Business in church: first steps

22 August 2014

Our architect recommended that we contact you for advice on how to move forward with our idea for setting up a community business in our church - a business that will help to build links with and serve local people. Can you help us to get started?

YOU have a sensible architect, who recognises that there are plenty of issues other than physical design which should be addressed in your community business.

Feasibility is the second stage of your bright idea. One element of feasibility is the challenge of adapting your space for business use. On the whole, that business - even the community café or bookshop - will need at least some sole-use space, so that its assets are not disturbed or used in its absence. Apart from that, address the physical changes needed for the business, and informally consult those who need to give permission, through your architect.

With any kind of business, the space is only one element of feasibility. Here are some other issues to be addressed and resolved in a draft business plan. First, management should address the legal and financial structure of the business, remembering that: the business will have to have appropriately qualified staff; the structure should almost always be legally separate from the PCC, such as a charitable company, or you will create VAT problems for the church; the structure should allow the church itself to continue its ministry as normal. The structure should also protect the business for the future, allowing the business to thrive even when a new priest arrives.

A new business - even a community business - should have thorough market research, so that its ability to be viable and sustainable can be well assessed. Then, a marketing plan should be drawn up, based on actual research. This will be site-specific: that is, you can use the model from another church or community business, but the specifics must relate to your actual location. Think of this in the way you would if you needed to draw up a plan to convince a bank to give the business start-up money.

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The cash-flow projection used for feasibility consideration must be based on financial reality. Be realistic about management and staffing, and the market, and work to establish the business; in the early days, it will not be profitable, but will need working capital to get it going.

You would be wise to get someone with a business background that is relevant to the type of business, such as a café or pre-school. And make a thorough risk assessment in relation to income and expenditure, external factors beyond your control, marketing, new businesses moving in near by, and more.

It is important that you establish the financial relationship between the church and the business before you start. The church should do its own cash projections to ensure that the business can pay enough to the church under its lease to at least cover all the costs of its use of the building. That covers everything from heating, to cleaning and lavatory supplies; it is better, in view of the rising costs of utilities, to consider raising the rent each year at least in line with inflation on items such as utilities, so that the business knows from the start that it will face regular increases.

The next element of feasibility is to be realistic in assessing the source of your funds for adapting your church and establishing the building. Capital costs may be determined with your design team, and the revenue cost may be calculated from the business plan. If you plan to ask grant-makers to assist, research the kind of criteria that they will expect you to meet.

Only if the feasibility stage shows "Go ahead: it will work" will you have a development stage. If you are dependent on outside funding, the first element of the development may be a fund-raising programme. Remember that the more money you need to raise, the longer it will take to achieve.

Then you will commission the work of the architect, and also establish the fundamentals of the business. It is the stage during which you will regularly rework your business and management plan, as you will find many more concrete details that can be inserted, and financial items that can be put into place.

If you are depending on outside funding (and if you are being wise with your own money), remember that you may need to put design work out to tender, and later comply with detailed requirements of the funders.

Construction comes next, but the final phase is taking the community business through its early stages and teething troubles.

It is a long journey; so gird your loins, knuckle down, and celebrate each stage as an achievement.

maggiedurran@virginmedia.com

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