The Feasibility Study
Essential in the Creation of
Cooperatives
BY
BILL PATRIE
EXECUTIVE DIRECTOR
COMMON ENTERPRISE
D EVELOPMENT CORPORATION
Feasibility Study - Examples
Feasibility studies can focus on production, marking, geographic areas and products.
Examples from my works have included…
The feasibility of…
 a soybean oil based bio-diesel plant within a 100 mile radius of Fargo, ND
 a canola oil based bio-diesel plant at Minot, ND
 a beef based meat canning plant at Bismarck, ND
 production and processing and marketing of natural beef using a New Zealand style processing plant
 marketing natural lamb products
 finishing feeder pigs to finish weights in Southwest North Dakota using barley
 crushing sunflower seeds and marketing the oil
 burning city garbage to produce steam to heat 66 businesses in Devils Lake, ND
 using wind driven generators to power a rural water system on the Turtle Mountain Indian Reservation
 the residents of a mobile home park purchasing the park from the owner and operating it as a resident owned
community
 a beef feed lot in Southwestern North Dakota
 a beef feed lot next to an ethanol plant in North Eastern North Dakota
 a wheat gluten plant
 cracking and drying eggs and selling dried egg products from a plant in Devils Lake, ND
 processing and marketing beef using the Halal protocol
Feasibility Study - Fundamentals
 Timing is everything.
 Needs to follow the full development of the steering
committee and the project champion.
 Requires an “owner” commitment—skin in the
game.
More examples of feasibility studies…
Pelleting of alfalfa—multiple studies
The conversion of barley to ethanol
The conversion of corn to ethanol
The co-location of a corn ethanol plant to a gasoline refinery
The co-location of an ethanol plant with a coal fired power plant
The production and marketing of tilapia fish using the cooling water of a power plant
The production and wholesale marketing of roses in a greenhouse heated by waste heat from a power plant
The production and marketing of farm raised tilapia fish
Feasibility Study - Fundamentals
 Passive feasibility studies are a waste of time—who
wants to know the answer and how they intend to
use it are as important as the question of feasibility
itself.
 Requires a methodology and a discipline akin to
engineering and the scientific method.
 Must be an interactive learning process for the
steering committee.
Feasibility Study – Fundamentals
 Feasibility studies age quickly—be prepared to act on
the study in 60 days.
 Use a firm with an honest reputation—it is very
expensive to have a firm learn on your money.
 Use the learning as you are learning it to fashion
market entry strategies (who might be our partners,
competitors, suppliers, etc)
Examples of feasibility studies…
The aggregation and cooperative marketing of feeder calves on the Ft. Berthold Indian Reservation
The production and marketing of hogs in hoop barns on the Spirit Lake Indian Reservation
The production and marketing of heirloom seeds on the Spirit Lake Reservation
The production, processing and utilization of vegetables through tribally controlled institutions at Spirit Lake
The collective distribution and retail marketing of Pride of Dakota member products
Feasibility Study – Learning about the business
 Purpose is learning at two levels.
 Do I want to be in this business?
 Do I have the opportunity to get in?
 Is entering this business something average, normal,
everyday people can do our does it require skills and
resources beyond our ability to procure?
Examples of feasibility studies…
The production, processing and marketing of rabbits in the United States and Canada
The purchase and operation of US West telephone service lines by telephone cooperatives and independent phone
companies
The manufacture and marketing of wheat based tortillas in eastern North Dakota
The formation of a pork producer cooperative to supply and process hogs for Cloverdale Foods, Inc.
The value of the Cloverdale label to retail grocery stores
The discounted future earnings value of Cloverdale Foods, Inc. Minot packing plant
Feasibility Study - Process
 Gaining industry knowledge by a consultant is
necessary.
 Self studies can work if those performing the work
are committed to objectivity (natural food
cooperatives) and have a study template.
 Beware the conflicted consultant (engineering
firm, building contractor, equipment sales firm,
etc)
Feasibility Study – Learning about the Industry
 Pay attention to the operating parameters such as the
minimum size, the amount of equity and debt, the skill
levels of management and staff.
 Is the industry expanding or contracting?
 How about the changes in technology?
 Who are the existing players and how will a new
company be accepted?
Examples of feasibility studies…
The feasibility of milling corn into high fructose corn syrup
The feasibility of growing storing and marketing potatoes in Stutsman and surrounding counties in Central ND
The feasibility of producing and marketing frozen French fries in Central North Dakota
The feasibility of a pasta plant in Northwest North Dakota
The feasibility of a pasta plant in the Northern Red River Valley of ND
The production and marketing of partially baked bread from eastern ND
The production processing and marketing of garlic
Feasibility Study - Process
 Sometimes a pre-feasibility study is the better
approach—do we really want to build a ship in the
desert?
 Studies should be sequential—market studies
precede—the study of the technology to produce a
project.
 Establish go-no go-decision points in the study with
the steering committee.
Feasibility Study - Process
 Ask for and get the research materials—notes,
interviews, consulted publications etc.
 Do the feasibility study with the business plan in
mind—can we generate return on equity or return on
investment projections?
 Test the assumptions in the study with other
industry experts


Do the market prices look correct?
Are the processing costs per unit correct?
Feasibility Study - Process
 Seeing is believing—I like to take steering committee
members on marketing interviews conducted by the
consultant.
 Visit competitors operations—always be looking for
partners.
 Involve your potential banker in the design and the
conduct of the feasibility study.
Feasibility Study – Risks & Consequences
Risk are taken without proper planning
• Significant financial loss can occur
•
•
Failure to do the feasibility study
Negative results are ignored
• Business fails to be operational
• Stress of failing business can take personal toll.
Feasibility studies don’t guarantee
success but can help to identify
opportunities that create jobs
and new wealth.
Dakota Growers Pasta Company
Carrington, ND Plant
Feasibility Study – Conclusions
 Always have steering committee members with some
personal financial stake in the study
 The feasibility study is a learning experience that
answers the questions 1. Do I want to be in this business?
2. What is the best way to enter the business?
 Ownership and leadership gel around the feasibility
study and makes business planning possible
 Call it by another name such as “an opportunity
assessment”, involve steering committee members in
conducting the study to reduce costs, but never skip this
essential step in cooperative development
Feasibility Study - Conclusions
 Designing the study is hard work—allow enough time
for it.
 Raise the necessary money to do the study right

USDA grants, state programs, steering committee investment,
other cooperatives, utility companies.
 Interview consultants and select the best, not just the
cheapest.
 Have fun with the study—it is a great way to learn
about an industry and to get to know the steering
committee members.
Thank you!
Bill Patrie
[email protected]
www.cedc.coop
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Essential in the Creation of Cooperatives