How To: Estimate a Church Building Program Budget
“What man would build a tower without first counting the cost?? – Jesus
Millions of dollars every year are wasted on church building plans that churches cannot afford to build. Many churches let the church building project define the budget, instead of letting the budget drive the design of the church. This simple transposition of steps in the process takes a toll on churches in terms of cost, time, effort, enthusiasm, and support for the project.
Design is part of the building process. Counting the cost does not mean sending your plans to the builder for an estimate. Counting the cost means understanding what you can afford before you begin. There are a great number of church building plans available, and any number of church architects that will create more, but knowing what you can afford is a necessary step before you concern yourself with design.
In my book, Preparing to Build, I discuss this in great length, but below is a basic formula that any church can use to get an first approximation of their budget for a building program.
There are 4 basic variables in determining your budget. Those 4 variables are added together to determine the preliminary budget. Often, early in the process, the church will have to use estimates for these values and refine them later in the process.
The four variables:
- Cash on hand: This is the amount of money available which can be applied to the building program. This would include whatever amount of money in checking, savings, money market or CD’s you want to use.
- Money you can borrow: The maximum that any church can borrow in a loan or bond program is 3-4 times its current income; and is often less. Borrowing ability is based primarily on cash flow, not the value of assets.
- Money you can raise from the sale of assets: This may be your current location (if you are moving), a parsonage, or real estate. If you owe any money on the asset you are selling, it will be the net cash to the church after paying off the debt.
- Money you can raise before construction: This is typically money raised in a church capital campaign. In a 3 year capital campaign, churches typically raise between one and three times the current amount of their annual tithes and offerings, with around two times income being the average.
Our formula then becomes:
Cash on hand ___________
+
Money that can be borrowed _____________
+
Money from sale of assets _____________
+
Cash that can be raised before construction _______________
=
Your budget _____________________
If your church needs assistance in answering the budget questions and/or defining what it truly needs to build, I would suggest downloading this pdf file about a Needs and Feasibiltiy Study.
If your church needs a capital campaign, we can help. Our church capital campaign consultants can provide everything from a full-blown capital campaign to a do-it-yourself capital stewardship campaign that you run in-house.
Related posts:
- Turning Around a Church Building Program Gone Bad As the poet Robert Burns so accurately stated, “The best laid plans of mice and go oft awry.”. Even more so, plans go even more...
- Avoiding Budget Bloat in Church Construction Church construction projects (and their budgets) seem only to grow over time, not shrink. Here are three tips to prevent construction budget bloat. Tip number...
- Church Financing – Still a Tough Market Churches continue to have difficulty getting the financing they need for buildling or relocation. We have seen any number of churches that should be able...
- Low Cost Church Building Plans Did you ever wonder how many thousands of church building plans have been drawn by architects over time, but when a church needs a set of...
- The Year of the Church Capital Campaign The banks have money to lend, they just don’t seem to want to do it. This week a number of the largest banks were called...
- Church Building Plans – The New Paradigm I am really exited over the relationships we have built with a number of church builders and architects. However, the relationships I am the most...
- Church Capital Campaign . A church capital campaign is a spiritual endeavor that every church should engage upon for the spiritual and financial benefits. Typically will raise 2x...
- Financial Considerations for When to Build A popular theory with some in the church is that the church should wait to build until it has raised most, or all of the...
Very good computation, it will help a lot on how to build a church. They think it before they will go for the church construction.