Everyone in theatre knows you can't put a price on art - but it's difficult for companies to survive on a shoestring, writes Peter Crawley

Last month the playwright Deirdre Kinahan submitted a new script to Tall Tales, the theatre company she founded eight years ago and for which she has served as part-time artistic director ever since. A high comedy entitled Limited Edition, it features a visual artist in his late thirties who discovers that the demands of a new baby relegate his artistic life to second place. "The whole play is about this artistic conundrum," Kinahan explains. "It's looking at serious issues around the nature of work and how people are defined by their work.

It's looking at artists and how art is valued." She pauses. "Or is it valued?" she asks. "Is it even considered a real profession?" These questions could easily be put to Kinahan herself. With her charming new lunchtime play Melody opening tomorrow in the Temple Bar Information Centre, her company set to present the Irish premiere of Bryony Lavery's brilliant, far less charming play, Frozen later in the year, and after nearly a decade of writing and acting with the company, Kinahan has yet to draw a salary as its director.

Riding the success of last year's gripping production of Topdog/Underdog at the Dublin Fringe Festival, a play by Suzan Lori Parks that initiated the company's Women Writing Worldwide series of productions and workshops, Tall Tales saw their arts council funding more than double - from €30,000 to €65,000. That's no small beer. But while it allows them to continue to pay equity rates to their actors and writers - which is how the multi-tasking Kinahan says she can make a living - and contributes to their production costs (for just one of their productions admittedly) at the end of the day there's still no pay cheque for the executive.

"That may sound bizarre and self-sacrificing," says Kinahan, "but seven years ago I made a decision that I was going to work in the arts and I knew I was never going to be able to make large amounts of money." This kind of pragmatism and a near resolution toward penury pervades small theatre companies - even those as critically successful as Tall Tales. Three short years ago, for instance, the debut production by The Performance Corporation enjoyed unanimous praise, generous audiences, four revivals, several Fringe and ESB/Irish Times Theatre Awards. It netted its creators €100 each through profit sharing. Now on their sixth production, and in receipt of state funding, Performance Corporation can afford to pay their performers but, alas, still not themselves. "We're on the ladder," Tom Swift recently remarked of their first year of funding. But as any company will tell you, the ladder has many rungs.

Take Catastrophe. Not long after the theatre company had chosen the name that would haunt them forever, the Galway-based group found themselves on tour in Leitrim. Faced with an audience of two people and staring down a 70/30 box-office split with the venue for that night's takings (€24), director Paul Hayes must have wondered if it was worth the effort. And though the company have steadily built up an audience in the four years since, now touring to regional arts festivals under guarantee, Hayes admits that "the days of being 25 and making 200 quid for five weeks' work are kind of running out". So why does he do it? "For the love of it, I suppose. I can never see myself not being involved in theatre at a very core level. What I've always had and definitely developed is a pleasure in seeing a good show go on. Anything after that is a bonus. I don't see it as an actual way of living and surviving . . . But I don't know what you'd be doing if you weren't doing it."

You hear this time and again with small theatre companies, most of whom are young, none of whom are naïve, and all of whom are passionate about their work. Two weeks after their debut production of Hedwig and the Angry Inch in June, actor Joe Roch and director Megan Riordan, both American theatre graduates, realised that their Making Strange Theatre Company may last longer than the first show it was created to serve. So now what? Invited to revive the show for one night in the Spiegeltent at this year's Fringe festival, they tried to formulate a mission statement for their work to come, as Roch puts it, to find "the stories that we don't see being told and the new ways in which we can tell those stories".

Kate McLaughlin's SlaughterHouse Theatre Company, presenting the third of its avant-avant-garde productions at this year's Fringe (EXIT 3. Black on White), has already tapped into such new ways, aiming for "a holistic theatre experience" that utilises "the actor's expressive capacity, physically and vocally, and entering their inner landscape". As you can tell, they are recent theatre graduates. Yet McLaughlin suffers no illusions about the demands of her profession. "At this stage we have enough energy that we can do three jobs, if we need to, to fund the work," she says. "But it does worry me that I will never make a proper living out of it."

It's often said a theatre company never has as much urgency or vibrancy as in the creative storms of its beginnings; a time when everything seems possible, everybody works for free, and there is simply nothing to lose. An explosion of artistic risk-taking leads to critical success; success leads to arts council funding; funding leads to accounting, bureaucratic and administrative requirements. These monopolise time and resources; you take fewer risks; you now have plenty to lose.

In their first year, with no funding, Tall Tales staged four productions, one of which was the Irish premiere of Edward Albee's  . This year, as a funded body, they are lucky to stage two. "One thing that has never changed is this desire to produce," reflects Kinahan. "When you're starting off, you're operating on a wing and a prayer. You're not in a position to pay people. You're all on profit share and it's a marvellous, frenetic, fabulously creative rush to be in. But I don't think you can keep that kind of pace of productivity going because you run into a stage where there are only so many favours that you can call in. You can only ask somebody to print up your flyers for nothing three or four times in a row.

"Once you get organised, once the funding comes in and you move into a situation where you're paying fees, then you start marching in the mile of PRSI returns, Vat receipts, company registration - all of that world which you never imagined yourself plodding through. You just wanted to be an artist. Of course the administration becomes a necessity to this, but that does help in terms of forming your plans over the next couple of years. There's some surety in knowing where you want to go."

Small companies rarely think small, and Tall Tales are no exception. "We have ambitions far beyond our station," says company manager Eileen Sheridan, now well versed in the art of procuring performing rights from international agents, tracking down affordable rehearsal spaces and tailoring productions to suit non-theatrical venues. "I feel that we have to be inventive about where we put things on," she explains. "You have to expand the boundaries a bit."

With Melody in the Temple Bar Information Centre (as part of the Diversions Festival), "the audience are going to be able to look in and see art being performed in a shop window". This is about as commercial as Tall Tales get. Even with full houses, Sheridan sees Melody as a loss leader with potential to be performed again in subsequent festivals. Otherwise, she agrees that it pays to be frugal. "It is not true to say the reason I wanted to do Frozen is that it has three characters in it and I thought at the time there was no set," she laughs, before adding with a shrug, "but it helps".

Kinahan also realises that her that economic factors must inhibit her muse. "Predominantly, the plays I've written are for Tall Tales so I'm obviously hugely aware of our budgetary constraints. I would often find myself in a position where I'm wondering can I afford that fourth character, or is there some other way I can work through this notion just using the characters that I have?"

Is it frustrating to work within such strict parameters? "It's frustrating in one sense, absolutely. And then in another way it makes you quite imaginative within your writing. If I find myself constricted, I'll find other ways around it. I have floundered, but I've never been beaten. You just have to be resourceful and find different ways to make things happen. It's the type of industry in which you need a dogged determination and self-belief really," she concludes, then laughs. "And you know, we really enjoy it."

• Melody opens today at the Temple Bar Information Centre, performances at 1pm, until Aug 20. Handel's Courtyard, Aug 21 and The Lab on Foley Street, Aug 22-27