Home > Blog > How to Develop a Budget

How to Develop a Budget

By Ed Stetzer

Where does all the money go? The question every church planter must ask. Money follows to vision, so the type of church you plan to start significantly influences the money required to start.

Budgeting and fundraising are often two of the most daunting things that church planters face. This doesn’t have to be the case. In simple terms the overall goal of the Church Planter is to determine what God is calling them to do (budgeting) and to discover how God will provide for it (fundraising).

After initial planning most church planters discover they need more money to accomplish what they would like to do than they currently have commitments in donations.

The Church Planter has three options; raise more money, spend less money, or some combination of the two.

In general, expenses through launch (pre-launch phase) can be grouped into the following categories:

1. Staffing – How much will you spend on staffing? Depends on how many staff will be hired, how much they will be paid, when they will be hired, and whether they are expected to raise any outside support. In a house church, staffing expenses may be zero. In a multi-staff, sponsorship plant, staffing expenses could be well over $100,000. Staffing is often a major expenditure for the new church and will include at least the lead planter’s salary.
2. Equipment – Most new churches have a number of one-time expenses for equipment purchases. These include but are not limited to a sound system, lighting, multi-media projector, storage cabinets, children’s supplies, Bibles, and a trailer. Depending on the quality and size, total equipment costs can range from zero (house church) to $80,000 or more. Unlike staffing expenses which are ongoing, most equipment purchases are one-time expenses in support of opening day. Most churches will spend at least $10,000 to $15,000 in getting started.
3. Marketing and Outreach – Marketing and outreach are all about starting conversations with seekers in the community. Too many church planters rely on one big marketing campaign just prior to launch to establish name recognition rather than a more balanced approach of outreach and marketing activities. A new church is ready for a big direct mail campaign only AFTER establishing broad name recognition in the community. Like equipment expenditures, total marketing and outreach costs can range from zero (house church) to $80,000 or more. Most churches will spend at least $10,000 to $15,000 in getting started.
4. Facilities – Many new churches can not afford to purchase worship facilities. Instead, they rent either schools, movie theaters, or community centers. Sunday rental typically ranges from $12,000 to $50,000 per year for Sunday rentals. Additional facility costs may include rented office space. During the pre-launch phase when the new church has not yet started weekly services, facility costs will be much lower. Costs will be driven by the timing of starting weekly worship services.
5. Operations – Ongoing operations including printing, copying, office supplies, insurance, phones, pagers, etc.

Developing a Budget 

Church planters are encouraged to develop a budget through opening day and a second budget for the first year of the church after opening day. In developing a pre-launch budget, we recommend the following approach:

1. Work through the development of a philosophy of ministry and picture of opening day
2. Develop a detailed action plan (launch plan) that will help turn your vision into reality.
3. Assign cost figures and completion dates to each of the actions in your launch plan.
4. Sum up the total expenditures and compare them to available income. If expenses exceed income, you will need to raise more money, spend less money, or some combination of the two.

NOTE: Budgeting requires that you look at two different aspects of expenses vs income. First, you need to verify that your total expenses over a given period of time are less than or equal to your total income over the same time period. Second (and often completely neglected), you need to verify that your “cash flow” stays positive as a function of time and that your bank account does not go negative.

Home > Blog > When You Have to Fire Someone You Don’t Want to Fire

When You Have to Fire Someone You Don’t Want to Fire

By New Churches Team

When you think about our COVID-19 context, everything began shutting down in March. There were government programs put in place to help employers. Those programs were intended to try and prevent layoffs from happening, but, in some cases, it just delayed the inevitable. When it relates to the church context, if giving decreases or as ministry changes, you may be forced to fire staff members that you don’t want to fire.

The Three Ms

When you are looking at your personnel budget, often it feels like family, especially in a smaller church. If you aren’t careful during this time, your personnel budget can greatly exceed your ministry budget. Before COVID, your budget may have been 40% personnel, but during this time you’ve cut many things to save jobs and now your budget is 60% personnel.

To remain solvent as we move into the final phase of this year, you need to decide what ministry has stopped and isn’t coming back, what ministry has shifted and will come back, and how you shift dollars around to cover that. You have to consider mission, methods, and men. The mission doesn’t change, but the methods and men might. Be loyal as much as you can be, but as a steward, you have to make wise decisions.

Making the Decision

Look at the ministry and the people they are developing. It’s easy to replace someone who just does stuff. It is not easy to replace people that develop people and develop ministry. The first positions to look at are the ones that just do stuff. Some would consider first cutting contractor jobs, but there are reasons to have contractors. If people are just doing tasks or are particularly gifted to do just one thing, it is better as a contracted position. There may be jobs on your staff that are better suited as contractor or part-time roles. Create a plan and a contingency plan in the event that the effects your church is experiencing last longer than anticipated.

Time for Creativity

Talent is what is most important about your ministry. If you have an equipper or a person who is a developer, that helps you. You want people on your team who are the multipliers of ministry. If you are considering letting someone go that you do not want to let go, be honest with that person and be creative with them about ways to save the job. Consider together what you can do if you make changes to the previous methods. More often than not, you can find a creative solution.

A percentage cut for all staff may be something to consider if you just can’t lose positions. The second thing to consider may be a challenge to cut salary or cut hours, but then help them find a side job to make up the lost dollars. In the short term, what can you all do that you can see as an evangelistic opportunity.

Adapted from the New Churches Q&A Podcast Episode514: Firing Someone You Don’t Want to Fire. Click here to listen to more to church planting, multisite, and multiplication tips.

Home > Blog > Funding Future Facilities

Funding Future Facilities

By John Muzyka

Today’s economy requires churches to have specific funds set aside for ministry and facilities. For a church plant, the start-up phase requires support from outside groups and it requires the planter to be a good steward of the limited funds available. From the beginning of your church plant, I encourage planters and their leaders to set aside funds for future facilities.

Part of being a good steward requires discipline in how we use ministry funds to accomplish the work of the church. As guests and members tithe and engage in ministry, they trust that the leadership of the church will use that money in the best way to further the kingdom. A healthy budget at the start, written down, will guide you and serve you well as you grow.

Church planters often ask, “How much money should we be saving?” This question has generally come after we have discussed setting up a building fund. The answer to the question is not a set answer for every church. Each group is different and every budget is unique. My response for most churches is “Save every dollar you can”. You can’t be wrong to start by saving 10% and setting it aside as savings. Later on, it may not be a building fund; it may be a rainy day fund.

If you are saving money specifically for a building fund, I encourage the church to set a consistent amount aside each month to show discipline in setting aside funds. This will help when a lender sees that a church has consistently paid a lease or a mortgage plus put away a consistent amount for the future. Moving into a lease space may require significant funds to renovate a space and if you are preparing to purchase then you will need to have 20 – 30% in cash to get a loan.

Categorize your Spending

In any discussion of saving cash, it is wise to make sure you understand your spending allocation. Let’s categorize your spending into three buckets: Staffing, Facilities and Programming. Having a plan, on paper from the start will help you set aside funds as you grow.

• Staffing – This is generally 50% of a church budget. Early on in a plant you may intentionally keep this cost low by being vocational and having volunteers as opposed to paid staff. If you can keep staffing low, then you can better invest in the ministry programs and the location you secure.

• Facilities – A healthy target is 25% of your budget. Many people will use a number closer to 33%, but that will tend to put more pressure on your budget. Again, if you can reduce the staffing expense, then you may be able to allocate a little more for your facilities.

• Programming – These are the ministries that you offer. For example, community events and curriculum will cost money. This may also include supporting other ministries or church plants that are important to your church.

Looking at the three buckets above, it is important to point out that you can surpass the suggested percentage in one bucket and make the other two work, but if you go too high in two buckets then the remaining bucket will suffer. The following example is a real story.

XYZ Church had been open for 5+ years. During that time they were able to use a great location for $1,500 per month.  Early on I met with this church and explained that the market area was expensive and recommended they save cash for a future lease or a building purchase. The pastor explained that their mindset was “every dollar in, every dollar out”.

I encouraged him to increase his facilities expense by paying the church building fund a consistent amount every month over and above the $1,500 they spent for their Sunday rent.  Fast forward 4 years and the perfect building, a building this church prayed for became available. The owner was willing to offer Seller Finance. However, the Seller reviewed the church finances like a banker would. In the end the Seller could not reconcile the church’s financial position and would not finance the deal. 

This church had a strong income of well over $500,000 per year. Their facilities bucket was less than 3.5% of the budget and everything else went to staffing and ministries. The end result was that the church did not have the ability to qualify for a loan. Had this church set aside the extra $10,000+ per month that a healthy church would have, they would have saved $480,000+ over 4 years. With that money in the bank the church would not have missed this opportunity.

A Building Fund

The funds that you set aside are often considered to be a “building fund”. It is critical that your church leadership understands that not only do you need to have cash set aside for capital improvements or a purchase, but the church must also have cash set aside for at least 6 months of reserves for the ministry to run. Most lenders will require a church to have a reserve fund that will sustain a church during a downturn in the economy.

Many church plants and young churches are spending every dollar on ministry and are stretching to make ends meet. As these churches grow, many seek to add staff to handle the growth.  There is great wisdom in keeping expenses low and setting aside money as early as you can to prepare to house the new growth.

This discussion can be a daunting one for many churches. I encourage every church I work with to get a clear understanding of their financial picture. If you need an advisor to meet with you and help you get a financial plan together, contact me and I will assist you in getting to the right person for your ministry. It may be a CPA in your church or a CPA that serves churches every day.

Either way, it is critical to your ministry that the finances are in order and that the ministry plan has a corresponding financial plan to meet the needs of the ministry. As a Pastor, there is a great responsibility to guard the gifts given by the people and to best use what is brought to the storehouse to the Glory of God and to accomplish the mission that we have been given. Seek wisdom and counsel so that each and every financial decision is missionally directed and ministry driven.