Contra Pay Variability

February 26th, 2014
contra, money
Attendance at dances fluctuates for all sorts of reasons, which means there's a lot of variability in how much money comes in. Dances usually handle this variability somewhere between two extremes:
  • fixed price: the performers (band and caller) are promised a fixed amount. When attendance is high the dance keeps the surplus and saves it to cover the shortfall with future dances with lower attendance.
  • percentage: the performers are promised a fraction of the revenue before any expenses.
Offering a fixed price insulates performers from factors outside of their control like bad weather, scheduling, or just whether people happen to come. When the dance can absorb risk by spreading it across many nights that seems pretty valuable. On the other hand, there are bands that consistently bring in more dancers, and changes in attendance based on the band are not something you want to insulate bands from.

The model I like best is a hybrid of the "fixed price" and "percentage" approaches. Guarantee the performers a fixed amount and if there's money left over after paying guarantees and fixed expenses give them most of it. A good place to set the guarantee is one where you lose money maybe one in five dances, and then make sure the organization keeps a large enough share of profits that the books balance.

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