Undeniably, the Income Budget is the most important component of a Ministry Plan. Everything in the Ministry Plan hinges upon meeting the Income Budget. Even so, many churches don’t spend near the amount of time vetting the Income Budget as they do the Spending Budgets.
But why?
I think it might be because Tithes and Offerings are somewhat of a mystery area. So, what ends up happening a lot of times is just a cursory review of historical giving trends, the results of which ends up something like this – “Let’s just increase giving by a certain percentage based upon history” or, “Let’s increase giving at some factor of budgeted spending needs”.
Now, there’s nothing inherently wrong with the method above, I’m just saying there’s a better way.
Today, I’m going to show you how to build an Income Budget for your church that’s simple, yet based upon quantifiable “drivers” or factors of Church Giving.
There are two primary drivers of Church Giving – the # of Givers and $ Given per Household. Going a little deeper, there are a few other variables at work, such as – givers added, givers lost, givers whose giving levels change and then there are special offerings.
Without building the Income Budget with these primary drivers and variables, when there is a budget shortfall (or gain) – the answers as to why are somewhat elusive and subjective in nature.
As mentioned, there are really only two primary components that drive giving – the Number of Givers a church has and the Amounts Given per Household. Over the course of a couple posts, we’ll look at how to build an Income Budget with these two components. Today, let’s work on the first part of the equation.
4 Steps in Budgeting the Number of Givers
1- Obtain the Number of Givers and the Average Worship Attendance for the last three to five years.
2- For each of those years calculate the year-over-year Change in Attendance and the # of Givers
3- Calculate the Givers to Attendance Ratio along with the change in this ratio year-over-year
4- Based upon the analysis of this data, Budget the # of Givers by projecting the desired or expected Change in Attendance and the Givers to Attendance Ratio.
That’s it. Pretty straightforward.
See an example below:
Again, the budgeted givers of 188 in this example are based upon just two variables – expected Worship Attendance and expected Ratio of Givers to Attendance. So, it’s really quick and quantifiable. The rest of the data is there to help Church Leaders make sense of the the number of givers being proposed.
To the extent you don’t know the givers lost and added, see this post.
A Couple of Considerations:
1- Understand the Variables related to the Number of Givers:
a) The Number of Givers You’ll Lose
I would suggest taking a look at your historical churn rates. Use last year’s churn rate or an average of the last 2 or 3 to estimate the number of givers you would expect to lose in the coming budget year. If you are executing plans to retain more givers, you may consider budgeting a lower ‘targeted’ churn rate.
b) The Number of Givers You’ll Add
Use the expected churn rate to generate the number of givers that would have to be added in order to meet the budgeted total number of givers.
At the end of the day, working thru these two important variables serves as a reasonableness test for your Church Leadership to think and pray through. Not to mention, you walk away with 2 additional Key Giving Metrics to track against in the coming year – Givers Added and Givers Lost.
2- Establish a Giving Threshold:
The reason for doing this is annual gifts below certain levels may not be considered to be from “givers” – in the sense of an ongoing activity. As I’ve talked about before, annual gifts below $200 are typically one-time gifts. However, arguments can also be made to increase this threshold to $500 or even $1,000 a year, as giving levels above these thresholds typically represent those who are more consistent in their giving – a “giver”.
Obviously, the process of projecting the # of givers impacts dollars given – let’s look at the dollar side in this post.