month 3 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Development and membership coordinator | $52,000 | Month 4 | 1 | 1 | 1 | 1 | 1 |
| Staff engineer | $50,000 | Month 9 | 1 | 1 | 1 | 1 | 1 |
| Education and outreach coordinator (part time) | $36,000 | Month 13 | – | 0.5 | 0.5 | 0.5 | 0.5 |
| Total payroll incl. on-costs | $324,347 | $429,190 | $429,190 | $429,190 | $429,190 |
Imani and Luis are on payroll from January 1, 2027 (and from October 1, 2026 in the pre-opening budget), with three part-time attendants who cover the staffed evening and weekend desk. The bookkeeper starts in month 3 and the development and membership coordinator in month 4, before the first big appeal. The staff engineer joins in month 9, when Studio A bookings reach about 20 hours a week and, with setup and teardown, use up the 24 hours of engineering the studio manager can spare. The part-time education coordinator starts in month 13, paid from the arts council grant. No further hire is planned in the forecast. Part-time posts count as half a person in the year-end columns; each attendant works 19 hours a week, or 0.48 of a full-time post, so the count is close. At year end the studio has 6 full-time equivalents in Year 1 and 6.5 from Year 2. Imani's salary is already inside the costs, so the surplus and deficit rows are what remains after she is paid.
Income and expenses over five years
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $485,425 | $698,685 | $824,792 | $892,309 | $947,299 |
| Direct costs (card and booking-platform fees, session supplies) | ($8,015) | ($11,536) | ($13,618) | ($14,733) | ($15,640) |
| Gross profit | $477,410 | $687,149 | $811,174 | $877,576 | $931,659 |
| Payroll incl. on-costs | ($324,347) | ($429,190) | ($429,190) | ($429,190) | ($429,190) |
| Rent | ($112,800) | ($116,200) | ($119,700) | ($123,300) | ($127,000) |
| Utilities | ($34,800) | ($35,800) | ($36,900) | ($38,000) | ($39,100) |
| Marketing | ($21,000) | ($18,000) | ($18,500) | ($19,000) | ($19,500) |
| Insurance | ($17,500) | ($18,500) | ($19,500) | ($20,400) | ($21,200) |
| Professional fees | ($9,000) | ($17,000) | ($18,500) | ($19,500) | ($20,500) |
| Software subscriptions | ($11,000) | ($12,500) | ($13,500) | ($14,000) | ($14,500) |
| Cleaning, repairs, cables, drum heads and strings | ($17,000) | ($20,000) | ($22,000) | ($23,500) | ($25,000) |
| Equipment repair and replacement | $0 | ($14,000) | ($20,000) | ($24,000) | ($28,000) |
| Workshop instructors and youth-program materials | ($7,500) | ($14,000) | ($16,000) | ($17,000) | ($18,000) |
| Volunteer program, hearing protection and safety training | ($5,000) | ($5,500) | ($6,000) | ($6,000) | ($6,500) |
| Phones, internet, office supplies and bank fees | ($6,000) | ($6,300) | ($6,600) | ($6,900) | ($7,200) |
| Allowance for unpaid session invoices | ($2,000) | ($3,000) | ($3,500) | ($3,800) | ($4,000) |
| Annual pay raises (3% a year) | $0 | ($12,876) | ($26,138) | ($39,798) | ($53,867) |
| EBITDA | ($90,536) | ($35,717) | $55,146 | $93,188 | $118,102 |
| Depreciation | ($45,276) | ($45,276) | ($45,276) | ($45,276) | ($45,276) |
| Interest | ($4,500) | ($4,335) | ($3,959) | ($3,553) | ($3,115) |
| Income tax | $0 | $0 | $0 | $0 | $0 |
| Net income before start-up costs | ($140,312) | ($85,328) | $5,911 | $44,360 | $69,710 |
| Start-up costs expensed at opening (legal, filings, launch marketing) | ($77,000) | $0 | $0 | $0 | $0 |
| Net income after start-up costs | ($217,312) | ($85,328) | $5,911 | $44,360 | $69,710 |
Year 1 ends with a deficit of $140,312 before start-up costs and $217,312 after them. EBITDA improves from ($90,536) to ($35,717) in Year 2 and turns positive in Year 3 at $55,146. It reaches $93,188 in Year 4 and $118,102 in Year 5, as the payroll line stays flat after Year 2 while the pay-rise line grows to $53,867. After depreciation of $45,276 a year, the change in net assets is a surplus of $5,911 in Year 3, $44,360 in Year 4 and $69,710 in Year 5. Year 3 is thin: a revenue miss of about 1% would erase it. No replacement reserve is funded: depreciation is not being saved, and the first large replacements fall in 2032.
Cash movements
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Cash from operations | ($178,357) | ($42,829) | $49,546 | $88,757 | $114,270 |
| Build-out and equipment | ($466,000) | $0 | $0 | $0 | $0 |
| Funding received | $785,500 | $0 | $0 | $0 | $0 |
| Loan principal repaid | $0 | ($4,852) | ($5,229) | ($5,635) | ($6,073) |
| Owner distributions | $0 | $0 | $0 | $0 | $0 |
| Net change in cash | $141,143 | ($47,681) | $44,316 | $83,121 | $108,198 |
| Closing cash | $141,143 | $93,462 | $137,779 | $220,900 | $329,098 |
Closing cash is $141,143 after Year 1 and $93,462 after Year 2, the lowest year-end balance, which covers about 46 days of that year's costs. It rises to $329,098 by Year 5. Principal repayments of $4,852 begin in Year 2 once the interest-only year ends. No distributions are paid or planned, because a 501(c)(3) cannot pay out its surplus to owners. The board intends to designate part of the Year 4 and Year 5 cash to a replacement reserve for the 2032 items and may use some to prepay the loan.
Balance sheet and net assets
| At year end | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Cash | $141,143 | $93,462 | $137,779 | $220,900 | $329,098 |
| Accounts receivable | $6,650 | $9,571 | $11,299 | $12,223 | $12,977 |
| Build-out and equipment (net) | $420,724 | $375,448 | $330,171 | $284,895 | $239,619 |
| Total assets | $568,517 | $478,481 | $479,248 | $518,019 | $581,693 |
| Accounts payable | $329 | $474 | $560 | $605 | $643 |
| Community lender loan | $60,000 | $55,148 | $49,918 | $44,283 | $38,211 |
| Paid-in capital | $725,500 | $725,500 | $725,500 | $725,500 | $725,500 |
| Retained earnings | ($217,312) | ($302,641) | ($296,729) | ($252,370) | ($182,660) |
| Total liabilities and equity | $568,517 | $478,481 | $479,248 | $518,019 | $581,693 |
Earned-income cover and break-even
| Measure | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| EBITDA margin | -18.6% | -5.1% | 6.7% | 10.4% | 12.5% |
| Net margin (before start-up costs) | -28.9% | -12.2% | 0.7% | 5.0% | 7.4% |
| Payroll incl. pay raises as share of revenue | 67% | 63% | 55% | 53% | 51% |
| Revenue per full-time equivalent at year end | $80,904 | $107,490 | $126,891 | $137,278 | $145,738 |
| Average monthly revenue | $40,452 | $58,224 | $68,733 | $74,359 | $78,942 |
| Monthly revenue needed to cover operating costs | $48,123 | $61,250 | $64,060 | $66,463 | $68,935 |
| Debt service cover (EBITDA / interest + principal) | -20.1x | -3.9x | 6.0x | 10.1x | 12.9x |
Average monthly revenue falls short of the figure needed to cover operating costs in Years 1 and 2 ($40,452 against $48,123, then $58,224 against $61,250). From Year 3 it clears it, by $4,673 a month that year. Earned income pays for 39% of Year 1 costs, 60% in Year 3 and 64% in Year 5, so the studio still depends on contributed money for about 40 cents of each dollar it spends in Year 3. Debt service cover is 6.0x in Year 3, 10.1x in Year 4 and 12.9x in Year 5, which reflects the small loan.
Earned income 20% short
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $440,340 | $619,348 | $732,834 | $792,647 | $841,439 |
| Net income before start-up costs | ($143,765) | ($91,820) | ($29,383) | $5,094 | $27,961 |
| Net income after start-up costs | ($220,765) | ($91,820) | ($29,383) | $5,094 | $27,961 |
| Closing cash | $138,243 | $84,502 | $93,679 | $137,630 | $204,155 |
This case cuts rooms, sessions, dues, workshop and lease income by 20% in every year and leaves grants and giving at their base figures. The response: the bookkeeper starts two months later, the education coordinator starts six months later, marketing is cut by 20%, Imani takes a 20% pay cut, desk hours are cut by a fifth in line with bookings, repair spend is halved, cleaning and workshop costs fall with attendance and utilities drop 5% as the building opens shorter hours. On those terms cash stays positive in every year, at no less than $84,502, which is the Year 2 low. Net assets end Year 1 at $504,735. The change in net assets is negative through Year 3 and positive from Year 4. Closing cash is lower than in the base case in every year. The cuts hold the studio, and the team would be stretched.
A separate test removes the $55,000 foundation award from Year 2 onward, with no management response. Closing cash falls to $40,086 in Year 2 and $30,311 in Year 3, which is positive but under the 45-day floor, and recovers to $113,446 by Year 5. A funder loss of that size would need a replacement grant or cuts by the end of Year 2.
Sources
- Internal Revenue Service, Exemption requirements: 501(c)(3) organizations.
- Internal Revenue Service, Unrelated business income tax (Form 990-T filing threshold of $1,000 gross unrelated income).
- Oregon Bureau of Labor and Industries, Minimum wage (Portland metro rate of $16.80 from July 1, 2026 to June 30, 2027).
- Oregon Department of Justice, Charitable Activities Section (registration and annual reports for charities).
- Oregon Cultural Trust, Cultural tax credit.
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