By Darren Thompson & Richard Koon
In our previous two articles, we worked closely with Bo Gutzwiller from Foothill Christian School in Glendora, Calif., to discuss some of the things churches should be aware of before starting a Christian school.
During our discussions, it became apparent that starting a school can be challenging — but also be incredibly rewarding and impactful to your church and community.
During a recent conversation with a borrower, it was apparent they were frustrated with their school operation and had been asking themselves, What did we get into? Surely, they are not the only ones who feel this way in the process.
That prompted us to consider some of the common pitfalls that churches could potentially avoid in these same situations.
Challenge #1: Finding balance between the school & church operations
This is one of the more common challenges we see. Prior to starting your new school ministry, it would be wise to consider how the new ministry will be structured. We see a lot of schools that are operating under the organizational umbrella of the church but keep separate financial records. They report up to the church but are responsible for covering their own expenses.
We have also witnessed churches and schools operating from the same budget and sharing costs.
There are pros and cons to each method. Choosing to operate from the same profit & loss statement can create unique challenges in determining the operational
efficiency and implementing financial accountability for each entity.
From a lender’s perspective, operating a school at break-even or better is a positive sign and could help the church qualify for better terms when funds are needed to expand or refinance an existing loan. Additionally, any efforts you can make to identify, separately, the income and expenses associated with different ministries is a positive step. It creates transparency, makes reporting easier, and helps the church define where it can allocate additional resources.
Challenge #2: Balancing facility use & other church resources
We often see daycare or school operations that outpace the growth of the church. Finding additional revenue sources might have been a reason you started this type of ministry in the first place; however, conflict can arise when the school requires more of the church’s space and resources, which could include rooms, parking, utilities and staff.
Identifying early how to share in these costs can alleviate some of the growing pains that ministries often go through. Returning to your original business plan (which is discussed in our first article) is a good place to start. Having a plan in place to deal with these issues will allow the ministry to adjust wisely.
Challenge #3: Balancing income pressures & expense control
Schools typically operate with higher expense ratios than churches, and it can be challenging to manage these costs while keep tuition affordable. More schools are looking for outside funding, which could come from individuals, corporate sponsors or grants. Searching beyond the traditional revenue sources can alleviate some of the pressure to continue raising tuition.
Keep in mind, as the level of education increases, so will your cost structure. With middle school and high school programs, you will have more administrators and teachers with credentials. Additionally, as more programs are introduced, the school should look at its current insurance coverage (elected and required) to make sure the ministry maintains adequate coverage.
Generally, growth can be very positive; however, your leadership should evaluate the benefits and the costs of expanding your school operation. For some, the best educational choice to achieve the balance you seek might be to offer a daycare only.
As witnessed by Bo at Foothill Christian School, everyone takes a different path in following God’s call on the ministry. If we take anything away from this series, it’s that God is working in amazing ways, using the Church to educate and offer Christian school opportunities to the children and youth in our communities.
We have tried to offer some guidance, relying on Gutzwiller’s real-life experience and what we see as a financial partner to hundreds of Christian churches, schools and para-church ministries.
If you have any further questions or if we can be of assistance to you as your church walks this path, please contact us at (800) 343-6328.
Darren Thompson is VP / Credit Services for America’s Christian Credit Union in Glendora, Calif.
Richard Koon is VP / Ministry Lending for America’s Christian Credit Union.