In my last post, we talked about Planning for Margin before diving into the budget process. [See that post here].

To start, let’s define the Margin Equation:

Total General Budget Offerings less Operations, Ministry, Missions and Compensation = Margin.

Let’s say these 4 areas were 80%. That’d leave you with a Margin of 20%. [Sustaining the Present]

20% of General Offerings would be left to fund reserves and pay down debt for example. [Preparing for the Future]

/Steps/

I believe the first area to nail down is Salaries and Benefits. This is most often the single biggest area of spending for churches. Establish this guardrail percentage 1st because to the extent it’s out of whack, it can limit what your church can do in all other areas.

It can also be helpful to identify acceptable ranges of each area above. At the end of the day, it provides a big picture view of where each of those expense areas have to be in terms of percentage, not dollars.

The next step is to compare your ideal % to where you are currently. (Note: realize it may take you a year or two to get where leadership wants to be). Your church may have to make some hard decisions along the way.

Indeed, Planning for Margin is very freeing because everyone knows the percentage ahead of time. For example, let’s say there’s a need to hire, but if that hire causes the Salaries & Benefits % to be outside of the acceptable range, then that hire can’t take place until it falls within the acceptable range.

Now, all that being said, it’s just a model…albeit a helpful planning tool. It’s not meant to put God in a box or be so rigid that no other way or vision is allowed. It’s just a tool to help clear a path for ministry planning.

In my next post, I’ll take a look at the model itself. [See that post here]