Originally posted on Smart Church Solutions’ LinkedIn page
Where do you start when it comes to church facility budgeting? This question has risen to the top of many inquiries we receive at Smart Church Solutions. We even asked the Church Facility Management Solutions Facebook Group which topics members would like more information on. As you could guess, “budgeting” was the top result.
More information on budgeting has been an ongoing demand. A few years back, we heard the cry and developed The 4 Buckets of Church Facility Budgeting, covering the importance of an intentional operating budget. But, we wanted to go a step further.
Therefore, through this eBook, we will be providing specific steps and considerations for budgeting. While every situation is different, these steps will set you on the right path to handle budgeting initiatives moving forward.
Where to Start?
Starting anything can be the most challenging part – we get it. Therefore, you will learn two crucial starting points in the following sections to set yourself up for success.
Confirm Total Heated and Cooled Square Footage
One of the first steps you need to take in gearing up for budget success is to confirm your facility’s total heated and cooled square footage. The majority of the national benchmarking and budget evaluations for facilities are based on your square footage.
Without this information, you cannot determine if you’re over or under spending or how to calculate replacement costs. The overall church budget, income, and attendance may vary from year to year. However, your facility size and square footage are far less likely to adjust unless you have added more space or sold property. Because of this reality, you must understand the impact of the size of your facility.
For example, if your church budget was $1 million last year and your facility budget was $200,000, that equates to 20%. However, if the church budget dropped to $900,000, and you didn’t reduce your facility’s square footage, then you will still need a minimum of $200,000 (plus inflation) to maintain the facility. Therefore, the new percentage would be about 22.5%.
Next, think about evaluating your utility costs. If you utilize the $/SF, you will need to know your square footage. You also need to know your square footage to determine certain renewal and replacement costs. For instance, if you determine the carpet in the children’s spaces needs to be replaced, and the vendor tells you he can do it for $5.00/SF, you will need to know the total square footage to determine the project’s cost.
Refer to the Past – Carefully
Looking over last year’s budget and actual spending is one of the most common ways churches will determine the following year’s budget needs. This is not a terrible option, but it can come with some pretty significant pitfalls.
If we lived in a perfect world where all inflationary factors were equal and facility deterioration was at the same rate every year, this could work. But we don’t. We have seen firsthand examples from churches on how referring to past dollars spent exclusively was the wrong approach.
We had a church spending over $2.00/SF for utilities for a 200,000-square-foot campus. They did not know that they should only be spending $1.25-$1.50/SF. Therefore, they were spending about $100,000 more than the top of the normal range. Their budgeting plan was to just add 3-5% to what they had been paying – big mistake. They were already spending 25-37% more than they should have been and were just going to add more to that? In this instance, solely relying on “historical” data was the wrong approach, and it would have been a waste of ministry dollars.
The cause of the overage in spending on utilities was a matter of bad behavior. The staff did not know how to operate their complicated building automation system, but instead of learning how to use it, they just let the system run. This is poor behavior, which is the leading factor to most overspending (and underspending).
Another reason why you should not use past data to set future expenses is that it assumes your facility is being utilized exactly as it was in previous years, and the cost to maintain the facility is the same. Therefore, utilization and maintenance costs should be addressed.
Like we said above, starting is hard. So, here are a few challenges we have for you, using the information presented above:
- Determine your heated and cooled square footage if you don’t know it already. If you do know, take some time to verify the data. Remember, facility square footage is calculated from the outside face of the structure and not the interior dimensions. If you use interior dimensions, you will not have an accurate measurement.
- Go back through last year’s expenses for utilities, janitorial, and general maintenance and plug the costs (and your square footage from above), and compare them to the recommended best practices we have found based on our national benchmarking projects. The best practice annual cost ranges are as follows:
- Utilities: $1.25 – 1.50/SF
- Janitorial: $1.50-2.50/SF
- General Maintenance: $2.25 – 3.50/SF
For more practical advice and to continue reading this article, please download our eBook on Church Facility Budgeting by going here.