How to Avoid the Epidemic Killing Our Churches

by | March 21, 2018

An epidemic of Biblical proportions is significantly impacting churches of today. Currently sweeping across the landscape of Christianity, this epidemic disables and ruins countless churches every year. This deadly disease is debt. The debt epidemic begins innocently enough. It typically begins with someone from the building or finance team passionately misquoting the famous line from Field of Dreams, saying “Build it and they will come.” Soon people begin to nod in agreement. The debt epidemic has begun.

The debt epidemic gains momentum when the architect says, “tell me everything you want in your building and don’t worry about the cost.” Recently, I visited a church in the midwest. In the beginning stages of this disease, the church’s annual budget is less than $300,000. After meeting with the architect, the plans for the new building were presented–a $3 million project. The drawings were beautiful and very enticing. One church member even exclaimed, “there is even a fireplace in the gathering space!” Other early symptoms of the debt epidemic include phrases like, “I’m sure the people in our community will want to help pay for it” or “All of the new people that we attract will pay for it.”

“Build it and they will come” has become, “Build it and they will pay for it.”

The next phase of the debt disease usually includes the church hiring a firm such as Horizons to help them raise the money to build their Field of Dreams. Often what they really want is a plan to inspire others to pay for their building.  During this phase, the church either becomes deathly ill or finds the right prescription to avoid succumbing to death by debt.

How does a church avoid succumbing to the debt epidemic?

 

Here are some ways to avoid the debt epidemic in your church.

1. Preventive medicine is always the best.

Hire someone like Horizons before you hire the architect. We can help set parameters that will prevent your architect from proposing a project that could result in extraordinary debt. This first step can prevent the disease from taking hold and save your church from contracting the debt disease.

2. Always insist on a pre-campaign feasibility study.

A quality study will include a projection of the dollars your church will likely raise from a capital campaign. Although a quality study will provide the data you need to prevent deadly debt, the results can often be a bitter pill to swallow. Churches typically spend thousands of dollars on building plans and church leaders are excited to see it become a reality. However, as your partners in ministry, Horizons’ strategists will honestly tell you if the current plan is beyond your congregation’s capacity to fund it. While potentially painful, knowing (rather than guessing) your congregation’s willingness and ability to fund your project is a necessary step for preventing deadly debt.

3. Test your plan with key financial leaders before going public.

A capital campaign will invite everyone to participate in making your church’s vision a reality, but a few key financial leaders will contribute the majority of funds. (Here’s how to identify and grow a few key financial leaders.) Inviting high-capacity donors to weigh in before unveiling your project to the congregation may illicit substantial support.  For example, a church had fallen in love with a project that cost eight times their budget. Initially it seemed they might take on a deadly amount of debt in order to fund it. After showing the project to key financial leaders, one couple became was so excited they decided to give nearly 40% of the project. Death by debt avoided.

 

How much debt is healthy and how much is deadly?

1. The most effective strategy is to conduct no more than two capital campaigns in a row for any one project.

Many pastors, donors, and volunteers experience campaign fatigue following two three-year capital campaigns. In addition often these same church members are involved in the building project, leading to a strain on volunteer resources. I’ve worked with churches that have had to conduct six and seven campaigns in succession to eliminate their deadly debt. Not only did it exhaust church leaders, but it also prohibited any growth in mission and ministry  until the debt was paid.

2. The pre-campaign feasibility study is an essential tool in right-sizing your project and avoiding deadly debt.

For most churches, it is unwise to take on a project that exceeds two times your feasibility study projection. Of course, this is simply a rule of thumb and may not apply to every situation. Things like high-capacity donors, investment income from endowments, and other factors may play a significant role in determining your church’s ability to fund your project. Also consider whether you have resources misaligned to your mission.

3. Debt service should not exceed 10-15% of your annual operating income.

Most churches that carry debt service exceeding 15% of annual income are unable to begin new programs, hire staff, or expand ministry. Death by debt becomes a real possibility.

 

Succumbing to death by debt is not inevitable. There is a cure.

Incurring a healthy level of debt within the guidelines I’ve shared may be an important strategy for achieving the vision God has for your church.  Field of Dreams may be a great movie, but it does not include sound advice for your building or renovation project.

4 Comments

  1. As always Scott is spot on. Miss you my friend!

    Reply
    • Kristine Miller

      Thank you, Paul!

      Reply
  2. Thanks for a great article. I especially appreciated the value placed on the feasibility study.

    Reply
  3. Kristine Miller

    Thank you for your affirmation, Ed. Much appreciated.

    Reply

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Everything you need to inspire generosity.

RECENT Posts

A Story of Faith and Transformation You Need to Know

Inspirational stories such as the story of Clarkston United Methodist Church, Clarkston, Michigan, provide encouragement, insights, and motivation. Their clear vision for ministry, hearts full of gratitude for God’s blessings, and willingness to follow God’s leading proved to be a winning combination. Add to the mix competent, capable, and faithful leaders and the story becomes a roadmap to growing generosity and achieving God-sized ministry objectives.

Here is the story of faith and transformation from Clarkston United Methodist Church.

In 2012, when conversations began about values, timing, and next steps, the leaders at Clarkston UMC had already been dealing with the constraints of a space that no longer fit their call to ministry. Their prime location had great potential, but the leaders were cautious to not adopt a “build it and they will come” attitude. Instead of building for building sake, they set out to engage the congregation in meaningful conversations about ministry needs and how to address them. A series of TownHall meetings provided the opportunity for sharing detailed information regarding the plans for expansion and re-purposing of existing space to meet current and future ministry objectives. The entire church community received an invitation to join in the discussion regarding how Clarkston UMC was being called by God to live out its vision.

Clarkston’s leaders began searching for a capital campaign firm that would enable them to fund their project and fulfill God’s vision for ministry. Based on recommendations from other senior pastors and a desire for an organic process that fit their culture, Clarkston UMC chose Horizons Stewardship. Rick Dake, Clarkston UMC’s senior pastor said, “We had not been thriving in the area of stewardship and wanted someone to tow the line with us.” Capital campaign co-chair, Ric Huttenlocher added,

Horizons stood out because of their customized approach.

They took the time to understand us and develop a personalized program.

Following a comprehensive pre-campaign study, Horizons determined Clarkston’s capital campaign was likely to raise between $2.3 million and $3.0 million over the next three years. The projection was based on a review of historical data, meetings with Clarkston’s staff, multiple face-to-face interviews with key church leaders, and an online church member survey. The survey also provided insights into how the campaign process should be designed for the highest degree of effectiveness. Rev. Dake explained,

 Our leaders were deeply involved in making the campaign suitable to our culture.

We were able to step up and embrace the challenging parts, but also empowered to give direction to the process to fit our context.

Over the next several months, the congregation engaged in intentional prayer using a 21-day devotional guide and gathered in various groups and settings to share their questions and enthusiasm for the project. The highlight was Gratitude Sunday which, according to Rev. Dake was “our Good Friday and Easter rolled into one. It was without a doubt a holy time for this congregation. We became unified in our understanding that what we do matters and that we are, in fact, changing lives through this ministry.” The campaign unfolded during Lent, which was, at first a concern for Rev. Dake. “I did not think it was a good idea to conduct the campaign during the holy time of Lent. When I saw the impact the campaign’s spiritual component had, I realized I had been wrong. It turned out to be the best Lent we ever had,” explained Rev. Dake.

Clarkston’s people prayed, gathered, shared, and gave thanks.

They also pledged over $3.3 million to their capital campaign.

Six months prior to the conclusion of the campaign,

they have collected over $3.5 million.

According to Rev. Dake, the capital campaign had a considerable impact in many areas. Rev. Dake said his understanding of generosity shifted beyond simply an adaptation of stewardship language. He clarified,

We have moved the needle in this church and now are able to talk about money in a very different way. Generosity is a spiritual discipline that begins with gratitude and ends with joy. This will be our culture moving forward.

Clarkston United Methodist Church continues to grow in worship, giving, and ministry. Following their successful capital campaign, Clarkston UMC also partnered with Horizons to conduct a Taking the Next Step annual budget campaign. According to Ric Huttenlocher, “We needed to devote the time and energy to helping people understand the meaning of generosity and how to apply generosity principles to their daily lives.”

As a result, Clarkston’s annual giving increased by 13% over the previous year. Also, Clarkston achieved a 46% increase in the number of commitments received.

 

8 Ways to Improve Your Next Capital Campaign

Every gift is valuable when you’re running a capital campaign – continuing to provide events, programs, and services to the community takes investment. In 2018, you can make your capital campaign more successful than ever by keeping in mind a few best practices and fixing a few issues that can plague even the most efficient church fundraising efforts.

Here are the building blocks of a successful capital campaign.

  • Identify the group that supplies most of your annual income.  Generosity is an important spiritual issue. Pastors should know how members are growing spiritually.
  • Nurture positive relationships with your major donors before you ask for a gift.  We have to earn the right to ask. By regularly meeting with your financial leaders to show interest in the things they are concerned about, you convey that they are part of the community and that you care about them, their families and their business. Mentor and minister to them spiritually to develop relationships and earn the right to ask when the time comes.
  • Find out how to connect families to your vision.  Find out what questions your donors have about the capital campaign. If you know what questions, reservations, or objections they have, you can address them in advance of your campaign. A pre-campaign study is a vital step in successfully connecting your most valuable donors to the project vision.
  • Involve your financial leaders early and invite them to help you establish momentum.  Leadership gifts build momentum, which shows the rest of the congregation that the goal is achievable if they will do their part.
  • Value every gift.  Without more considerable gifts you will not raise what you need. Nonetheless, it’s important to value the widow’s mite contributions equally with the large donations.  All your members working together will achieve a bigger result than what a few can accomplish alone.

 

Here are the three issues to avoid in your next capital campaign.

1. We need to go right now!

You may feel like momentum is on your side, or like a big church vote points to a need to act swiftly. Or maybe you have a note coming due. When a church comes to me with such a sense of urgency, I wonder if they did not know all of these things several months back. I respond that we can certainly go “right now!” but I sure wish I had more time. When things are rushed, the chance for errors increases markedly. You frequently do not do things as thoroughly or creatively as you might like because the clock is ticking. If you see even the possibility of a campaign in your church’s future, call immediately. Talk with a professional about timing. The cost to have someone under contract is the same, whether it’s for one year or for two months. Ideally, you should have this conversation from one year out to no later than nine months out.

2. We only want to raise ___________.

Don’t settle for less than what you need for your budget. When someone comes to me asking for less than what they might really need, I ask them if they could use two times the amount. Usually, I get something like, “Well I guess, but we have not talked about it.” This is a big mistake. For a campaign to raise you half your budget will cost you the same as if I raise 2-3X the amount. At least test for a higher target. Once your church has done a capital campaign and declared victory; that’s it. You can’t turn around and do it again in a year – you’re done for a while. Whenever you think you will need a campaign, make sure you are trying to reach your maximum potential.

3. We need a campaign because we are way behind on the budget.

You are fishing in the wrong pond. Capital dollars do not fund operating budgets. The annual pocket or (better yet) the generosity pocket supports your operating budgets. This approach is entirely different from a capital campaign. It may even take longer, but it will pay long-term benefits.

The lesson in all of this is to be cautious and thoughtful. First, diagnose your problem or need. Then identify the right solution. And finally, take a step-by-step approach under the guidance of a qualified, experienced partner. The result will be a smoother, more successful capital campaign that will sustain your efforts for longer and even help to build community through the funding process.

This article was originally published by Voices on Stewardship (voicesonstewardship.com).

What You Need to Know About Debt Campaigns

Recently, I was reading through a magazine for church leaders when a quote in one of the articles caught my attention. The quote was, “Donors don’t give to pay down debt.” Having been personally connected to dozens of debt campaigns that have raised in excess of $170 million, I have found that people will give generously and sacrificially to address the issues and restrictions caused by debt. Moreover, a debt campaign can be highly energizing and catalytic in a church’s journey to realize their vision and mission of reaching people for Christ. However, campaigns focused primarily on debt require a very different approach and strategic messaging.

Campaigns to raise money for debt must connect to and be driven by the church’s overall vision and mission.

Simply asking people to give because the church has debt rarely inspires sacrificial giving. Remember – not one single member of your church is losing sleep because the church is in debt–except maybe the pastor or business administrator. The reason people are not concerned about the church’s financial obligations has much to do with the fact that many church members are struggling with their own debt issues. Therefore, the message surrounding a church debt campaign has to communicate how reducing debt will allow your church to reach more people, make more disciples, and grow your ministry.

If your church has debt, ask yourself the following questions:

  1. Has the debt had a negative impact in any way on the church’s ability to meet current operational needs?
  2. Has the church been forced to cut back or restrict ministry focused resources in order to service the loan obligation?
  3. Could the money currently being spent to service a debt obligation be re-appropriated to new ministries that could inspire and encourage your church and possibly attract new families?
  4. Have there been negative impacts on the church’s ability or willingness to start new and innovative ministries?
  5. Is there a mixed message being sent with respect to the manner in which the church is responding to debt and how the membership is challenged to view and manage personal financial obligations?

If you answered “yes” to any of the above questions, then moving forward with a debt campaign is imperative.

Communication before, during, and after a campaign should be open and transparent. The congregation needs to understand how the debt was incurred, how much exists, and the plans for paying it off.

Answer the following questions about debt clearly and concisely.

  1. Why does the church have debt?

Surprisingly, many of your church members do not know or may not remember how the debt came about. If the loan obligation is a result of building construction, members may assume if the building is complete it is also paid in full. If the church conducted a capital campaign but did not raise all of the needed funds, some people mistakenly believe the first campaign actually took care of all of the financial needs. Unfortunately, some people will believe the debt is the result of poor decision-making. Do not assume people accurately recall the events leading up to taking on the debt. Be proactive and transparent when communicating the cause or source of the debt. A clear and accurate timeline of events will provide a strong foundation for your campaign message.

  1. How much does the church owe?

Once the first question has been addressed, make sure there is no ambiguity regarding the full extent of the debt. As with all communication to the church, assume nothing and state facts in several different ways so people can fully grasp what you are saying.

  1. How much is being spent to service the debt?

People are often surprised by how much of the operational budget is needed to service a debt. Help your people see the debt total from both a monthly and yearly perspective. Show the debt service using a dollar amount as well as a percentage of total expenditures. For guidelines on the impact of debt service, go here.

  1. How much interest will be paid over the life of the loan?

The total lifetime interest of a loan creates the “ah-ha” moment for many where the reality of good stewardship comes into play. People are motivated when they can see how much could be saved in the long term by addressing the obligation more intentionally. People will become inspired when they realize how the interest saved could be used for ministry.

  1. How long would it take to retire the current debt if you did nothing?

Help your congregation understand the length and long-term consequences of the loan. Was the loan amortized over 10, 15, or 20 years? Could the reality be, at the current pace of repayment, your children and possibly your grandchildren will still be paying on the debt? Saving years, as well as saving interest over the life of the loan, is just good stewardship.

  1. How will the money currently being spent on debt service be re-appropriated for ministry?

Members need to understand the underlying reasons behind raising funds to eliminate the financial obligation. The goal is not just to eliminate the debt but rather to achieve specific ministry objectives. People are inspired to give more willingly and sacrificially when they understand the objective. Reducing or eliminating loan obligations is to free up resources so the church can engage in new and expanded ministries such as:

  • Starting a new ministry to reach more people
  • Creating a new staff position to address a ministry opportunity
  • Expand an existing ministry to meet the needs of your community

As mentioned earlier, people are not inspired to give so their church can be debt-free. People are inspired by the larger goal of growing ministry.

Include these elements in a campaign to reduce or eliminate debt:

  1. Use the church as an example.

Encouraging families and individuals to be financially free and teaching them how to live with margin is essential for the church. Provide personal financial management classes and encourage your members to free themselves of financial burden. A debt campaign sends the message that the church operates by the same teaching. Find more insights here.

  1. Include something tangible.

Debt campaigns focus on something that happened in the past. Many churches balance that “looking to the past” perspective by including something future-oriented and tangible. This could be a specific mission project or a low-cost facility enhancement. A word of caution here: without question, the primary focus in a debt campaign is eliminating or reducing the debt. Any “add-ons” should not interfere or reduce the potential for maximum results or disguise the main objective.

Keep in mind that the church does not have a choice about whether or not to pay its debt. It must be paid.

Your congregation knows it bears the burden of paying that debt. The only choice the church has is how to pay that debt. What is the best stewardship practice to deal with indebtedness? Eliminating or reducing debt is about changing the future of the church. It is about repositioning the church’s financial picture so the church can invest financial resources in ministry rather than in debt service. It is about effectively freeing the church to make future funding decisions. Changing the debt position in your church does not just impact ministry for two or three years; it repositions the church financially to reinvest in ministry for the next 10, 20, or 30 years. Reducing or eliminating debt is simply good stewardship, and a wise step that will deepen your congregation’s trust in your leadership.

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