We work with a lot of churches and ministries who are planning to scale. Outgrowing the size of your church is one of the best problems to have! But unfortunately, scaling is never as simple as just adding walls and a roof. It needs a lot of strategic planning. So much that we’re adding a second part to this blog. If you’re a church or ministry is considering scaling, here’s a step-by-step strategy:
Step 1) Letter of Intent
Negotiating your letter of intent (LOI) is your first step and arguably the most critical. Your LOI is the agreement between you, the tenant or buyer, and your landlord or seller. It’s in your LOI that you lay the foundation for your church in years to come. That’s why when you negotiate your LOI, your mindset needs to be in the future, not in the present. Get the terms you want for tomorrow, even if it means making temporary sacrifices today.
For example, let’s say your church is in a commercial building that has some vacant space you don’t necessarily need yet as you scale. You can negotiate in your LOI that your church needs to give approval for that vacant space to be leased out and that your church has the right to refuse it being leased. Why is this important? Because it allows your church to save that space for the future – additional scaling, renting out rooms, etc. Our tips:
- Negotiate a 30-day response time for any leasing approvals or refusals. While 5-day response times are typical, they aren’t long enough for a church or ministry who often needs elders or a board of directors to make a final decision.
- Work with experts to negotiate your lease. If you don’t, you’ll probably have to write a new lease after you scale because the price by square footage will have risen (rent goes up 3% every year). An expert will keep the rising square footage price, and more, in mind when negotiating your LOI.
Step 2) Speak with Your Leadership
While the LOI is important, it isn’t technically binding. This is because commercial contracts aren’t boiler plate like residential contracts. The perfect time to approach leadership in your church or ministry is after the LOI is written. That’s when you’ll draft the contract together which will inevitably need revisions. One of the most important things to include in your contract is tenant improvement. A lot of churches and ministries don’t know that landlords will often pay to build out space. It’s a win-win for the tenant and landlord. The tenant gets their building paid for, and the landlord gets to keep it if the tenant moves on.
Churches and ministries don’t always know what they can negotiate. That’s why working with experts is key. For example, a church can include in their contract that whatever they don’t use is a lease reduction over a number of years, meaning if they only use a portion of the money negotiated, they can pocket the rest to use for later.
We’re halfway done! Stay tuned for the second half blog coming out soon.