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Metrics that Drive Sustainability

Ministry isn’t about financial data.  However, numbers tell the story about effective governance, stewardship and strategic resources. What is measured can be managed.

Which metrics are most important for Business Administrators to watch that will drive effective use of resources?  Which metrics guide strategic objectives so that the church’s vision becomes a reality?  Which metrics define sustainable ministry? We identified 10 metrics that measure the following:

  1. Operational resources (effective ministry goals)
  2. Long-term resources (stewardship/governance management)
  3. Unrestricted reserves (sustainable resources)

Six operating metrics deal with money in and money out:

Metric #1 – Effective Donor Development – Donors, employees and volunteers serve as the church’s stakeholders.  Compares the number of donors with the contributions to create a monthly benchmark that defines your donor base.

Contributions divided by number of donors = Average donation

Monitoring this metric tells how effective the church is in creating stewardship/fundraising programs.

Metric #2 – Effective Fundraising Campaigns – Compares total fundraising costs to funds raised (i.e., contributions) to create a benchmark that defines the cost of raising $1 of support.

Contributions divided by total fundraising costs = Percentage of funds raised for every $1 spent on fundraising

Metric #3 – Effective Allocation of Resources – Compares expenses between direct/indirect ministry, administration and fundraising (i.e., supporting services).

  1. Direct ministry expenses divided by total expenses = Percentage of budget invested in church activities
  2. General and administrative expenses divided by total expenses = Percentage of budget invested in supporting the church’s programs
  3. Fundraising expenses divided by total expenses = Percentage of budget invested in raising support

Metric #4 – Effective Personnel Resources – Provides benchmarks for measuring compensation and related benefits compared to total expenses, plus defines the average employee cost to the church.

  1. Total compensation (including benefits) divided by total expenses = Percentage of budget invested in personnel
  2. Total compensation divided by number of full-time employees = average employee compensation

Metric #5 – Effective Facility Management – Provides benchmarks for measuring occupancy costs compared to total expenses, plus creating an occupancy cost per square foot of facility space.

  1. Total occupancy costs divided by total expenses = Cost of maintaining bricks and mortar
  2. Total occupancy costs divided by square feet = Cost of maintaining facility per square foot of usable space
  3. Depreciation expense divided by total expenses = Amortized cost of property acquisitions

Metric #6 – Resources available for short-term operations – Provides benchmarks to measure the number of months of operating expenses held in unrestricted cash.  (In other words, how many months can a church survive without income?)

  1. Unrestricted cash divided by annual operating cash disbursements = Number of months available to fund ministry and supporting activities.

Three metrics measure how long-term resources are invested:

Metric #7 – Effective use of External Financing – Provides a benchmark of financing costs compared to total expenses, plus the average rate of interest based on total debt financed externally.

  1. Interest expense divided by total cash expenses = Percentage of total costs paid to finance debt
  2. Interest expense divided by total debt = Average rate of financing
  3. Total debt divided by total assets = Percentage of resources dedicated to financing long-term assets

Metric #8 – Effective use of Ministry Assets – Provides a benchmark to compare resources invested in property, plant and equipment used in operations:

Total costs of fixed assets used in operations divided by total assets = Percentage of resources invested in brick and mortar

Metric #9 – Effective use of Investment Property – Provides benchmarks to compare resources invested in income producing assets:

  1. Total investments divided by total assets = Percentage of assets invested in public market
  2. Investment earnings divided by total investments = Percent of return from public investment pools

The final metric creates benchmarks for long-term, sustained ministry:

Metric #10 – Effective Governance of Ministry Assets – Provides benchmarks that define how resources have been invested and used in ministry activities:

  1. Unrestricted net assets divided by total net assets = Percentage of resources available for future operations
  2. Donor designated net assets divided by total net assets = Percentage of resources with restricted use

Remember – what you measure you can effectively manage and control for long-term sustainability.

Do you wonder how your church’s metrics compare to your peer group?  Join us on July 9th for our session at the national conference in Grapevine.  We will review these metrics plus reveal peer metrics based on total revenues.  If you’re interested in participating in our peer survey, please complete our questionnaire. Your metrics will remain anonymous, plus you will receive a peer report with your church’s metrics highlighted.

Numbers tell the story, your ministry story.

Rebecca M. DaVee, CPA

Salmon Sims Thomas & Associates