Budgeting

Project Completion: The Summit Church

The McKnight Group Announces Completion of Remodel in Indiana, Pennsylvania.  

Recently completed was the addition of a two-story Children’s and Youth Building in addition to the remodel of existing classrooms into new foyer space.  The new Children’s and Youth Building consists of classrooms, children’s worship space, restrooms, and play area for the children on the first floor, and restrooms, classrooms, and worship space for youth on the second floor. 

The expanded lobby provides more room for the café and a new women’s restroom.  This project cost finished under the original budget and The McKnight Group was able to return those dollars back to The Summit Church for its ministries.

Construction Start:  July 2016
Construction Completion:  April 2017
Remodel: 3,660 SF
New Construction: 12,146 SF First Floor, 5,637 SF Second Floor

Owner: The Summit Church, Indiana, PA
Design/Build Firm: The McKnight Group, Grove City, OH
General Contractor: McKnight Development Corp., Grove City, OH
Architect/Designer: McKnight & Hosterman Architects, Inc., Grove City, OH

 

2017-07-28T18:00:34+00:00 July 28th, 2017|Budgeting, Church Design, Foyer Design, Press Release, Remodeling|

Get the Church Financing You Need: 4 Elements of a Comprehensive Budget

There are many steps your church should take when preparing to construct a new church building or undertake a church renovation project. One is getting a church funding plan. Without it, your project isn’t going to get very far.

Chances are you’d think—in the beginning, anyway—that the cost is equivalent to the amount of money needed to construct the building.

However, there is a good deal more to any church building budget, and if you want to optimize your church financing, you need to know what comprehensive budgets entail.

4 Elements of a Comprehensive Budget

Essentially there are four elements to a comprehensive church building budget. The largest piece—the third element, if you’re looking at this chronologically—we’ve already mentioned: The cost to construct the building.

The first part, however, involves what we call “site work.” This is preparing the ground where the church will be built. It must be level and solid enough to handle the weight of the building, plus water, sewer, gas, and electric lines all need to be laid before the building goes in. Furthermore, site work must also be done for the parking lots and sidewalks including their actual installation.

Next, the second element, which involves the various fees that must be paid for drawings, approvals, and permits prior to the building being constructed. There will be architectural drawings to be drafted and approved, along with structural, plumbing, HVAC, and electrical engineering components that must be individually planned and integrated into the overall design. There are also building permits to be issued and soil samples to be taken and analyzed.

The final, fourth, element is everything that goes inside the church building once it has been constructed. We call it “FF&E,” or Furnishings, Fixtures, and Equipment. This includes the furniture, appliances, all your audio/visual equipment and technology such as servers, WIFI, and alike.

If you walk through your current church building and pay attention to everything that’s been installed in every room, you will discover there’s quite a bit of FF&E that must be either brought over from the old building or purchased for the new.

Taking it all into account

For example, let’s imagine a roughly $750,000 church building construction project. We need to budget approximately $61,000 in fees, another $18,500 for inflation (because no church building is built in an instant, and costs will go up the longer it takes), and another $101,500 or so for FF&E.

This means the total budget for the construction project is over $930,000.

Why a Comprehensive Budget Boosts Church Financing?

When you, as church leaders, approach a lending institution for church financing, that institution wants to know you’ve done your homework. A comprehensive budget, covering all four areas, shows you’re well-prepared and improves your chances of getting whatever financing is needed to complete the project.

Find Out More

We have more resources available for you regarding church design, building, and renovation. To learn more about better budgeting, see this post. To learn more about church financing and a whole lot more, visit our website, and sign up for our free i3 webinars.

2017-07-06T04:21:22+00:00 July 5th, 2017|Budgeting, Church Building, Financing|

Craft Your Budget with Rising Church Construction Costs in Mind

Rising costsThere are multiple factors that influence the construction of a new church building or the process of a significant church renovation. Visioning, planning, budgeting, financing, and many more elements will impact the progress of your building project.

In this post, we want to add another to the list: church construction costs.

Understanding Church Construction Costs

You might think that constructing a church building would not be impacted by the ebb and flow of construction in other sectors, but that’s simply not true. For example, last year skilled labor was in short supply due to greatly increased industry activity. This made it more expensive to hire qualified labor, thus raising overall church construction costs.

This year we are facing increases in the price of many basic building materials, which are used in the construction of both residential housing and church building projects. For example, gypsum prices rose 5.3 percent in February. Gypsum is a non-combustible mineral that is ground into a powder and becomes the center of “gypsum board,” the standard material used for walls and ceilings in just about any building or renovation project.

Another contributor to rising church construction costs is a lumber trade dispute between the U.S. and Canada. This has resulted in a one-month increase of 4.8 percent in the price of softwood lumber, while costs of other types of lumber have risen by as much as 30 percent.

Items such as particle board and concrete are also rising in price, probably due to an increase in demand thanks to the ongoing residential construction boom.

Understanding the Church Building Planning Process

What do these church construction costs mean for your project? Let’s start by talking about the planning and budgeting process.

Church construction projects are not conceived in one week and begun the next. First, a need is observed and discussions are held to develop a church vision. Committees or teams are formed to study various issues and propose solutions, then develop a budget and timeline to implement those solutions.

But once you have your solutions, budget, and timeline, you still are not ready to put a shovel in the ground.

Your next step is to secure funds. This will probably entail a special fundraising campaign. Drawings and engineering specs must be completed so you can request permits from appropriate local agencies. Only once funds are in place and permits are granted can you finally begin to build.

Understanding the Impact of Inflation and Rising Costs

On average, about 18 to 24 months will elapse between the time you begin to identify your church vision and needs and the moment you finally start actual construction.

During this time, the budget requirements you envisioned a year or two ago may have changed. For example, a 2017 church building project envisioned two years ago could be impacted by both the labor and materials increases outlined above.

In fact, in the 47 years The McKnight Group has been building churches, we have consistently seen construction inflation outpace consumer inflation every year, except for the recession of 2008-2009. This means that if your budget is two years old by the time the first shovel hits the ground, you can expect your church construction costs to have increased by 10 percent from your original estimates.

Plan Now—and Take Action

Yes, this is not easy news to receive. We believe the lesson is this: No one knows with certainty what inflation is going to be in any given year. What we do know is that prices are on the rise and you need to make sure you are planning accordingly.

If your church is sensing a need and seeking solutions, don’t procrastinate. Begin the conversations. And feel free to contact us for assistance in thinking through the first steps of your church building or renovation project.

Also, don’t miss our ongoing i3 webinar series, which will provide additional support for you and your fellow church leaders as you consider a renovation or new building project. Simply visit our website and sign up—they’re absolutely free, so you have nothing to lose.

2017-05-09T11:18:50+00:00 May 9th, 2017|Budgeting, Church Building|

Key Capital Stewardship Campaign Concepts for Church Funding

fundraising_planA capital stewardship campaign can be essential to the success of any new church building or renovation funding process. In this post, we’ll share some key guidelines for campaign success, explain why you should hire a consultant, and talk about how a successful campaign can encourage lending institutions to loan you more for your new church building.

What is a Capital Stewardship Campaign?

A capital stewardship campaign is the strategic process through which you ask the members of your congregation to pledge money specifically for a major church building project. You don’t make this happen with a surprise sermon, asking members to commit a certain amount of money that day. You’ve got to prepare everyone—which is why it’s called a campaign.

Capital campaigns are generally four to six months long. First, time is spent in preparing the materials and mobilizing people within the congregation, then educating the entire congregation on the reason church funding is needed and how the vision and mission will be fulfilled with the new tools for ministry. Finally, you’ll ask members of the congregating for a pledge commitment. Traditionally, that commitment would be for a three-year term, but we’re finding that fewer people are willing or able to make a long-term pledge, so more churches are asking for a one- or two-year commitment instead.

The timing of your capital stewardship campaign is also very important. You don’t want to do the public campaign itself during the summer when many people are away on vacation, or during winter, when everyone is focused on the holidays. These are the times of year when you should start planning the steps of your campaign. The best time to actually run the campaign is in the fall (September through November) or spring (February through May) and have it end right before or after Easter.

Who Should Run Your Capital Stewardship Campaign?

Sometimes consultants get a bad rap, and there are certainly consultants that don’t deliver on their promises. But statistically, church funding consultants are worth their pay, and we strongly encourage churches to use them. In fact, you can find a short list of established capital campaign organizations on our website. It’s there because we believe that any church leader can benefit from having a conversation with them about funding ideas.

Here are the current statistics: Consultants will raise, on average, one-and-a-half to two times your church’s annual budget in capital pledges. Churches that don’t use consultants only raise about half of the church’s annual budget. So if your annual budget is $500,000, a consultant can help you raise between $750,000 and $1 million, while doing it yourself could get you just $250,000. That’s a huge difference.

What Do Lenders Think of Capital Stewardship Campaigns?

Here’s another reason to hire a professional: Lending organizations are more likely to trust pledges made in a consultant-run stewardship campaign than in a church funding campaign you’ve run yourself. This matters even more when you understand that lenders generally don’t want to include pledged dollar amounts in their calculations of the amount they’ll lend for your new church building or renovation project. If they do include pledge funds in their calculations, they’re going to do it at a discounted rate, such as seventy, or even sixty, percent.

Today’s shorter capital stewardship campaigns are not such a bad idea, and can even work out well in this aspect. If you have a one-year campaign, and you approach the lending organization once you’re finished and have the first round of donations in hand, you’re going to get more funding. Lending institutions usually calculate maximum loan amounts based on around three times your church’s annual revenue. The collected cash from your capital campaign will count in that revenue calculation, significantly increasing the loan value you would have received without it.

Church Funding Planning Begins Now!

It’s never too early to begin thinking about a capital stewardship campaign. If you’re already talking about the need for a larger or updated building to fulfill your church vision, it’s time to start planning now. If you’re not quite at this stage in your church financing journey, our free i3 webinars can also help you understand all the factors involved.

2017-01-10T12:50:50+00:00 January 10th, 2017|Budgeting, Church Building, Financing, Uncategorized|

Does Your Church Architect Have the Church Building and Budgeting Expertise You Need?

church-architect-building-budgeting-expertiseOver our last several posts, we’ve shown you some of the elements needed to make the best possible presentation when seeking financing for a new church building or remodeling project. But the fact is you’re still pulling together different pieces of information, and the people providing those pieces don’t always understand each other’s perspectives.

Shortcomings with Using an Architect Inexperienced with Churches

For example, in our most recent article we talked about how schematic design studies are key for getting the right budget information to a lending institution. But your average architect doesn’t necessarily have all that estimating information. Here’s how our own Philip J. Tipton, Vice President of Architecture, explained it in an i3 webinar:

I’m a registered architect, so I’m certainly not intending to insult my profession. But I will say this: I don’t personally believe that architects are the best estimators. We’re good at what we do, but the people who really know day-to-day costs, who just have a pulse on what things are really costing, are the contractors and subcontractors. They know every day what prices are doing. Architects certainly have friends that we can call, networks of people, but we’re not doing estimating in the capacity and detail that contractors are. So there’s a big risk, in my opinion, if the architect is the only person on your team leading up to the point of bidding—a risk that potentially you might be over budget, and then you might have problems.

Design-Bid-Build versus Design-Build

So how can you avoid the problems Philip talks about? The answer is by using a Design-Build approach to your church building.

When an architect works separately from the builder, it’s usually in a traditional Design-Bid-Build environment. We discussed this in-depth in a prior post. The process involves having architects and engineers create a full set of drawings, then sending those drawings out for potential contractors to bid upon. The property owner then selects one of those contractors to construct the church building.

The problem with Design-Bid-Build is that you’re dealing with two different companies that don’t necessarily work well together or understand each other. Cost overruns are usually blamed on “the other side,” and your budget can end up in tatters by the time construction is finished.

With Design-Build, both the architect and the building contractor work together on the project from the beginning. This minimizes the chance for miscommunication and the “blame game” from occurring.

Keeping Your Church Building Budget in Line

It takes a special relationship in the building process to get the best information, and the design-build relationship does that. The church architect can consult with his or her construction colleagues on the actual current costs of various elements being included in the drawings. This means your budget is constructed with accurate information right from the start.

We think Design Build is better, especially when the architect and builder are under the same roof. And it’s a process that’s certainly worked very well for our firm, as we’ve been successfully completing church building projects for decades. That experience has uncovered a number of other advantages to Design-Build in addition to good budgeting.

Learn More with Us

We will share more about those advantages in our next post. Meanwhile, we invite you to visit our website, where you can sign up for our free i3 webinars and discover more of the lessons we’ve learned as a successful design-build business.

2016-08-17T09:13:03+00:00 August 17th, 2016|Budgeting, Church Building, Uncategorized|

Church Financing Tips: Better Budgeting

BudgetA well-built budget is key to thriving financially, whether it involves one’s church, business, or personal life. And when it comes church building and getting the project paid for, a realistic and well-thought-through budget will make the loan application process much easier as well.

Refining Your Church Design’s Big Picture

Naturally, any lender is going to want information on exactly what you’re planning to do with your new church building or renovation project. You can’t just tell them, “We’re going to build a new building that includes a worship space, offices, and five classrooms.” You must communicate what you’ll be doing and how that will be reflected in your new building, from the ministries happening in each of those spaces to bathroom capacities and the circulation around the building.

Better Drawings = Better Budgeting

This is why we always recommend completing schematic design studies before you submit your application to a lending institution. The more the design reflects the ministry you will be doing the better you can estimate the cost to complete the project.

If you were to construct a budget without this information, industry experts say your budgeting could be off by as much as 30 percent on the low side or up to 50 percent on the high end. Lending institutions are not going to want to work with numbers as uncertain as that.

Of course, drawings add some upfront expense—but the fact is you’re going to need that information anyway. Here at The McKnight Group, we take the time to examine churches ministry needs so that we can complete schematic design studies that will include specific budget information.

Our work provides enough detail that our budgets are consistently accurate, with a variation of 5% under or over the budget. Banks are happy to work with budgets in that range and trust the numbers.

So What’s in Those Budget Numbers?

The schematic drawings we create don’t just include information on the cost of the building itself. As we’ve discussed in a prior article, there are four areas that need to be considered for your church financing budget: direct building costs, site prep costs, fees, and FF&E.

FF&E stands for furnishings, fixtures, and equipment, and it’s the most overlooked area when church leaders don’t involve construction professionals in their budgeting and church financing process.

Think for a moment about the requirements for creating a welcoming restroom. You don’t just need to estimate building costs like toilets and good-looking stalls to separate the toilets. You need lights and sinks and mirrors.  You will also need furnishings and equipment like soap and paper towel dispensers, and wastebaskets for those paper towels. If you’re going to have a powder room, you need comfortable chairs and couches with end tables; you need fashionable lighting, mirrors, and flooring; you need more wastebaskets, and maybe some stylish silk flowers—that’s a lot to consider for outfitting just one restroom.

Then, when you begin to think about your worship space, it gets a lot more complex. Yes, there’s the seating and the flooring and the stages and a production booth.

But there’s also all the different types of lighting, sound systems, and wiring, as well as projectors and screens, seating on the stage, musical instruments, and their connections into the sound system … the list goes on. Repeat that process for every room in your new or renovated church building, and you get a sense of why the budgeting process involved with church financing is complicated.

Involving Church Building Experts in Your Church Financing Process

This is why we believe church design studies are critical to the success of any church financing process. We’ve been in the business of building churches for more than 45 years, so we know about the FF&E details, as well as everything else you need to build a comprehensive budget estimate for your church building project. To learn more, visit our website and sign up for our free i3 webinar series, or contact us today with your specific budgeting questions.

2016-08-10T11:23:18+00:00 August 10th, 2016|Budgeting, Church Building, Financing, Uncategorized|

Church Building Budgeting Principles

church-building-budgeting-principlesWhether or not your church building committee decides to invest in a feasibility study (a topic we recently covered and something we believe is a wise investment in any future church design or building project), there’s a lot to consider when crafting estimates in a church’s building budget beyond the architectural and construction costs. With that in mind, here are some helpful budgeting tips to help ensure your next church building or renovation project goes smoothly every step of the way.

It’s Not Just About the Church Building

Of course, the church building itself will usually represent the bulk of a project’s cost. But there are other expenses that also must be factored into a building project, and since they represent a smaller percentage of the overall costs, it’s possible they can be overlooked.

Fees, for example, are one area where costs can grow quickly. These can include building permit fees, utility fees, permit fees for various types of site work, as well as architectural and engineering fees.

Speaking of site work, that includes another set of costs most church leaders wouldn’t think of: dirt work—to prepare the land for building, parking lots, sidewalks, etc. You also have to allow for parking lot lighting, as well as water, gas, electric, and sewer connections that might need to be installed or upgraded.

Don’t Forget the FF&E

What’s FF&E, you ask? It stands for furnishings, fixtures, and equipment, and for a church these items can get pricey. Think about the electronics alone: sound systems, video systems, camera equipment, not to mention lighting.

Furnishings, of course, include not just chairs, tables, and podiums, but also risers and the equipment you need to move all that stuff around if you want to change your worship space into, say, a banquet room.

Professional Assistance with Budgeting

Fortunately, you—and we—don’t have to go it alone when it comes to budgeting. There are organizations such as the American Society of Professional Estimators or the American Association of Cost Engineering that can provide assistance.

These folks have developed different types or classes of estimates based on the work being done or progress of a project. Estimates are based on industry standards for everything from basic conception through change orders, and include what percentage of estimates can be defined.

At the budgeting stage, before a build, that category tops out at only about 40 percent of the total estimated cost, meaning that 60 percent will be relatively unknown early on.

This uncertainty is why, when we develop preliminary estimates along with our church designs and blueprints, we advise that you include a budgetary buffer  based on your design’s level of detail. That helps to ensure you develop a sufficient funding plan and provides helpful information you can use when speaking with loan officers or fundraising professionals.

The More Information, the Better

So when it comes to planning a new or renovated church building, remember that there’s more to the bottom line than just the cost of the building itself. And there’s more to our work than just designing and building your church.

We want to provide you with the best in customer service, which is why we share so much information through these articles and our free i3 webinar series. As a new year begins and a new series of webinars gets underway, we hope you will remember to visit our website and sign up for more insights into the church building process.

2015-12-30T12:02:48+00:00 December 30th, 2015|Budgeting, Church Building, Uncategorized|