Church economies

I am not a businessperson. I have invested my entire adult life in the church. What I know about running a for-profit company is primarily theoretical. I have very little practical experience. I am a partner in a very small LLC that was formed to manage a piece of property that belonged to our parents. It is not, however, focused on profits, but rather on maintaining a break-even enterprise to maintain the property. Outside of a very modest reserve, all income is reinvested in the property.

One of the tasks I have had to do over and over again is to teach very competent and intelligent business people that a church doesn’t run like a business. People who are very successful and very good at running businesses often try to apply principles that make them successful in business to the operation of the church. These ideas generally need to be significantly modified in order to be applied to a church.

For example, a business needs to carry significant operating reserves to be able to respond to ups and downs in the market. The basic principle of “buy low, sell high” requires that cash be available to make purchases during market downturns. A church, however, doesn’t play the market. While we try to be prudent and keep costs low, the things that a church consume are, for the most part, purchased as needed. A church’s highest expenses are salaries, utilities and the costs of owning a building. There are a few churches that don’t go the route of being building owners, but all of the churches I have served have had building expenses as a large slice of their operating budget. There are other expanses that support programs, but they are small by comparison with salaries, utilities and building. Our income stream, unlike a business, however, is the generosity of our members and friends. We do not set the price of any services. We gratefully receive donations. And donors are not motivated by large reserves. I try to help people understand that the real reserves of a church are not financial, but rather people. If there is a deep need, we ask our people to respond and they will. Jesus was frequently reminding his disciples not to be afraid of the future and to not worry about the details. This faith approach is what works best for churches.

The churches I have served have all had simple budgets. We operate as a cash business. What we do not have, we do not spend. What we have we spend according to our priorities.

Other than mortgage debt, churches really have no need of debt. The reality is that interest is expensive and a luxury that churches often cannot afford. This is not a hard and fast rule and there are, I am sure, times when it makes sense for a church to incur debt, such as making a major building expansion or acquiring new property. However, for the most part the concept of leveraging a purchase is not a good idea for a church.

Churches really don’t have a product. We exist to serve and there is no way and no reason to put a price on what we do. How can you translate the process of walking with another person in the midst of grief into numbers? What price would you apply to raising our children in faith? What is the value of Sabbath? These are not things that can or should be measured in dollars and cents.

As a brief aside, it is my observation that government also does not run like a business and this is also due to the nonprofit nature of government. Government exists to serve the people not to make a profit. I am suspicious that too many generations of governmental leaders who try to run government as a business are a big factor in the ever-increasing debt piled up by our government.

I have often said that rather than apply a business model to a church’s finances, it is helpful to think of a church more as a family. A prudent family will have some kind of savings, but it will also dip into savings for significant expenses such as the downpayment on a house or a college education. The savings exist for a greater purpose. Families, like healthy churches, focus on the future. The education of children and planning for retirement are important factors in family finance.

All economies, whether business, church, government or family take place within a certain set of larger cultural assumptions. One of the assumptions that dominates the US economy is that growth will continue. The belief that continued growth is not only possible but desirable dominates so many decisions about money in our time. The future will have more goods, more profits, more jobs, more people. And there is certainly evidence that growth is continuing. Just keep count of the number of people in the world and growth is obvious. But we also operate in a world with finite resources. There are only so many fossil fuels. When they are gone they will be gone. There are only so many precious metals. The limited supply is what makes the price go up and up. We only have one atmosphere and a finite amount of water. We are only just beginning to take the limits of our resources seriously after many generations of operating as if they were infinite.

While there are still some churches that are based on continual growth models as was common in the 1950’s, most mailing congregations have learned to adapt to a different way of thinking. We understand the sociology of religion and do not expect that we will continue to have more an more members year after year. We extend an extravagant welcome out of our calling to serve others, not out of a belief that we will somehow be bigger and grander institutions in the future. In fact, many congregations will continue to experience decline in membership. This does not, however, mean that they cannot be effective means of ministry. It does meant that we need to adjust our way of thinking and our expectations.

The most important factor in running a church, business, government or family is the ability to learn and to adapt to changing times. Churches, however, as well as prudent families, governments and businesses understand that most important is not money or resources but rather faith. We exist because we believe.

Copyright (c) 2018 by Ted E. Huffman. I wrote this. If you would like to share it, please direct your friends to my web site. If you'd like permission to copy, please send me an email. Thanks!