1. Development Guide for New and Emerging Food Hubs and Incubator Training Farms Cooperative Boards Editor: Tom Snyder, Ph.D. Snyder@horizonview.net Snyder@horizonview.net (1/2/16) Chapter II - Feasibility Studies and Business Plan Development

2. Development Guide Overview  Designed to assist cooperative board of directors, managers, and technical support individuals.  Not meant to be a comprehensive resource, but it is targeted at board of director and managers’ activities and tasks.  New/additional support materials, samples, examples, and templates will be added to the guide as they are developed and/or identified.

3. Development Guide Design  This material is designed to assist in addressing the following five areas identified as key to the success of food hubs and incubator training farms:  Maintain a strong executive board and leadership  Maintain product supply (quality, quantity, timeliness, safe, sustainable, and consistent)  Maintain and retain growers/workers (recruiting, hiring, training, and support programming)  Maintain a strong, current, business plan  Maintain experienced, motivated, and capable management staff

4. Development Guide Chapters The five key areas are addressed in the following six chapters: I.Cooperative Board of Directors Development (Available) II.Feasibility Studies and Business Plan Development (Available) III.Farmer Education, Training, and Support/Follow-up Services Development (Available early 2016) IV.Hiring and Managing Management Staff (Available mid 2016) V.Group GAP, Quality Management, and Lean Farming Practices (Available late 2016) VI.Finding and Acquiring Farm Land/Facilities to Start Your Business (Available early 2017)

5. Chapter II - Feasibility Studies and Business Plan Development – Guide Unit Outline Introduction A - Drafting a Five to Ten Year Tentative Cooperative Plan B - Feasibility Studies and Business Plan Needs Assessment Process C - Growers Business Plans Development D - Education and Training Incubator Farm Plan Development E - Support and Follow-up Services Plan Development F - Food Hub, Processing, Packing, and/or Distribution Feasibility Study and Business Plan Development Miscellaneous Materials

6. Chapter II - Feasibility Studies and Business Plan Development Research/Assumptions

7. Food Hub and Training/Incubator Cooperative Purpose and Activities - Example The primary purpose of the food hub and training/incubator cooperative is to assist individuals in becoming trained in growing and farm business management. The cooperative will assist individuals in having the opportunity to start/expand their own independent farm business. The main activities of the cooperative will be to work together to benefit members with shared purchasing, equipment, aggregation, marketing, labor, healthcare services, worker recruitment, training, education, marketing, distribution, processing, and/or other related business, support, and follow- up services.

8. Food Hub and Training/Incubator Cooperative Operational Models Food Hub/Farmers Production Models Wholesale, Retail (Stores), and Institutional Sales Direct-to-Consumer Sales Hybrid Training/Incubator Models Comprehensive Job/Occupational Training (Tasks Driven) and Support/Follow-up Services Skill/Knowledge Enhancement Training (Topics Driven) and Support Services

9. Food Hub/Farmers’ Production Division (Organizational Chart Example) Wholesale, Retail, & Institutional Sales - Food Hub Cooperative Owned Production Base Farm Production Satellite Farms’ Production Independent F-T Farms’ Production Direct-to- Consumers Food Hub Independent P-T and F-T Farms’ Production Base Farm Business Plan – 1 st Satellite Farm(s) Business Plan – 3 rd Independent Farms Business Plans – 2 nd

10. Operational Model Comparisons (Food Hubs –Webinar Slide 2015 NGFN - Wallace Center At Winrock International) Survey results from a Cooperative Agreement between USDA Rural Development and VA FAIRS – a collaboration between Matson Consulting and the USDA with input from various food hubs and industry participants. Operational Model Staff levels at Viability (FTE) Breakeven Sales*Viability Sales** Wholesale6.3$1.21 Million$2.4 Million Direct-to- Consumer 1.8*$314,000$567,000 Hybrid6.3$1.19 Million$2.36 Million *Additional volunteer labor not included. Business Development Stages: Start-up = Usually Needing Grant/Loan Financial Support * Breakeven = Covering Operating Expenses Growth = Becoming Cash Flow Neutral ** Viability = Preparing for Future Growth

11. Food Hub Farmers’ Sales Sweet Spots Direct-to-Consumers Sales (Farmers Markets, Farm Markets, CSA’s ) $0 to $2,300 (~ 40% Increase in Farmers) Part-Time Successful Food Hub Farmers’ Sweet Spot? (Decrease in Farmers $2,400-$100,000 ~ 10-35%) Full-Time Successful Food Hub Farmers’ Sweet Spot? (Largest Decrease in Farmers $100,000-$499,000 ~ 40-60%) Wholesale, Stores, Institutional Sales Over $1,000,000 (~ 80% Increase in Farmers) (Farmers $500,000 - $1,000,000 are increasing/decreasing neutral and may be part of a food hub or may market their own products) Data: USDA 1997-2007

12. Higher average profit margins give larger farms a competitive advantage. Operating profit margin = 100% X (net farm income + interest paid – charge for unpaid operators’ labor and management)/gross farm income Average operating profit margins are negative until sales exceed $100,000 F-T Farmers Sweet Spot P-T Farmers Sweet Spot

13. Farmers’ Training/Incubator and Support/Follow-up Services Cooperative Division (Organizational Chart Example) Cooperative Training and Incubation Center Programs Cooperative Farmers Base Farm On-Site Growers (Incubating New F-T Farmers) “Comprehensive Training” and Support/Follow-up Services Cooperative F-T Satellite Farmers “Skill Enhancement” Training and Support Services Independent Part-Time Farmers “Skill Enhancement” Training and Support Services Independent Full-Time Farmers “Skill Enhancement” Training and Support Services Independent Cooperative Membership Satellite Cooperative Membership Base Farm Training Plan – 1 st Satellite Farmer(s) Training Plan – 3 rd Independent Farmers Training Plan – 2nd

14. Chapter II - Feasibility Studies and Business Plan Development  Feasibility Studies: Is a process to analysis a business to determine if it can be operated cost-effectively (will it work economically?, how well can it produced what products?, can products be sold and at what price?, etc.)  Results of the study process determines how and whether it should be in the business plan  This guide will present examples, samples and templates of business plans types in the following areas: 1)Long-term Tentative Cooperative Plan Overview - training, operation, and financial projections for the life of a loan and/or until business viability is achieved 2)Pre-Business Plan - process usually used as a first step to business plan development and/or for smaller operations 3)Normed Based Plan - a somewhat customized plan completed using general normative and industry based data and assumptions 4)Externally Lead - Technical Assisted Plan - a customized plan using the cooperative’s ideas and/or existing operational information 5)Internally Lead Plan - a plan directed by internal management staff who has the expertise, experience, data, and technical support to develop a strong, relevant business plan

15. Chapter II - Feasibility Studies and Business Plan Development A. Drafting a Tentative Five to Ten Year Cooperative Plan

16. A. Drafting a Tentative Five to a Ten Year Cooperative Plan Objective Statement A-1-a) Farm manager(s) and/or the board of directors will draft a tentative five to ten year cooperative plan NOTE: Plan length may be determined by how long it is projected to get to operational viability and/or loan payoff

17. A. Drafting a Five to a Ten Year Cooperative Plan Handouts, Examples, Samples, Assessments, and/or Reference Materials A-2-a) Handout listing a process for manager(s) and the board of directors to work together to develop a long term tentative cooperative plan (including all the plan’s needed components) A-2-b) Example tentative ten year cooperative plan and template A-2-c) Example of a five year projection plan

18. A-2-a) A process for manager(s) and the board of directors to work together to develop a tentative 5-10 Yr. plan (Handout) The board of directors should identify staff, board members, and/or outside technical assistance agencies/persons to form a committee/team and select a chairperson to complete the tentative cooperative plan. Have committee/team chairperson report to the full board of directors at each board of directors’ meeting for feedback and direction. Present the final overview of a tentative five to ten year cooperative plan to the board for approval.

19. A-2-a) The five to ten year cooperative plan components (Handout) List projected income and expenses for all divisions of the cooperative including the (1) base farm, (2) satellite and/or independent farm, and/or the (3) training/incubator operations. List projected trainees/employees for all divisions of the cooperative including the farm and the training/incubator operations. List the areas of projected production separately, such as field acres and high tunnels. Indicate areas and amounts for which outside funding, loans and/or grants that will be needed/used. List the assumptions and bases for estimations in the cooperative plan. NOTE: Constructed on spread sheet software so that changes can be easily made and figures will automatically be recalculated.

20. Chapter II - Feasibility Studies and Business Plans Development B. Feasibility Studies and Business Plans Needs Assessment Process

21. Objective Statement B-1-a) Division manager(s) and the board of directors will complete a feasibility study and a business plan needs assessment process.

22. B. Feasibility Studies and Business Plans Needs Assessment Process Handouts, Examples, Samples, Assessments, and/or Reference Materials B-2-a) Handout describing processes of completing a needs assessment for the food hub division and growing/farm division needed to identify and/or facilitate cooperative funding, staffing, and operations management. B-2-b) Example of a Business Plan Topical Outline B-2-c) Example of a completed feasibility studies/business plan needs assessment document (designed for existing operations or operations who have product value chains predetermined) B-2-d) Blank of a feasibility studies/business plan needs assessment document

23. B-2-a) A process of completing a needs assessment to identify feasibility studies and/or plans needed to complete the business plan(s) (Handout)  The division manager(s) and/or the board of directors should identify staff, board members, and/or outside technical support agencies/persons to form a committee/team and select a chairperson to complete the needs assessment.  Have committee/team chairperson report to the full board of directors at each board of directors’ meeting for feedback and direction.  Present the final needs assessment to the board for approval and support to move forward.  Complete feasibility studies and plans as needed.

24. Chapter II - Feasibility Studies and Business Plan Development C. Growers/Farmers Business Plans Development

25. C. Growers/Farmer Business Plans Development Objective Statement C-1-a) Farm manager(s) and/or board of directors will facilitate a satellite/independent farm grower’s pre- business plan and a base farm business plan based on feasibility study results and the tentative five to ten year cooperative plan design.

26. C. Growers/Farmers Business Plans Development Handouts, Examples, Samples, Assessments, and/or Reference Materials C-2-a) Handout describing the processes of completing a pre and a full business plan based on feasibility study results and the tentative five to a ten year cooperative plan design. C-2-b) Example of a business plan form for a satellite and/or an independent farm (Pre-Business plan) C-2-c) Example/template of a full business plan document for the base farm (Normed Based Plan)

27. C-2-a) A process of completing a study/business plan(s) for the growing/farm division (Handout)  The division manager(s) and/or the board of directors should identify staff, board members, and outside technical support agencies/persons to form a committee/team and select a chairperson to complete the business plan(s).  Have committee/team chairperson report to the full board of directors at each board of directors’ meeting for feedback and direction.  Present the final draft business plan(s) to the board for approval.

28. Chapter II - Feasibility Studies and Business Plan Development D. Education/Training Plan Development

29. Objective Statement D-1-a) Farm and/or Training manager(s) and board of directors will facilitate a farm business plan based on feasibility study results and the tentative five to ten year cooperative plan design. (NOTE: Growers comprehensive training program “major program design development areas” will be presented and addressed in Chapter III of this guide.)

30. D. Education/Training Plan Development Handouts, Examples, Samples, Assessments, and/or Reference Materials D-2-a) Handout describing the processes of completing a business plan and spreadsheet financial documents for an incubator farm based on feasibility study result and the tentative five to ten year cooperative plan design D-2-b) Example of a business plan for an incubator farm if the farm is not part of a base farm and is designed to market direct- to-consumers (Normed Based Plan) D-2-c) Example/template of a financial spreadsheet document for an incubator farm if the farm is not part of a base farm and is designed to market direct-to-consumers (Normed Based Plan)

31. D-2-a) A process of completing a business plan(s) for the incubator farm (Handout)  The division manager(s) and/or the board of directors should identify staff, board members, and outside technical support agencies/persons to form a committee and select a chairperson to complete the study/business plan and spreadsheet documents.  Have committee chairperson report to the full board of directors at each board of directors’ meetings for feedback and direction.  Present the final draft business plan(s) to the board for approval.

32. Chapter II - Feasibility Studies and Business Plan Development E. Support/Follow-up Services Plan Development

33. Objective Statement E-1-a) Manager(s) and/or board of directors will construct an support/follow-up services plan based on farmers/trainees’ needs, existing available services study results, and the need to provide new services.

34. E. Support/Follow-up Services Plan Development Handouts, Examples, Samples, Assessments, and/or Reference Materials E-2-a) Handout describing the processes of completing a support and follow-up services plan based on identified needed services, an existing services providers study results, and the need to provide additional services. E-2-e) Example of a support and follow-up services development plan.

35. E-2-a) A process of completing a support and follow-up services plan (Handout)  The manager(s) and/or the board of directors should identify staff, board members, and outside technical support agencies/persons to form a committee and select a chairperson to complete the support and follow-up services plan.  Have committee chairperson report to the full board of directors at each board of directors’ meetings for feedback and direction.  Present the final draft support and follow-up services plan to the board for approval.

36. E-2-a) Major areas to be considered in the plan for identified needed services, existing services providers study, and the need to provide additional services (Handout)  Housing, transportation, family budgeting, nutrition education  Individual and family counseling  Independent farmers’ cooperative formation, meetings, and related serves coordination  Prosperity, inputs, and equipment procurement services  Production technical and product marketing support

37. Chapter II - Feasibility Studies and Business Plan Development F. Food Hub/Packing/Processing/Distribution Feasibility Study and Business Plan Development

38. Objective Statement F-1-a) Division manager(s) and/or board of directors will facilitate an business plan(s) based on any feasibility study results and the tentative five to ten year cooperative plan design.

39. F. Food Hub/Packing/Processing/Distribution Feasibility Study and Business Plan Development Handouts, Examples, Samples, Assessments, and/or Reference Materials F-2-a) Handout describing the processes of completing a pre and full business plan based on any feasibility study result and the tentative five to ten year cooperative plan design. F-2-b) Example-template business plan topical outline F-2-c) Example food hub feasibility study (Southern Wisconsin Food Hub) F-2-c) Example of a food hub business plan (Internally Lead Plan)

40. F-2-a) A process of completing a study/business plan(s) for the food hub division  The division manager(s) and/or the board of directors should identify staff, board members, and/or outside technical support agencies/persons to form a committee/team and select a chairperson to complete the business plan(s).  Have committee chairperson report to the full board of directors at each board of directors’ meetings for feedback and direction.  Present the final draft business plan(s) to the board for approval.

41. Chapter II - Feasibility Studies and Business Plan Development Miscellaneous Materials

42.  Building Successful Food Hubs: A Business Planning Guide for Aggregating and Processing Local Food in Illinois (A resource for communities, businesses, not-for-profits, and others interested in establishing food hubs)  The Business of Food Hubs: Planning Successful Regional Produce Aggregation Facilities (Webinar, slides, and two studies)

43. Materials can be downloaded from the West Virginia Small Farms Center website at: http://smallfarmcenter.ext.wvu.edu/cooperatives /cooperative-development-guide http://smallfarmcenter.ext.wvu.edu/cooperatives /cooperative-development-guide or by contacting: Tom McConnell, Extension Specialist and Extension Associate Professor, West Virginia University Extension Building, PO Box 6108, Morgantown, WV 26506-6108 (304) 293-2642 TRMcConnell@mail.wvu.edu TRMcConnell@mail.wvu.edu