La Crosse, Wisconsin
Food Co-op Organizers Conference
4 Cornerstones in 3 Stages
November 2-3, 2012
Food Co-op Initiative, Cooperative Development Services, University of Wisconsin
Center for Cooperatives, and North Dakota Association of Rural Electric Cooperatives
Desired Outcomes:
Participants Understand:
‘Four Cornerstones in Three Stages’ and the Process
of Assessing Feasibility
How to Develop and Use a Timeline
Creating an Effective Organizing Process
The Importance and Use of a “Sources & Uses”
Budget and Financial Pro Forma
How to Assess Progress and Address Critical Issues
Participants are focused and energized to take on the
next steps in creating their co-op.
Four Cornerstones in Three Stages
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An overview article of the Food Co-op 500 Model is available at:
http://cdsfood.coop/fourcorner
Cornerstone: Vision
Vision:
“The articulation of hopes and dreams of a founding group”
Broad, Long-term, Inspiring and
Specific and Local
Refined as the emerging co-op moves through the
development stages
Includes the co-op as a solution to a common problem or
need
Core values and purpose
A vision of the process of developing a food coop
Building a shared vision over time
Cornerstone: Talent
Talent:
“Those invested in the co-op’s success”
Champion(s)
Steering Committee or Task Force or
Founding Team
Board of Directors
Developer(s) (Usually external to the co-op)
Management (Development Project Manager,
Facility Project Manager, General
Manager) and Staff
Cornerstone: Capital
Capital:
“Financial resources necessary for all stages of
development”
Organizing
Feasibility
Business Planning
Implementation
Sustaining (recover and reinvest)
Internal resources are used to leverage external
resources
Education: members responsibility to capitalize co-op
Cornerstone: Systems
Systems:
“Organized, integrated, coordinated, and interdependent methods”
Legal
Governing
Management & Human Resources
Planning & Assessment
Communication and Marketing
Finance & Accounting
Operations
Membership
Commitment to continuous improvement
Systems become more complex through the stages
The Value of a Timeline
as Roadmap
as Management Tool
as Communication Tool
as a one page picture
to illustrate ‘Decision Points’
to build systems of accountability and
planning
to measure progress or lack thereof
‘Timeline’ as a “Practice”
Using the ‘Three Stages’ timeline
template as a container.
There’s lots of flexibility within each
stage.
Your co-op project will resist the ‘Three
Stages’ template.
Practice discipline by fitting your
project within the template.
‘Timeline’ as a “Practice”
(continued)
Monitor, update and revise as you acquire additional
information
Date each revision
Always be aware of which stage you are in.
Note the remaining tasks to accomplish before moving
on to next stage.
Note and prepare for the decision point at the end of
the stage you are in.
Note unfinished tasks from current stage (if any)
before moving on to next stage. Address them
promptly in next stage.
Three Stages: An Overview
Stage 1: Organizing
Stage 2: Feasibility/Planning
2A: Feasibility
2B: Planning
------------------------------------------------------------Stage 3: Implementation
3A: Preconstruction__________________
3B: Construction & Renovation
3C: Preparation for Opening
3D: Sustaining - First Year & Beyond
Note: Dotted Line = Site secured w/Contingencies; Solid Line = Contingencies Removed
Stage 1 - Organizing
Emerging Co-op: Brings about the organization
One or more people start with an idea
Recognition of a common problem or need that a food co-op could meet
Includes
– Convening a core group
– Assessing common interest and needs
– Designating, supporting, and developing leadership
– Incorporating
– Building a shared vision
– Committing time and money
– Create Member Equity Structure, Launch Initial Membership Drive
– Possible Preliminary (informal) Feasibility Assessment
Brings about the organization
Stage 2 - Feasibility & Planning
Emerging Co-op: Brings about the operation
An organized group with commitment, interest and capacity
Assesses feasibility: market potential, financial feasibility,
internal readiness and design feasibility
Includes
– 2A = Feasibility - full assessments of market feasibility, financial
feasibility, and organizational readiness/capacity
– 2B = Planning – a business plan for financing and operations,
preparing to hire general management, preliminary store design
Builds commitment and capacity (both leadership and
management)
Brings about a secured site for the operation
Stage 3 - Implementation
Emerging Co-op: Brings satisfaction of member
needs
Demonstrated capacity in all the cornerstones
Includes
–
–
–
–
3A = Preconstruction
3B = Construction & Renovation
3C = Preparation for Opening
3D = Sustaining - First Year and Beyond (and now the work begins!)
Brings about the satisfaction of member
needs
Decision Points
The initial decision/action to organize a food co-op is not
the final decision point?
When is the final “no turning back” decision point?
Development is a process: building on a series of
decision points – each subsequent decision involves
committing increased time and money at risk – while
building the comfort level towards making that final “no
turning back” decision.
Decision points are like climbing a ladder.
Decision points populate and follow the 3 Stage Timeline
Three Stages: An Overview
Stage 1: Organizing
Stage 2: Feasibility/Planning
2A: Feasibility
2B: Planning
------------------------------------------------------------Stage 3: Implementation
3A: Preconstruction__________________
3B: Construction & Renovation
3C: Preparation for Opening
3D: Sustaining - First Year & Beyond
Note: Dotted Line = Site secured w/Contingencies; Solid Line = Contingencies Removed
Three Stages: Time Range
Stage 1: Organizing (6-12+ months)
Stage 2: Feasibility/Planning
2A: Feasibility (3-6 months)
2B: Planning (3-6 months)
-------------------------------------------------------------------Stage 3: Implementation
3A: Preconstruction (3-6 months)_________________
3B: Construction & Renovation (3-6 months)
3C: Preparation for Opening (1 month)
3D: Sustaining - First Year & Beyond (forever!)
Approximately 19 – 37+ months from Stage 1 - 3C
Three Stages: Key Decision Points
for ending each Stage
Stage 1: Organizing – organization is formed, with ___ members, an assessment of
preliminary feasibility (informal)
Stage 2: Feasibility/Planning
2A: Feasibility - market and financial and feasibility are positive,
organizational readiness/capacity are positive, with ___ members
2B: Planning - site is secured with contingencies, and made public, ___ members
-----------------------------------------------------------------------------Stage 3: Implementation
3A: Preconstruction- all financing (internal & external ) in place tied to
finalized construction/renovation contracts, ___ members, contingencies removed,
final “no turning back” decision point!____________________________
3B: Construction & Renovation - construction ~98% complete
3C: Preparation for Opening – construction finalized, all equipment,
inventory and trained staff in place, with ____ members
3D: Sustaining - First Year & Beyond- monitor and support
Three Stages: Member Thresholds *
Stage 1: Organizing
300 members
Stage 2: Feasibility/Planning
2A: Feasibility
450 members
2B: Planning
600 members
------------------------------------------------------------Stage 3: Implementation
3A: Preconstruction__800 members; all member loans collected
3B: Construction & Renovation
3C: Preparation for Opening
1000 members
3D: Sustaining - First Year & Beyond
* suggested thresholds by end of stage – depends on total store size (this assumes 6000 sq ft)
Keys to Creating an Effective
Organizing Process
Building and Sharing a Vision
Building on Common Values
Be Strong at the Core – before Reaching Out Too Far
Networking
Setting the Tone
Listening and Learning
Diversity and Balance
Energy, Excitement, Enthusiasm
Momentum
Open and Inclusive Communication
Leadership and Empowerment
Awareness of Process, Evaluation of Process
Facilitation
____________ & ____________& ____________&____________
As you build a ‘Shared Vision’,
will your vision be feasible?
During:
Stage 1: Organizing and Stage 2a: Feasibility
you begin the process of determining whether
the co-op’s vision is feasible.
Assessing feasibility involves assessing 4
areas: -market feasibility
-financial feasibility
-internal readiness
-design feasibility
From Vision to Business Plan
During the Feasibility Stage, you will test the
feasibility of your emerging shared vision.
Is your dream and shared vision:
-achievable?
-realistic?
-practical?
-feasible?
From Vision → Concept → Business Plan
When do you hire?
Hiring a Project Manager (ASAP) and a
General Manager (6-12 months before
opening) are key decision points.
Making good hires early, assuming adequate
sources of funds, can bring momentum,
professionalism, accountability and progress
to your start-up project.
Development Project Manager – hire ASAP
Facilities Project Manager – Stage 2B or 3A
General Manager – Stage 3A or 3B
Sources & Uses Development
Budget
Provides a clear one page financial
picture of the Start-Up of a Food Co-op.
Includes a listing of Key Assumptions.
Lists the Uses of Funds.
Lists the Sources of Funds.
Sources = Uses
There will be many drafts.
Sources & Uses Development
Budget (continued)
S&U Development Budget is a key management and
communications tool for the leadership group
The goal is to be conservative and estimate costs so
there won’t be unpleasant surprises.
Listing a “Use of Funds” does not mean you
automatically have an open allowance to spend that
money. Cost containment should be practiced without
compromising the quality of what you are trying to
achieve. Yet you will need to spend to achieve your goal.
Creating a S&U Budget is a stretching process. (Creating
a co-op costs more than you think.) Limber up!
Sources & Uses Development
Budget (continued)
A sample Sources & Uses budget has
been developed using what we view as a
typical scenario for a start-up food co-op.
Actual experiences will vary widely, yet the
sample represents a typical range. Most
importantly it illustrates a format.
The sample budget also has a tab that
shows how the Sources & Uses budget
flows over the start-up period.
Sources & Uses Development
Budget and the Financial Pro Forma
The Sources & Uses Budget serves as
the cover page to your Financial Pro
Forma.
The Sources & Uses Budget does not
determine Financial Feasibility.
The Financial Pro Forma is a tool to
help determine Financial Feasibility.
Financial Pro Forma includes:
Sources & Uses Budget (along with Key
Assumptions)
Income Statement (Profit & Loss), Balance
Sheet, Cash Flow, and Debt Service Schedule
projected for 10 Years
Comparison of Expenses to Other Start-Up
and Existing Food Co-ops
Examination of Key Ratios in Years 1-10
including Debt to Equity Ratio and Current
Ratio.
Financial Pro Forma
Key Indicators of Financial Feasibility
assessed through Financial Pro Forma
-Cash Flow
-Profitability
-Key Ratios
Contact CDS Consulting Co-op if you
wish to learn more about Financial Pro
Formas.
Stage 1 - Organizing
Funding Stage 1- The Organizing Stage
is a challenging dilemma. Where do
you start? How do you fund it?
Stage 1 could last 6-12 months or
longer, and require a budget of $10,000
- $20,000+.
Stage 1 - Organizing
Sources of Funds include: fundraisers, donations,
grants (if any), co-sponsorship, loans (from the
leadership group), pro bono contributions (to conserve
$). Be creative.
Member Equity can be raised in Stage 1 after
incorporation as a cooperative, but the funds should be
restricted if possible until Stage 2.
Uses of Funds include: fundraising expenses, copying,
postage, promotion, rent, legal fees, consulting fees,
project management fees. Be realistic.
Don’t be dependent on grants, or you may get stalled.
Stage 2 – Feasibility/Planning
After the organization has been formed and a
certain level of community support has been
built (e.g. 300 members), Stage 1 concludes
and the formal feasibility work begins.
Stage 2 can last 6-12 months or longer, and
require a budget of $50,000 - $60,000.
Member equity will be used and put at risk in
Stage 2.
Stage 2 – Feasibility/Planning
Sources of Funds will primarily be member
equity but will also include fundraisers,
donations, grants (if any).
Uses of Funds include project management,
consulting, market analysis, financial pro
forma, preliminary design, training, legal fees,
hiring expenses, accounting fees, promotion,
fundraising expenses, and rent (office space
and/or meeting space).
Stage 3A – Implementation:
Preconstruction
Stage 2 concludes once a site has been
secured (with contingencies).
Stage 3A - Preconstruction can last 3-6
months or longer, and require a budget of
$80,000 - $100,000. Stage 3A ends when the
contingencies of the lease (or purchase) are
removed, the sources & uses budget is fully
financed, and the final decision point is
reached and crossed over (no turning back).
Stage 3B, 3C, 3D – Implementation:
Construction, Preparing for Opening, and
Sustaining
Stage 3B is the construction stage and
typically lasts as long as the preconstruction
stage (3-6 months).
The budget for Stage 3B represents ½ to 2/3
of the total Sources & Uses budget.
Stage 3C (one month) is Preparing for
Opening and Stage 3D (forever) is Sustaining.
The budget for these stages includes the
remaining funds in the Sources & Uses
budget.
Member Equity and Member Loans
Member Equity $ will likely need to be used
before the final “go/no go” decision point.
Communicate this possibility/probability to
your members.
Member Loan $ should not be used until after
the final “go/no go” decision point.*
Communicate this clearly to your members.
* The only exception is if an initial (and limited) round of member loans is
raised to fund Stage 1. Such loans are high-risk.
Monitoring and Celebration
Monitor/update the Sources & Uses budget as your
organization goes through Stages 1, 2, and 3.
Monitor/update the timeline for your start-up.
Once Stage 3C is complete, be sure to do a final tally/report
on the actual budget compared to the projected budget.
Celebrate!!!
And now the real work begins!!!!!
Good luck! Best wishes! Let us know if we can help.
Thank you for your interest , commitment and cooperation!
-Bill Gessner, 612-823-4509,
BillGessner@cdsconsulting.coop