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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

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Page 1: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

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

Page 2: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

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.

Page 3: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

Four Cornerstones in Three Stages

An overview article of the Food Co-op 500 Model is available at:http://cdsfood.coop/fourcorner

Page 4: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

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 coopBuilding a shared vision over time

Page 5: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

Cornerstone: Talent

Talent:“Those invested in the co-op’s success”Champion(s) Steering Committee or Task Force or Founding TeamBoard of Directors Developer(s) (Usually external to the co-op) Management (Development Project Manager,

Facility Project Manager, General Manager) and Staff

Page 6: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

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 resourcesEducation: members responsibility to capitalize co-op

Page 7: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

Cornerstone: Systems

Systems:“Organized, integrated, coordinated, and interdependent methods”Legal GoverningManagement & Human Resources Planning & Assessment Communication and Marketing Finance & Accounting OperationsMembership Commitment to continuous improvement Systems become more complex through the stages

Page 8: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

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

Page 9: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

‘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.

Page 10: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

‘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.

Page 11: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

Three Stages: An Overview

Stage 1: OrganizingStage 2: Feasibility/Planning

2A: Feasibility2B: Planning

-------------------------------------------------------------Stage 3: Implementation

3A: Preconstruction__________________3B: Construction & Renovation3C: Preparation for Opening3D: Sustaining - First Year & Beyond

Note: Dotted Line = Site secured w/Contingencies; Solid Line = Contingencies Removed

Page 12: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

Stage 1 - Organizing

Emerging Co-op: Brings about the organizationOne 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

Page 13: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

Stage 2 - Feasibility & Planning

Emerging Co-op: Brings about the operationAn organized group with commitment, interest and capacity Assesses feasibility: market potential, financial feasibility, internal readiness and design feasibilityIncludes – 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

Page 14: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

Stage 3 - Implementation

Emerging Co-op: Brings satisfaction of member needsDemonstrated 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

Page 15: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

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

Page 16: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

Three Stages: An Overview

Stage 1: OrganizingStage 2: Feasibility/Planning

2A: Feasibility2B: Planning

-------------------------------------------------------------Stage 3: Implementation

3A: Preconstruction__________________3B: Construction & Renovation3C: Preparation for Opening3D: Sustaining - First Year & Beyond

Note: Dotted Line = Site secured w/Contingencies; Solid Line = Contingencies Removed

Page 17: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

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

Page 18: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

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% complete3C: Preparation for Opening – construction finalized,

all equipment, inventory and trained staff in place, with ____ members

3D: Sustaining - First Year & Beyond- monitor and support

Page 19: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

Three Stages: Member Thresholds *

Stage 1: Organizing 300 members

Stage 2: Feasibility/Planning2A: Feasibility 450 members

2B: Planning 600 members

-------------------------------------------------------------Stage 3: Implementation 3A: Preconstruction__800 members; all

member loans collected 3B: Construction & Renovation3C: 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)

Page 20: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

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

____________ & ____________& ____________&____________

Page 21: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

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

Page 22: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

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

Page 23: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

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 ASAPFacilities Project Manager – Stage 2B or 3AGeneral Manager – Stage 3A or 3B

Page 24: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

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.

Page 25: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

Sources & Uses Development Budget (continued)

S&U Development Budget is a key management and communications tool for the leadership groupThe 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!

Page 26: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

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.

Page 27: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

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.

Page 28: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

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 YearsComparison of Expenses to Other Start-Up and Existing Food Co-opsExamination of Key Ratios in Years 1-10 including Debt to Equity Ratio and Current Ratio.

Page 29: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

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.

Page 30: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

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+.

Page 31: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

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.

Page 32: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

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.

Page 33: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

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).

Page 34: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

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).

Page 35: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

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.

Page 36: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

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.

Page 37: La Crosse, Wisconsin Food Co-op Organizers Conference 4 Cornerstones in 3 Stages November 2-3, 2012 Food Co-op Initiative, Cooperative Development Services,

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,

[email protected]