Developing your first church budget

Lee Stephenson: 00:00:08

Hey, welcome everyone, to Unfiltered Podcasts. My name is Lee. I get to work with Converge and Church Planning. And my buddy here co hosts, Danny.

Danny Parmelee: 00:00:17

Parmalee from Converge Mid America.

Lee Stephenson: 00:00:19

And we're excited today to be talking with you about church budgets. And I know maybe you're sitting there going, well, that doesn't seem like an exciting conversation. We're going to do our best to make it fun today.

And. But this is an important conversation because the budget really is the thing that helps make the vision come to life.

And I know a lot of guys, it's like you sit there and you begin to plan, you begin to think, and you're going, man, I have no idea how this is going to cost. Why do I need a budget? You need a budget because it does. It puts reality around the vision and allows you to know what you have to work with.

And I think it keeps you creative as well. So when it comes to budgeting, what did you guys do early on? Because to me, there's two phases.

There's church planning budget, and then there's existing church budget.

And I don't know about, for you, Danny, but I know for us in those early days, we approached the budget completely different than we did, you know, as we kind of grew and became more of an existing church.

Danny Parmelee: 00:01:23

Yeah, I think, I actually think that those first few years are the most difficult because you just have no idea. So you don't know what your rent is. You don't know if it's going to be $100 a month or 2,000. You know, you just, you, you have no idea.

So you kind of, kind of just pick some different numbers. But I think that to kind of take some of the stress off of is you just have to almost just pick some numbers and then go.

That begins to at least build kind of a track record. You also don't know what your, what you're giving is going to be and where it's going to match up. So you just give yourself a little bit of a break.

Say the budget is just to kind of help give some guidelines, is to kind of give some different proportions and you kind of set it and kind of go with it from there.

Lee Stephenson: 00:02:04

No, that's, that's great. Are there kind of non negotiables that a church planner needs to think about when they're kind of putting a budget together in your mind?

I mean, obviously, you know, if percentage has got to be salary, and we'll talk about nuances in a moment, but, you know, salary needs to be a Part of the budget. Are there other things that need to be included in the budget as you're kind of creating that?

Danny Parmelee: 00:02:28

So what we.

So what we did personally, and even as I work with our planters in Mid America, a majority of their salary is coming from outside support, which is handled in almost a completely separate account, which is kind of helpful because it is a big chunk of it.

So if they're able to raise all of their financial support, they can kind of say, all right, well, what is a realistic rental, you know, kind of situation in my context? All right, so I'm just going to throw down, you know, put down $1,000 a month, cost more. We figure that out.

If it costs less, then it opens up, you know, a little bit more opportunity. And there, man, I just. I feel like it is so, so contextual to what you're. What you're trying to do as a church.

And then you have all the initial kind of startup capital expenses like sound equipment and trailers, which are going to.

Lee Stephenson: 00:03:20

Be more than what most people expect it to be.

Danny Parmelee: 00:03:23

Way more. Yes.

Lee Stephenson: 00:03:25

Signage, your audio, visual pieces, they're just going to cost. And so just know that up front, more you can raise, the better. It'll help you offset that. I know, too.

All the coaching I do with guys, I tell them early on, just proportionate, begin the process to become a tithing church from day one. Set aside 10% of everything that comes in to give outside the doors of the church. Bless local missions, do church planning, do international.

Just begin that process from day one.

Danny Parmelee: 00:03:56

Yeah, and it's awesome. If you start at a place of generosity, it'll just set you up well for the rest of it. From even spiritual, philosophical standpoint.

Lee Stephenson: 00:04:06

I know for us, we approached, we couldn't create a year budget like that was just impossible because we're on outside support. Our rent was $1,000 a weekend for a movie theater. We had five hours on Sunday. I mean, that was just what we paid. But we had a budget quarterly.

I mean, the things were changing so quickly and it was hard to understand. And so I know for us, that was a workable rhythm. Like, we go, okay, this quarter, we brought in this.

We can expect this for the next quarter, you know, and we worked that until eventually it became more consistent. And then we began more of a yearly budgeting process.

Danny Parmelee: 00:04:44

Right. And this goes back to one of the other podcasts that we had. Maybe it was on generosity. It might have been on something else.

But this is where actually knowing giving and giving units is an important thing. Once you have One year kind of under your belt to project. And what I mean by that is if you don't know what your giving units are.

So let's say that first year your. Your budget was $50,000. So and just as a side note, our first year's annual offering was $11,000. The whole offer annual was 11.

So year two is, I think, 36.

Lee Stephenson: 00:05:20

So you don't have it that bad out there, guys, is what he's saying.

Danny Parmelee: 00:05:24

But let's say, say that you're giving was $50,000.

If you don't look, you don't know if that was one family giving a $30,000 check and everybody else giving 10, and that that one person who did give that check in June moved and took a different job somewhere else or what's kind of the consistent kind of, you know, coming in per family that you can at least somewhat gauge it on. That's great because for us, what we, our kind of simple philosophy was don't spend more money than what you have.

So that's also kind of how we budgeted. And we did use previous year's giving to kind of set the budget for the coming year. To set the budget for the coming.

Lee Stephenson: 00:06:06

Year, which I think is wise. We did the same.

And I would highly encourage planters, just get into that because as you grow and go through season growth, you have a lot of play money then to be able to utilize.

Danny Parmelee: 00:06:19

Yeah.

And of course, we would set things that we would say, okay, well, if we increase and we hope, and we've even had a track record of increasing year after year. But let's not all of a sudden just spend money before it's even a healthy projection.

If God presented an opportunity, then we would go through the proper channels with our overseers to get that approved, to go beyond what the budget was for that. So that was something that was helpful.

The other thing is that I do think putting savings in right away is good as well, too, because it's not only from a practical sense, but it does I think, even model for the church that you are looking for the future investment.

You know, whether again, that's a capital expense that you're going to do or you're really hoping to, you know, hire that worship leader, youth pastor, children's ministry person that you're like, hey, this is kind of some of our practice in churches that got in trouble.

Lee Stephenson: 00:07:17

Do you start with a certain percentage or do you coach guys to start with a certain percentage to put into Savior?

Danny Parmelee: 00:07:21

Yeah, I mean, if.

If you can do 10% I know that that's a really huge chunk, but if you can do 10% giving and, and 10% towards savings, I think it can be a healthy thing. But again, each church is going to be a little bit different.

Lee Stephenson: 00:07:33

Yeah, I know for us, we started at three and then built, built it. Built, built from there. And that seemed to be a manageable pace for us. We wanted to get to 10%, but we knew, like, for your savings.

Yeah, yeah, for savings specifically. But we started with three and then worked accordingly.

Danny Parmelee: 00:07:50

Yeah. The other thing that we did is we kind of did red, yellow, green light types of items.

So as people were kind of putting budgets together now, this is of course, later on, once we had a few more staff and a few more like ministry teams that were kind of managing their own budgets is that even if their budget was approved, there might be things in there that they kind of had to wait till mid year to see if we were kind of tracking. So I was like, ah, it's kind of like a yellow light thing. You're going to need to wait on that.

And it's like, okay, now we're over a certain threshold now. That's a green light. Or hey, that's a red light right now.

Like, you know that, you know, big youth retreat, you know, you want to take the entire youth group to Africa. That's not happening, you know, because I.

Lee Stephenson: 00:08:35

Want to join that.

Danny Parmelee: 00:08:36

Yeah. You know, so. So just different things like that and that helped. We were not the best at this.

But the more that you can have the actual management of the budget by those staff and, and those teams, it just, it makes it better that they're the ones kind of paying attention. How much am I spending? And this is where being a little bit of a control freak and micromanager, everything was still coming to me.

So they were constantly like, danny, can I, you know, buy a copier? Danny, can I. Can we get a new sign? Can we get a new set of speakers?

And honestly, what that created as the church got larger is I really was the bottleneck.

Instead of being like, hey, this money set aside, that's fine, you can get your speakers now, but if you need XYZ keyboard later, you already spent it on speakers. And instead I'm wasting all this time managing other people's budget.

Which in the beginning it might have worked out well because I managed the church's money well and set aside savings and that. But as we grew, I became kind of the. Yeah, I became the.

Lee Stephenson: 00:09:44

It takes more time. The bigger the budget gets as well.

For Us early on, it was really helpful to paint a picture of our people, that we exist because of the generosity of others. And so I would encourage you. This worked really well for us.

As you're putting together budgets and you're trying to educate your people, most of them, early on in the church, like they have no idea what it actually takes to make the church happen on a weekly basis. Put the weekly need in your program, like, write that in. This is what it takes.

And I encourage you do weekly need over monthly need or yearly need because the numbers are more manageable and people tend to interpret the budget of the church based on their home budget. And so those numbers then stay relatively consistent from one to the other.

Then I would put outside support and then put that number and divide it down to a weekly understanding of that. And then you could do inside giving as another line item. And so you're able to show like, hey, this is what it takes for us to exist.

This is the generosity that other people are buying into the vision here that are outside our church and this is where we're at. And then gives you a platform to talk about, like, see that middle number? It's going away.

Yeah, like that within two years or whatever, like, we're outside support's gonna be gone. We need to grow as a church to be able to take on and own our own funding. And for us, it was really helpful in casting the vision.

Say, guys, we have all these aspirations of doing this, this, this. We wanna plant churches here, we want to send missionaries here, we want to do this.

But we will never fully be able to do that until we learn to take care of things here first. And that helped people begin to understand, like, this is important.

Danny Parmelee: 00:11:35

Did you print both here's the weekly need and here was the actual giving or not?

Lee Stephenson: 00:11:40

No, we did a five week rolling average when it came to the actual giving. And the reason we did that was it gave a more accurate snapshot of really what was coming in.

Because you're going to have weeks that are really good and you're going to have weeks that are really bad and you don't want to. I don't know if you really want to publish a bad number. You know, where people are like, we're done. You're going. We're not really.

Like, we had a huge offering last week, but it gets interpreted funny. And so we just chose to do a five week rolling average.

And so that it gave us a consistent snapshot of really where we were financially from a health standpoint.

Danny Parmelee: 00:12:15

So that's Great. And I say that because I think this is the first thing that maybe we differ on that I've talked about in the podcast. And we didn't.

Not that it was like hard, philosophical, but we didn't print need and. Or where things were at. But probably more for what you said on the second thing. Because most of the giving ended up being in December.

So the whole year it just kind of looks and people have this, like, sinking feeling. And if there's some sort of weird pressure that way. But that would be.

Man, I would love for different pastors to weigh in on pros and cons or what they have found. And even if it's in comments on this type of thing of. Of what has. What has worked as far as printing.

Lee Stephenson: 00:12:56

I know for us it worked well because we had a lot of people that they. They cared about the numbers. Like, they, they paid attention and they, they would constantly come up and ask us about. About, like, where are we at?

Danny Parmelee: 00:13:07

Yeah.

Lee Stephenson: 00:13:07

And. And it was hard for them to know when we're meeting in a movie theater, you know.

And so it did help us in making sure we're constantly staying in front of people. Like, this is where we're at right now, and this is what it costs for us to do this.

And, you know, it wasn't something we talked about every week from Massey and I go, this is what we need. We didn't have a board up in front of the church, you know, with all the numbers kind of laid out.

But we knew that there were a number of people in the church. Like, they're just number people and they are paying attention to those things and it's helpful to be able to educate them.

So that's why we chose to do that.

Danny Parmelee: 00:13:39

And I always know when I go to a church, I look for it on the bulletin because I'm just curious, you know what I mean? Like, and maybe that is. Maybe as visitors are coming into. They're curious.

Lee Stephenson: 00:13:48

Yeah. And I know. So I visit a church on a regular basis that they count number of giving units every week. And that's one of the numbers in there.

I thought that's a neat way of talking about that as well, because they talk about. We're more concerned about our everybody giving. Yeah. Participation as a whole. And so they're actually counting that.

And they celebrate like, hey, last month, you know, we actually grew X amount of givers as a whole, as a church from where we were before.

Danny Parmelee: 00:14:19

Very cool. Yeah. Was there ever a time that you went over budget, meaning we spent more Than, yeah, year end. And did you do fiscal year January through December?

Lee Stephenson: 00:14:31

Yeah, fiscal year was January 1st. And. And I just. It's just easy. That's how people think when it comes to their money, taxes, all that kind of stuff.

And so made sense to end of the year giving push, those type of things. We never really went over budget from a spending standpoint. We managed that well. Every year our budget grew, so that helped.

When we had a conservative approach, we always brought in more money than we actually had budgeted for. And so that really wasn't problematic for us.

Some of the more of the challenges were like when we did go from portable to permanent, that was a major jump in our budget. And we were like, we have the cash in the bank, but it wasn't something we saw coming that year.

And we went from, you know, I think our rental fees went up 50% overnight when we made that lease agreement. Well, we had to come back and adjust the budget accordingly.

And, you know, there were a couple times we grew so fast that, like, the budget that we had was obsolete and too small to maintain the ministry by which we had. And so we knew, like, we're going to spend more, but we're also bringing in more, but our budget doesn't reflect accurately where we are at.

And so we'd come back and we'd create a whole new budget and we'd throw that before the church as well and get their affirmation on that.

Danny Parmelee: 00:16:03

My last question is, to what level did you share the budget with the congregation? In other words, like, was it, here's our five main categories or was it. No, hey, here is, you know, small groups.

Here is ministry budget, staff salaries as well, too.

Lee Stephenson: 00:16:21

Yeah, it. I would say it was the main aspects of the budget. So it was kind of the key factors. So we do, like missions and outreach.

We do, you know, staff salaries, but they were a whole. Yeah, we do building, facility maintenance, all as one.

So we kind of kept it the big picture items, and then we'd answer questions if they came up about more specific pieces of that.

So we gave enough information where we felt like we were being honest and we're being accurate and we're giving them a good understanding of all the things that are involved in this, but without having to go through line item by line item explaining what was going on.

Danny Parmelee: 00:17:02

Yeah, cool.

Lee Stephenson: 00:17:04

And that seemed to work well. As you grew, what did you guys. What was your budget processing as a larger church? How did you approach that?

Danny Parmelee: 00:17:16

Yeah, so at that point, having an executive pastor was helpful because you Just.

Lee Stephenson: 00:17:22

Say, hey, you just do this.

Danny Parmelee: 00:17:23

And hard too. Because if you remember before, I'm like, control freaking.

Especially in the beginning, I signed every outgoing check and part of that that was just for me to mentally have on my mind everything that was going out to the point where it's like I wasn't seeing that on a regular basis.

But one of the things is he really did work with the staff to propose their budgets and they got to come up with their budgets and it was vision driven. In other words, hey, what do you want to do this year? Not, hey, last year you were given $20,000. This year you get 25. What do you want to do with 25?

It was, what's your vision for youth ministry this year? Tell us what you want to do and come up with the budget. So it could be 20 grand more than it was the year before.

And it might be like, you know what, that's not in the budget. Or then once everything was brought together, like, hey, this is going to be a really important and critical piece.

Let's try to, let's try to actually make that happen.

And it really did create a lot of, a lot more ownership because they were having to think through from a vision perspective, not just, hey, here's my amount of money that it wasn't an allowance, it was a vision driven budget.

Lee Stephenson: 00:18:30

Yeah, that makes sense. Yeah.

We ended up eventually going to a spot where we did a staff retreat and I required all of the staff members to give a 15 minute presentation talking about the vision of their ministry and how the church vision is being incorporated in that. And then they had to make a financial ask for their budget.

Danny Parmelee: 00:18:52

To the group or to the whole group?

Lee Stephenson: 00:18:54

To the whole group.

And it ended up being a really good time because everybody, all the staff are hearing about their vision for their area of ministry and they begin to own like, man, I want to see that happen. But it also allowed us as an executive team to be able to have insight enough. Do they actually get the vision?

Can they articulate the vision and are they living in reality when it comes to dollars and cents to make the vision happen? And then we didn't say. And then they had to be ready for 10 minutes or so of questions from anybody, including the executive team.

And then out of that, we take all those numbers and we begin to, we dismiss them.

And then we begin to put those numbers together and go, well, I know that the children's guy just asked for 45% of the budget, so we're not going to be able to do that, but this is what we can do, you know, and so we begin to put numbers and then we come back to them and. And be able to give them feedback on their presentation as well. And it was funny the first time we did. I mean, the staff are as nervous.

Danny Parmelee: 00:20:03

Wreck Survivor style, like alliances.

Lee Stephenson: 00:20:06

Yeah, you just got voted out, but, you know, it actually worked really, really well from there on now.

Danny Parmelee: 00:20:13

Yeah.

And I think just even as a general rule with that getting engagement and buy in on the process, even if it's not final decision, and that's what you need to just make clear, it's like, hey, we're not saying, yeah, you're not submitting your thing that's automatically accepted, but getting that, that buy in is really important, that engagement involvement.

Lee Stephenson: 00:20:34

Yeah. Well, this is our conversation on budgets. I think you can agree, Danny, that both of us, we like big budgets.

Danny Parmelee: 00:20:40

Yeah.

Lee Stephenson: 00:20:40

And I'm not going to lie. Yeah, we're not going to lie. So. But thanks for tuning in with us. This is the unfiltered podcast, and until next time, keep it real, guys.