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How to Start an Art Gallery

How to Start an Art Gallery

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How to Start an Art Gallery

How To Start An Art Gallery

So, you’ve got a passion for art and a keen eye for what looks good on a wall – what’s next? While having the artistic skill set is undoubtedly a great starting point, opening an art gallery is more than just about curating beautiful pieces. It involves a mix of business know-how, strong relationships with artists, and the ability to sell. Not just art, but also an experience.

This guide is here to help by providing an overview of the business, steps to get your studio up and running, and answers to questions.

Business Overview

An art gallery is a retail business that sells fine art, including paintings, sculpture, photography, prints, and other artwork. Galleries typically represent a range of artists and aim to build a reputation for a particular style or niche. Besides sales, galleries often provide other services like framing, restoration, appraisals, and art rentals. Galleries may also offer classes, workshops, or demonstrations.

Industry Summary

The US art dealer industry generated $12.5 billion in annual sales in 2022, and has increased over the past five years. Galleries range from small businesses to large companies with multiple global locations. Barriers to entry include the need for capital, expertise, and reputation. Keys to success include relationships with artists and collectors, business savvy, marketing ability, and knowledge of trends.

While it may seem upscale and reserved for the elite, the rise of online platforms has democratized art buying, making it more accessible to a broader audience. This shift means new opportunities, even for small gallery owners who can now reach global markets.

Step 1: Market Research

Before starting an art gallery, it’s essential to have a good understanding of the industry. Researching the industry can help you know the current trends, pricing, and demand for art pieces. You can reach out to successful gallery owners, attend art events, and follow art blogs to gain valuable knowledge.

Here’s where you start asking the big questions. Is there a genuine demand for an art gallery in your area? If so, what kind of art is in demand? You can gather this information through surveys, observing buyer behavior in existing galleries, or even by talking to local artists.

Don’t underestimate the importance of this stage. Even if you’re convinced that your idea will be a hit, you should get data to back it up before spending a lot of time and money. The art world might seem like it’s all about instinct and inspiration, but succeeding in the gallery business also requires analytical skills.

It’s also important to understand who your competitors are and what they offer. Look at both direct competitors (other galleries) and indirect competitors (online platforms, art fairs). Consider their strengths and weaknesses, and think about how you can differentiate your gallery.

Step 2: Create a Business Plan

You’ve done your market research and feel confident that there’s demand for your art gallery business. The next step? Crafting a business plan. This isn’t just a formality to get funding from the bank; it serves as a reality check. A business plan requires you to put your dreams on paper and translate them into actionable steps. It helps you think through every aspect of your business, from your mission statement to your financial projections. Speaking of finances, one benefit of creating a business plan is that it forces you to project your income and expenses. This exercise alone can tell you whether your business idea is feasible or just a pipe dream.

There are a few sections that are especially important in the business plan when seeking funding. These include:

Market Analysis

This section is your opportunity to demonstrate why your art gallery will succeed. It should include an examination of the current art market, a competitive analysis, and evidence of demand for your gallery. Lenders want assurance that there’s a market for your business and that you understand it well.

Management Team

The people behind the business are often a determining factor in its success. Lenders pay close attention to the management team section, which includes the owners and key personnel. Their background, experience, and competencies can be indicators of the business’s likelihood of success. Essentially, lenders want to know if you and your team are capable of running a successful art gallery.

Location

For an art gallery, location can significantly impact success. In this section, describe the proposed location for your gallery, explaining why it’s ideal. Consider factors like foot traffic, proximity to other cultural institutions, and accessibility. Lenders want to know that you’ve carefully considered where to set up shop.

Financial Projections

Banks will zero in on this section. It’s not enough to just provide projections; you must be ready to explain how you arrived at those numbers. Whether it’s your expected revenue, break-even point, or operational costs, every number must be well thought out. Before presenting your plan, it’s advisable to have an accountant or experienced business owner review this section. They can help identify any unrealistic assumptions or gaps in your planning.

Related: How to write a business plan

Step 3: Secure Funding

You’ve validated your market, written a solid business plan, and now you stand at what can be the most challenging juncture: securing funding. Understanding your options is key to overcoming this hurdle, as each source of funding comes with its own set of criteria, benefits, and drawbacks.

Personal savings: The first place for funding is the entrepreneur’s own bank account. Starting an art gallery can get expensive, so outside funding may also be needed.

Traditional lenders: After personal savings, banks and credit unions are the next most common source of funding. Lenders generally expect you to put down between 15% and 25% of your personal funds toward the total project cost. Plus, they’ll want to see a good credit score and sufficient collateral. If lenders feel your business plan is too risky, they might still agree to fund you under an SBA (Small Business Administration) loan guarantee. This provides the bank some security, knowing that the SBA backs a portion of the loan.

Friends and family: Tapping into your personal network is another option. It may feel informal, but if you go this route, it’s critical to put all agreements in writing. Clearly outline the terms, whether the money is a gift, a loan, or an investment. Written agreements prevent misunderstandings and protect relationships.

Microloans: If your credit history is a barrier or if you need a smaller loan amount, consider a microloan. These are smaller loans, often less than $50,000, offered by local economic development organizations. Some also offer business training in addition to funding, which can be beneficial for new business owners.

Investors: For some art galleries, seeking private investors is a viable option. These are individuals who believe in your business idea and are willing to invest their money in exchange for a share of the business. It’s a way to secure a significant amount of money without taking on debt, but it does mean giving up some ownership of your business.

Related: Finding the money to start a business

Once your funding is secure and your gallery is officially registered, the next exciting step is acquiring and setting up your gallery. This is where your vision starts to take shape, from an empty space to a vibrant gallery.

First, you’ll need to acquire the physical space for your gallery. This is often a long process that involves negotiating leases or even buying property. Your choice of location, as outlined in your business plan, will come into play here.

Next, focus on designing the interior. This isn’t just about aesthetics; the layout should facilitate a smooth flow of foot traffic while highlighting the art in the best possible light. You may want to consult with an interior designer who specializes in galleries. You’ll also need to start installing proper lighting, setting up security measures, and ensuring climate control.

Step 5: Register the Business

Starting your own art gallery involves not only passion and drive but also a clear understanding of the legal requirements involved. While specific requirements can vary from state to state, here’s an overview of what is needed.

Choose a business structure: Your first decision is to determine the type of business structure that suits your gallery. The four most common structures are:

  1. Sole proprietorship: Simple to start and inexpensive, but comes with unlimited personal liability.
  2. General partnership: Similar to sole proprietorships but involves two or more people. Again, personal liability is a concern.
  3. Corporation: Offers the owner’s liability protection but is more complex and costly to set up and maintain.
  4. Limited Liability Company (LLC): A blend of corporation and sole proprietorship/partnership features, offering liability protection without as many corporate formalities.

Each has its advantages and disadvantages. For instance, a sole proprietorship is the easiest to start and has the lowest costs, while an LLC or a corporation provides liability protection, which means your personal assets are protected if your business is sued.

Related: Comparison of business structures

Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.


Some popular LLC formation services include:


IncFile - $0 plus state fees & free registered agent for 1 year!

ZenBusiness - Best for beginners. $0 plus state fees & free registered agent for 1 year!

Northwest - Best privacy protection. $39 plus state fees & free registered agent for 1 year!

Business name registration: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process.

During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.

Related: Finding a domain name for your business

Obtain business licenses and permits: Almost all businesses need a few licenses or registrations to operate legally. A few common ones for an art studio will likely include a state or local business license, sales tax permit, Employer Identification Number (EIN). There may be local ordinances or licenses, such as a Certificate of Occupancy, that may be required since you’ll be operating a public space.

Related: What licenses do art galleries need?

Step 6: Build Relationships with Artists and Vendors

One of the cornerstones of a successful gallery is the quality and uniqueness of the art you display. To build an impressive inventory, establish strong relationships with artists. Research and identify those whose work resonates with your gallery’s mission. Start with your personal network, but also look for talent at art events, shows, and open studios to meet artists and understand their work firsthand.

Step 7: Hire Staff

When it comes to running an art gallery, hiring the right team can make a significant difference. The team could include roles like gallery assistants, curators, sales and marketing personnel, and even art handlers. Each role contributes to the smooth operation of the gallery and enhances the visitor experience.

Before you start the hiring process, there are several legal requirements to consider as a new employer:

  1. Obtaining an EIN: An Employer Identification Number (EIN) is a unique number assigned by the IRS to businesses for tax purposes. You’ll need an EIN to report taxes and other documents to the IRS, and to record your employees’ information.
  2. Employment eligibility: As an employer, you’re required to verify an employee’s eligibility to work in the U.S. This typically involves completing an I-9 form for each employee and checking appropriate identification.
  3. State reporting: Each state has different requirements for reporting new hires, so it’s essential to familiarize yourself with your state’s specific guidelines.
  4. Worker’s compensation: Most states require businesses to have workers’ compensation insurance. This coverage provides benefits to employees who suffer work-related injuries or illnesses.
  5. Labor laws: You’ll also need to comply with federal and state labor laws, which govern aspects like minimum wage, overtime, recordkeeping, and youth employment.

Step 8: Prepare to Open!

As you approach the finish line for launching your art gallery, there are several remaining steps to take care of. Everyone will have different needs, but here are some of the most common:

Business insurance: Don’t overlook the importance of insurance. This could include general liability insurance, fine arts insurance, and property insurance.

Bookkeeping setup: Accurate record keeping is essential for managing finances and meeting tax obligations. You might choose to hire a bookkeeper or use a software solution like Wave Accounting (FREE) or Quickbooks.

Contracts: Having clear contracts can prevent misunderstandings and protect your business. You might need artist agreements or consignment contracts. RocketLawyer and Law Depot have free and inexpensive templates that may be helpful.

Business bank account: Keep your personal and business finances separate by opening a dedicated bank account for your gallery.

Industry-Specific Software: Consider adopting management or point-of-sale software such as ArtBase, ArtBinder, or Artlogic to streamline operations.

Credit card payments: Make it convenient for customers to make purchases by setting up a credit card payment system. Services like Square or Stripe can make this process easier.

Marketing strategy: It’s not just about opening the doors but also getting people through them. Develop a robust marketing plan that includes a logo, website, social media presence, and perhaps collaborations with local artists for events.

Industry associations: Associations like the Art Dealers Association of America (ADAA), National Art Education Association (NAEA), or the International Association of Art (IAA) can offer valuable networking and professional development opportunities.

Grand opening: Plan a memorable grand opening event that showcases your unique collection and creates buzz in the art community. This might involve special promotions, artist appearances, or live demonstrations.

Greg’s Tip: Starting an art gallery can be expensive. From rent and insurance to marketing and inventory, costs can quickly add up. It’s important to have a clear business plan with a detailed budget.

Greg's Business Tip

Common Questions When Starting An Art Studio

How much does it cost to start an art studio?

Starting an art gallery is a substantial investment. While costs can vary depending on location, scale, and the type of art you plan to sell, it’s not uncommon for initial startup costs to be in the range of $35,000 to $150,000.

Location: One of the major expenses involved in starting an art gallery is the location. Renting gallery space in cities like San Francisco or Los Angeles could range from tens of thousands to hundreds of thousands of dollars. Look for spaces with good lighting, high ceilings, and room to install display walls and partitions.

Renovations: Expect to invest $5,000 to $30,000 on renovations like lighting, display fixtures, walls, flooring, and improving accessibility.

Inventory: Even though some art will be sold on consignment, you will likely purchase items to sell as well. Plan on an initial investment of $10,000 to $50,000 on artwork inventory.

Furnishings: Desks, office equipment, furniture, and supplies will likely cost $5,000 to $10,000.

Marketing: Budget $3,000 to $5,000 for initial branding and advertising like website, signs, stationery, and printed materials.

Insurance – General liability insurance and product insurance will likely cost around $2,000 to $7,000 annually.

Legal/professional fees: Allocate $1,000 to $2,000 for help with contracts, licensing, permits, and business registration fees.

Other costs: Miscellaneous expenses like installation tools, office supplies, technology, security, and an opening event budget will likely total $5,000 to $10,000.

In addition to these costs, it’s also a good idea to budget for 3-6 months of operating expenses as a buffer while you establish the gallery.

How profitable is an art studio?

Art galleries typically earn commission-based revenue from art sales. A common commission structure is 50% of the retail price of each artwork sold. For example, if an art gallery sells 100 pieces each month at an average retail price of $400 each, that would generate $40,000 in total revenue. With a 50% commission rate, the gallery would earn $20,000 in commissions.

Gallery expenses, including rent, staff, marketing, insurance, and other operating costs, can range from 40-60% of total revenue, or $8,000 – $12,000 based on the $20,000 revenue figure above. Subtracting the midpoint of $10,000 in expenses from the $20,000 commission revenue would result in $10,000 in profit.

What skills are helpful in running an art studio?

Running an art studio requires a blend of artistic, business, and interpersonal skills. Here are some of the most important skills that can contribute to the success of an art studio:

Artistic skills: This includes a deep understanding of art, creativity, and the ability to appreciate different forms and styles of art. You should also be able to guide and mentor artists working in your studio.

Business acumen: Running an art studio is like running a small business. You need skills in budgeting, marketing, sales, strategic planning, and financial management.

Communication skills: Whether it’s dealing with artists, clients, or suppliers, effective communication is key. You should be able to clearly convey your ideas and negotiate deals.

Networking skills: Building relationships with artists, buyers, and other stakeholders in the art community is crucial. The ability to network effectively can open up opportunities for collaborations, exhibitions, and sales.

Leadership skills: As the owner of the studio, you need to provide direction, motivate your team, and make important decisions.

Organizational skills: Managing an art studio involves juggling multiple tasks, from organizing exhibitions to maintaining inventory, so strong organizational skills are essential.

Customer service skills: Excellent customer service can help attract and retain clients. This involves listening to customer needs, resolving issues promptly, and ensuring a positive experience for all visitors.

Knowledge of art market trends: Understanding current trends in the art world can help you make informed decisions about what kind of art to produce or exhibit in your studio.

If you don’t have all of these skills, don’t worry. These skills can be developed over time through education, experience, and continuous learning.

What is the NAICS code for an art studio?

The NAICS code for an art studio is 711510, which is classified as Independent Artists, Writers, and Performers.

The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.

Related: What is a NAICS code and how to find yours

How to Start an Art Gallery

How to Start an Art Gallery

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