Why churches need business plans.
It’s common for pastors to spend money freely and later justify it as a “ministry” expense. Yet in business, casual or careless expenditures are not tolerated.
Say that a church provides free coffee to people on Sunday mornings, and next to the coffee pot is a jar with a sign that reads, “Donations Appreciated.” While unspoken, what that sign really says is, Do you know how much it costs to have hot coffee ready and waiting for you each week? Come on. Don’t make us charge you for this service. Help us out by making a donation!
Let’s assume the cost to provide coffee is $100 a week, but just $45 a week is collected through the donation jar. The church would be losing $55 each week, which is $3,000 a year. That’s money otherwise given by church members to further the kingdom, “as unto the Lord.”
How many times and in what other areas of a church does something similar play out? The financial losses add up exponentially. Yet pastors don’t seem to mind. We’ll tell the finance committee that needs justify expenses, and explain away losses simply as the “cost of doing ministry.”
BUSINESS VS. MINISTRY
In business, however, when a company spends money on giveaways, it’s considered part of its customer acquisition cost, which is the cost incurred by an organization while convincing a customer to buy a service or a product. Similarly pastors might see a value in providing free coffee, hoping that through hospitality the church can attract new members and retain those who are already part of it.
While there is nothing wrong with such thinking, we should recognize there’s a difference. Business leaders have a plan to convert freebies into revenue and thus recoup expenses. Typically, pastors do not. In fact, when pastors label something “ministry” in the context of money spent, more often than not they’re describing a financial loss. Some are so accustomed to spending and losing money in this way that they’ll call it an “investment,” presumably in people.
Again, however, where business is concerned, net losses are unacceptable and unsustainable. In the future, given stagnant and declining budgets, churches will need to consider them unacceptable as well.
To stop such financial losses, churches have several options, including learning to monetize existing services. Put simply, there are certain things a church is already doing and for which it is already paying that can be converted to generate income.
For instance, the hypothetical church with the coffee problem could sell hot sausage biscuits alongside the free coffee it serves on Sunday mornings. If it charges $2 for each biscuit it buys for $1, it could recoup the $3,000 a year expense and repurpose the money for more spiritual causes, such as to provide scholarships for youth to attend summer camp.
Do you have a media department? Are you paying for janitorial service or the ongoing upkeep of a parking lot? By developing a business plan, such things could be monetized. In this way, your church could not only save money, but perhaps generate even more revenue to supplement its budget.
For pastors and churches interested in doing so, Daniel Cook, founder of the architectural firm Building God’s Way, suggests the following five steps:
1. Develop goals and objectives that are both short- and long-term.
2. Identify the income strategy that best fits your ministry, facility and community.
3. Select revenue source(s) to pursue. Research each of these and gain expertise either internally or through consultants.
4. Write and execute a revenue source (business) plan.
5. Evaluate the results quarterly while continually striving for improvement.
Cook concludes, “The easiest money you will ever raise is the money you will no longer need by operating your existing facilities wisely from a standpoint of reducing costs on energy, maintenance and janitorial expenses.” By monetizing existing services, churches can erase losses and help their budgets.