Why You Should Consider Phasing Your Next Building Project

It doesn’t occur often, but occasionally I run across an article, webinar, or blog post with content so good I am eager to share it with you and expand upon it. Such is the case with a recent post from Tim Cool at eSpace, called “If It’s Phase-able, It’s Feasible.” I’ve known Tim for almost 15 years now, and have high respect for the work he does for ministries around the country.

Tim and I share a common frustration – seeing a set of well-intentioned church building plans sitting on a desk in the office that will never be built. Why? Because the church simply cannot afford to build what was designed.

How does this happen and, more importantly, what can you do to avoid making these same mistakes that lead to a similarly expensive and ineffective result? Let’s get to that in a moment. But first, some important background information.

HOW IT USED TO BE
Twenty-five years ago or more, it was fairly common that a church with a need to take on a construction project would do a three-year capital campaign to support it. As a result, the church building was built, being funded by the campaign, and the church incurred little to no long-term debt. Results in capital campaigns in those days averaged returns of approximately two times the annual income of the church.

TODAY’S CAMPAIGNS
Today, results in capital campaigns continue to return approximately two times the annual income of the church. However, that same church building project may require multiple campaigns and/or significant long-term debt to fund the project.

So what has changed? We raise the same multiple of income today as we did then. Church buildings built then were regularly funded with one campaign with little to no long-term debt, but today multiple campaigns and/or long term debt are required to build.

The difference is in the cost of construction. While the money raised has been consistent over the years, the cost of construction has climbed significantly, requiring a much larger construction budget when compared to yesterday’s dollar.

This emphasizes the need to carefully plan a project that is feasible – fulfilling the need to better equip the church for ministry, while insuring the ability to afford the project through monies raised and possibly borrowed.

Here are three key considerations for your next church building project:

1. Get everyone on the team early in the process.
I can’t find it in scripture, but when it comes time for a church to expand, the first (and often only) person called upon is the architect. The architect does exactly what he/she is tasked to do – help the church create new spaces to accommodate a growing ministry within the church. With a budget number in mind, they begin designing.

But wait – how much can the church afford? What could be raised in support of the project? What is the debt capacity of the church? What will it truly cost to build the plan as designed?

These are all questions the architect is ill-equipped to address. So, while you are selecting the architect, you would be wise to also select your contractor or a design-build firm, select your church lender, and engage your generosity consultant so you know your capacity for raising funds. (If  the plan contains much technology, engage the AVL firm also – you can spend a fortune in this area!) Get your project team in place early on, and you’ll save time, energy, and money in the end.

With this team in place you now have:

1. An architect who can produce an acceptable masterplan and design
2. A contractor who can provide more up-to-date and accurate cost projections to build the design
3. A lender who can do a debt capacity analysis, providing the church with needed amounts they can borrow if necessary
4. A generosity consultant who can conduct a giving analysis, implement a pre-campaign assessment study (is there support for the project?), and offer projections on monies that should be attainable in a successful generosity initiative

Now the church can now move forward knowing the cost of the project, and the path to fund it as designed. If the project is not feasible, you’ve figured that out before the architect goes to detailed plans and construction drawings, saving the church tens (if not hundreds) of thousands of dollars, the embarrassment of a failed project, and the tremendous loss of momentum in the church’s growth trajectory.

2. Work with the architect to create a project that can be completed in phases, if at all possible.
This is the point of Tim’s post: those projects that are phase-able are more likely to be feasible. Sometimes this is unavoidable – the project is what it is, and if you’re going to do it, it all has to be done at once. But often there are options in your building project plans that can help you create phases.

For example, in a recent worship center building project in my church, we had the main worship room as phase one, with considerable square footage also planned for new office spaces, conference room, counseling center, and the renovation of existing office areas into new discipleship and small groups spaces. As designed, the worship center was the primary phase. The new office wing would be shelled in, but left unfinished. When enough monies were available, that wing would be completed.

As it turned out, the campaign produced enough to build phase one, but a subsequent financial commitment that came in a few months later allowed the office wing to be finished at the same time. Had it not, the office wing could have been finished at a later date without delaying the much needed worship space.

PS – Sometimes your architect can get so locked into their original drawing, that it is hard for them to see options to phase or reduce original cost projections. Having a second or third set of eyes on the plan often presents alternatives that bring everything into budget. I’ve seen it happen more than a dozen times, especially if you’ve engaged an architect with little church design experience. So don’t hesitate to get a second or third opinion, should you come to the wall that says your project does not appear to be feasible. If you hire the right firm to begin with, they should have enough church design work in their portfolio that they can bring all possible options to the table. (If you need a recommendation, please call me!)

3. Don’t neglect to consider new expenses when that new space goes online.
From utilities to additional staffing needs, from possible debt payments to establishing additional capital reserves for eventual maintenance costs (Tim recommends 1-4% annually of replacement value), there are expenses beyond construction that many churches are not considering when determining feasibility. Don’t neglect those considerations or you’ll end up being “house poor” when those new doors open.

It’s been said that an ounce of prevention is worth a pound of cure, and that holds true with building projects. Set yourself up with your team early on, work your project into phases from the start, and consider additional expenses at the outset. Planning ahead of the game will help ensure your project’s success and also maintain the momentum of growth your church is experiencing.

What questions do you have about an upcoming building project? Let me know how I can serve you.