If you have been following along, I have been doing an on again off again series from an article by Strategy Planning guru Verne Harnish www.verneharnish.typepad.com and www.gazelles.com. He mentions 4 decisions that need to be made when thinking strategically about your organization. Here is the final decision:
CASH DECISIONS
And the last challenge is Cash. The first law of entrepreneurial gravity is “Growth Sucks Cash.” We encourage companies to calculate their Cash Conversion Cycle (CCC) which measures companywide how long it takes between when you spend a dollar (marketing, design, rent, wages, etc.) until you get that dollar back. In the early days of Dell, the CCC was running 63 days and caused Michael to almost run out of cash. By focusing on decreasing this cycle, today they are running close to minus 35 days. This means they generate more cash the faster they grow, which is why they have over $9 billion in the bank, up from $6 billion when they got in trouble. We believe all growth firms can accomplish this or at least dramatically improve their CCC giving them sufficient internal cash to fuel their growth.
I suggest executives read Neil Churchill’s famous Harvard Business Review article entitled “How Fast Can Your Company Afford to Grow” which provides the formulas for calculating your cash conversion cycle.
My Comments
Let’s start with the question raised in the Harvard Business Review article – but change it to: How fast can your church afford to grow? Though the forces and drivers are different in the church, the question is still a good one.
For instance, can you afford to bring on a new staff person who will dynamically affect the growth of your church? The simple answer is “Yes”! But the more important question is how long will it take before the growth happens? In other words, if you knew this new staff person would grow the ministry in such a way to bring in 20 families within the first year; then, you need to have enough money to pay for his position for a year or so. These new families coming in will begin to support the church (particularly the area of ministry that brought them in). So, by sometime in year 2 this new staff position will begin paying for itself.
But what if other factors slowed this growth? What if you knew it would take three years for this position to begin paying for itself? Would you still be able to afford the investment? All of this sounds so unspiritual, but it was Jesus who said: “Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it? For if you lay the foundation and are not able to finish it, everyone who sees it will ridicule you.” (Luke 14.28-29).
The current global financial situation is causing a lot of churches to re-examine their budgets, and make difficult decisions about staffing and funding ministries for the future. More and more churches are trying to find ways to do more with less. (I touched on the staffing issue in the post Four Decisions Part 1.)
What I don’t understand are those churches that are in decline, but holding on to a considerable amount of money “for a rainy day”. Folks… it’s raining! Why not use some of that money to invest now in the growth of your church? (You remember the parable of the talents don’t you?)