February 19, 2013
Big Churches Expect Big Things in 2013
Gleanings from Leadership Network’s new economic outlook.
Leadership Network released its 2013 economic outlook this morning, relaying a mostly upbeat forecast for the nation's big Protestant churches in the year ahead.
The organization created the report, written by Warren Bird and Stephanie Jackson, by combining responses from two surveys it conducted last year with large-sized churches.
The optimistic outlook is a contrast to the for-profit Atlas of Giving's recent projections of harder times ahead for religious giving in 2013.
The following 10 highlights from Leadership Network's report are especially helpful for church leaders who oversee budgets, staffing, and other management responsibilities, regardless of church size:
1. Size helps weather storms better. This isn't particularly surprising, but it's noteworthy nonetheless. Responding to a question about the effects of general economic struggles across the country, "67% of churches with attendances of less than 1,000 reported some level of negative impact," while "57% of those with attendances of 1,000-1,999" said the same, "while only 50% of those with attendances of 2,000 and higher," said the same.
2. Church foreclosures happen—rarely. Sometime in the next few weeks, media outlets will report on 2012 data tracked by CoStar Group, a national commercial real estate firm, regarding foreclosures of churches. The past two years, the coverage trumpeted record numbers. While there is undoubtedly an increase, some perspective is in order: For instance, CoStar reported that 138 churches were sold in 2011 by banks. That's a miniscule percentage when compared to the more than 300,000 churches operating across America.
Leadership Network's report affirms the rarity of these situations: "Church foreclosures have shifted during recent years from virtually non-existent to occurring on rare occasion, almost all influenced by other problems such as major conflict, moral failure of the pastor or significant debt loads." In terms of size, Leadership Network also notes "very few mega-churches have experienced financial foreclosure."
3. Giving increased for many in 2012. Among 185 megachurches, many reported increases in giving for 2012. Specifically:
- 24% reported increases of 1% to 5%;
- 2% reported increases of 6% to 10%; and
- 11% reported increases of 11% to 15%.
We are asking the same question for churches of varying sizes through the 2013 State of the Plate survey. Results will release this spring.
4. The "80/20" rule applies. Leadership Network attempted to probe further on the percentage of households within a church that give, and how much of a church's overall giving depends on those households. Leadership Network found that the so-called "80/20 rule" seems to hold true. Its research showed 69% of churches said 70% or more of their overall giving depends on 20% of the households in their church.
5. E-giving continues to grow. We've covered the continued growth of electronic giving, and Leadership Network’s report shows the trend remains. A majority receive 20% or less every week through e-giving tools; that is notable, but not nearly as much as this next tidbit: One in five megachurches say they receive between "31% and 60% of their offering" through electronic means.
6. Unrelated ventures yield little revenue. Churches can generate additional income from a variety of ventures, such as cell phone tower antennas permitted on their roofs, church-run schools, daycares, coffee shops, and bookstores, or building-use fees. Leadership Network's report, though, suggests few total dollars actually come from such ventures. "Very rarely does a church’s bookstore or gym or café generate a positive cash flow. It is even less likely for a church’s radio or television ministry to produce net income," the report says.
Leadership Network found churches of 1,000 to 1,999 people raise 91% of their overall budget from giving, and those of 10,000 or more raise 99% of the budget that way. In other words, unrelated business ventures, which often trigger taxable income and other legal questions for churches, bring in a sliver. Those results underscore an important point: Churches should only pursue business-related opportunities that advance ministry objectives—not because of any perceived potential help for their top or bottom lines.
7. Debt levels don't heavily affect outreach spending. Among megachurches, 24% devote 20% or more of their budgets to outreach, such as soup kitchens and other community initiatives. Another 24% spend 15% to 19%, while 36% spend 10% to 14%. Leadership Network found those spending levels held steady, regardless of debt levels for the churches.
Our recent Outlook on Outreach research also explores the work churches are doing locally, nationally, and internationally, including budget expectations and realities.
8. Keeping cash reserves. The average cash reserves (cash available in reserve to spend) for 54% of megachurches was "2 or 3 months," Leadership Network said. In general, that average aligns with recommendations from our Essential Guide to Church Finances, which encourage churches to maintain at least three months' worth of cash reserves. We're looking at the same question for the 2013 State of the Plate, so we'll see if the reserves figure holds steady this year.
9. Half the budget pays people. Among megachurches, 50% of budgets cover salaries and benefits for pastors and staff. Leadership Network makes this interesting observation: "For every $100,000 in a church's giving, there will be one more person on the church's paid staff. So a church with a general fund giving of $4.4 million will have an average of 44 paid staff members." It's an interesting metric for any size church to consider.
10. Many expect raises and new hires. Leadership Network said 18% of respondents plan 2% raises in 2013, while 35% plan 3% raises, 11% plan 4% raises, and 8% plan 5% raises. Leadership Network also said 75% of churches plan to hire in 2013.
We're currently tracking pay levels through our biannual national church compensation survey. Results will release this fall.