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Buying Power

Guidance churches can use for buying decisions.

Eric Guyer was on a mission. The executive pastor of Frontline Church needed to buy 300 new chairs for his downtown Oklahoma City congregation. After conducting research and selecting three vendors to make the first cut, Guyer asked each company to send one chair apiece for a trial run—more accurately, a trial sit.

The trial helped eliminate a poor quality product. "We knew one of the samples would have broken within the first six months," Guyer says. "If we had purchased 300 of these chairs, we wouldn't have been able to return them. But we only bought one and tested it for a week. That ended up being a good deal for us. That's why we don't buy anything in quantity until we've tried it out."

Frontline's "try before you buy" approach is one example of how a church can flex its buying muscle to get the best deal possible and to stretch a purchasing budget that is always limited, especially in difficult economic conditions. Whether your church is buying an item as substantial as a new building or as tiny as a box of plastic spoons, keeping a sharp eye out for the best deal will help guarantee the best stewardship of God's resources.

To add the highest degree of potency to their buying power, churches must successfully answer one basic question: How can we find the ideal combination of price, quality, and reliability of both the product and service of a vendor?

Reasoning Together

If you shop at a grocery store to buy buns for the church picnic, the price on those buns is non-negotiable. In many other purchasing situations, though, a church has flexibility in negotiating with vendors.

"The price is never the price. There's always wiggle room," Guyer says.

These negotiating strategies can help churches get great deals:

Let the vendor know what you need: Vendors are better able to hit the target if you provide them with a detailed list of requirements. This information can help vendors suggest the best fit from their roster of product offerings and prices.

"Give vendors honest, straightforward information to help them," advises David Fletcher, executive pastor of The Chapel in Akron, Ohio, and founder of XPastor.org, a website and ministry for executive pastors. "Tell the vendor you will be getting two or three quotes on this particular sale item and that you will be checking back with them."

Haste makes waste: Calvary Church in Grand Rapids, Michigan, needed to make a decision on how to purchase copiers. Randy Helm, the church's director of operations, says the church carefully explored all of its options. "We slowed the process down and took our time analyzing the situation. Each time we did that, they came back with a better deal," he says. "Not being too quick to come to a conclusion helped us."

Churches also should respect a vendor's time and resources. Because of this, negotiations are best made between decision-makers on each side. If you are truly prepared to buy an item and tell the vendor, "We can write you a check today," you may get a better price.

Stay connected to multiple vendors: Churches that have long-standing purchasing relationships enjoy a sense of stability, but run the risk of becoming "vendor blind" by being unwilling to look for better deals elsewhere.

"A good practice for leaders is to have multiple conversations with multiple vendors, even when they are not in a buying mood," says Phill Martin, deputy chief executive officer for the National Association of Church Business Administration. "If you're using a particular software program, it may be helpful to understand what else is out there and at least have conversations. That way, when you are ready to make a transaction, you have some understanding of what's on the market."

Operate within a budget: Always enter negotiations with two figures in mind—the maximum amount you can spend and the ideal figure you would like to pay. Stay in close contact with board members and other decision-makers. Be aware of your church's cash flow situation—tight money at a given moment may lessen the amount of money you actually have to spend.

Ask for a discount: "If there is a particular vendor we want to go with that is not the lowest bidder but has the better quality and service, we sometimes will give them a chance to come back with a better price. Most of the time, they will be able to do that," says Chip Vincent, business administrator for Burnt Hickory Baptist Church in Powder Springs, Georgia.

Ask for references: Short-term customers may not have worked with the vendor long enough to provide an accurate record of performance. Ask for references of customers who have worked with the vendor for three years or more, and ask for one reference that does not already appear on the vendor's prepared list of references, Vincent advises.

Stress that you are a non-profit organization: "We say we're a non-profit organization based in the city, and that we are looking for the best price, not for handouts or freebies," Guyer says. "We tell vendors that we are shopping that item and looking for the best deal."

The price is never the price. There's always wiggle room,especially with the economy the way it is.—Eric Guyer

The lowest price may not be a bargain: If you put all your eggs in the "lowest price" basket, the result might turn into a rotten omelet. "One time we went with the lowest bidder for copiers and the service was absolutely horrendous," Vincent says. "We had copiers that went down Thursday that were needed to print Sunday bulletins. But when we called them, they said they couldn't get here until Monday or Tuesday. Sometimes we would request toner, and they said they were out."

A local vendor may have a price that is two or three percent higher than the out-of-town company. But if your church requires a quick service response for repairs, the extra cost for the local company may be worth paying.

Bidding for Business

There is no universally recognized dollar threshold that triggers a bidding process for churches, although Fletcher estimates the average bid triggers at $2,500. Frontline asks for three bids on any item more than $300. Vendors who are members of Frontline get no inside track or special treatment, but proceed through the process the same way as any other vendor.

Churches should take into account the time spent managing the bidding process, Martin says.

"A church has to be very careful not to be penny-wise and dollar-foolish by spending a lot of staff hours doing bids on every piece of equipment. A minister of music needs a new soundboard, and must submit this huge request for proposal and get multiple bids. These go before a committee and the committee has to debate and vote on it. You can be foolish in setting up too many of these kinds of requirements," he says.

Lease or Buy?

Which option—leasing or buying—provides the best deal for a church? That depends on the item being purchased and the needs of each church.

If your church places high value on having the most current technology, leasing may provide the best deal. Two additional concerns, particularly when considering whether to lease or purchase vehicles, are safety and the cost of repairs. Leasing late-model vehicles adds an additional monthly expense, which must be weighed against the cost of repairing old vehicles and reducing the risk of their use.

Leasing can hold a financial management advantage, Vincent says. "It is easier for cash flow and budgeting purposes to absorb a small monthly payment rather than a large, one-time expense," he says.

One other scenario may favor leasing over buying: if your church is in a temporary facility and isn't sure what its exact equipment needs will be down the road.

On the other hand, leasing can motivate a church to focus on its monthly payments rather than the total expense. This scenario can result in overpaying, Fletcher says.

"The salesperson says, 'this is only $29.95 a month.' So you are tempted to buy more equipment than you need or can afford. A service contract is wrapped into the lease, but you haven't negotiated it. You just accepted it as part of the lease," Fletcher says.

If your church plans to keep an item for the duration of its reasonable life expectancy, buying can provide a better bargain than leasing. Fletcher says he advocates for churches to wait and save money to purchase equipment outright rather than lease it. Using this strategy, a church lessens its debt load and owns equipment that was purchased within its means.

Buying in Bulk

When considering bulk purchases, make certain that the bulk price actually is a discount. Compare unit prices, and when in doubt, ask for a quantity discount. Then make sure you buy items the church is actually going to use. "You may save 20 percent on a specific item, but if you don't need that volume, then the truth is that a portion of the product will go to waste," Martin says.

Inventory control is a key issue in bulk purchasing. Make sure there is enough space to safely and efficiently store items. Churches should constantly monitor the quantities of items on hand to avoid duplicate purchases.

"We got a real good deal on window cleaner and bought an entire pallet of it," Guyer says. "We put it in the basement of our church. Our janitors knew we had it. But ministry leaders upstairs needed to clean windows and were going out to buy it. It was accessible, but they didn't know it. Now the only bulk items we buy are those that are in front of people so they remember they have them."

Buying Together

An individual church can make decisions to purchase from an individual company, but other transactions can take place in cooperative ways. Churches can join retail co-ops and also can partner with other churches to form larger buying units.

Flying solo can be a simpler approach. For instance, if a church wants to purchase new office furniture, it can choose to engage in a one-on-one negotiation and try to get the best deal it can without incurring the expense of a membership fee or adhering to the rules of a cooperative arrangement. The open market may also provide a wider selection of product choices than co-ops or purchasing partnerships.

But cooperative buying arrangements work well for churches that can find the brands they like at lower prices. A group of churches may also be able to wield more buying clout than an individual church acting alone. Medium- to small-sized congregations in particular may benefit from such an arrangement. So can multi-site churches, which can purchase like a self-contained group.

"Many congregations are saving a lot of money doing that," Martin says. "It's important to understand that a co-op is a worthy vendor that may bring some leverage to your buying power that you would not have without the co-op."

A Collaborative Effort

From a church leadership perspective, the people charged with the responsibility of purchases also play a critical role in securing smart deals.

Ministry-level staff, church administrators, and gifted laypersons can form an effective purchasing team. These team members should operate from a well-understood central buying process. "Watch out for the tyranny of automatic pilot," Martin says. "You do the most convenient thing every time, but that may not give you the best cost savings."

Ministry-level staff members often know the needs regarding purchases better than an administrator and can purchase items to meet those needs, says Helm with Calvary Church. But the administrator still should exercise oversight.

"If we notice an over-expensed item, we might come back and tell them that this looks out of line or overpriced. We ask them to find a better deal because we know that somebody else has bought this elsewhere for a better price," Helm says.

In smaller churches, volunteers who are either skilled at negotiating or knowledgeable in a certain product or service area can be called upon to offer their expertise.

The Human Element

The search for great deals and expanded buying power is more than an exercise in mathematics, comparative logic, and negotiating tactics. Churches also benefit when they remember that purchasing is an enterprise involving people.

"There is a trust factor always present in buying situations," Martin says. "We tend to buy out of that relationship. We do this in our personal lives and in our churches as well."

For churches, the three keys to maintaining good relationships while getting great deals are to be tough, honest, and fair.

"You want to have high ethics, and a lot of businesses want that, too," Fletcher says.

Lee Dean is a freelance writer living in Michigan and a frequent contributor to ChurchLawAndTax.com.

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Posted:
  • March 15, 2010