1. Developing a Budget for Creating a Food Co-op

2. Bill Gessner, Visionary Stuart Reid, Presenter Bill Gessner, Visionary Stuart Reid, Presenter

3. What’s in Your Wallet Budget? Introductions Who we are and what we do. Who we are and what we do. What kind of budget are you using now? What kind of budget are you using now?Introductions Who we are and what we do. Who we are and what we do. What kind of budget are you using now? What kind of budget are you using now?

4. Mobilizing Community Assets VisionTalentCapitalSystems

5. Vision What does your community need and want? What kind of storefront can meet those needs? What does your community need and want? What kind of storefront can meet those needs?

6. Talent Legal advice Legal advice Graphic Design Graphic Design Web site and Social Media Web site and Social Media Professional consulting: Professional consulting: – Market research – Financial projections – Design Project management Project management GM GM Legal advice Legal advice Graphic Design Graphic Design Web site and Social Media Web site and Social Media Professional consulting: Professional consulting: – Market research – Financial projections – Design Project management Project management GM GM

7. Capital How much will it cost to make your vision a reality? How much will it cost to make your vision a reality? How much can community members contribute? How much can community members contribute? What other sources of financing are available? What other sources of financing are available? How much will it cost to make your vision a reality? How much will it cost to make your vision a reality? How much can community members contribute? How much can community members contribute? What other sources of financing are available? What other sources of financing are available?

8. Systems Can your systems help support this project? – Accounting – Membership and contact records – Legal issues Can your systems help support this project? – Accounting – Membership and contact records – Legal issues

9. What is the S&U Budget? A financial plan (budget) for opening your co-op A financial plan (budget) for opening your co-op – Costs associated with starting a business – Including costs that continue after opening – Capital of all kinds to pay those costs Planning tool Planning tool – Helps clarify organizing goals & vision – Shows stakeholders where there money will go – Establishes milestones and targets A financial plan (budget) for opening your co-op A financial plan (budget) for opening your co-op – Costs associated with starting a business – Including costs that continue after opening – Capital of all kinds to pay those costs Planning tool Planning tool – Helps clarify organizing goals & vision – Shows stakeholders where there money will go – Establishes milestones and targets

10. What the S&U Budget is Not An indicator or feasibility or future success An indicator or feasibility or future success An operating budget (pro formas) An operating budget (pro formas) An indicator or feasibility or future success An indicator or feasibility or future success An operating budget (pro formas) An operating budget (pro formas)

11. The Sources & Uses Budget Uses: Acquisitionn/a Leasehold Improvements$420,000 Equipment$390,000 Inventory$160,000 Fees$146,000 Operating/Admin prior to Opening$15,000 Start-up Promotion$12,000 Start-up Staffing$80,000 Holding/Site Costs$32,000 Interest during project$12,000 Post Opening Professional Support$30,000 Working Capital, allowance$144,000 subtotal Uses$1,441,000 Overrun Allowance$216,150 Total Uses$1,657,150 Sources: Cash from benefits, donations$15,000 Grants$35,000 Member Equity$150,000 Member Loans$600,000 Miscellaneous0 subtotal Owner's Contribution$800,000 Landlord Contribution$105,000 Vendor Credit$40,000 Free Fill$24,000 City/Community$150,000 subtotal External/Subordinated$319,000 Bank Debt$538,150 Total Sources$1,657,150

12. Assumptions Lease or Buy? Lease or Buy? How big? How big? – Retail square footage is about 65-70% of gross What are your expected sales levels? What are your expected sales levels?

13. Gathering Info

14. Uses Acquisition Acquisition Leasehold Improvements Leasehold Improvements Equipment Equipment Inventory Inventory Fees Fees – Consultants, architect, design, legal, financing, etc. Market rate $70 - 80/ft 2 $70 - 100/ft 2 $35 - $45/ft 2 12% of the above plus $30,000 for Project Management

15. More Uses

16. Sources Donations & Fundraising Donations & Fundraising Grants Grants Member Equity Member Equity Member Loans Member Loans Other equity Other equity Total Owners’ Contribution $15,000 ? $35,000 ?? Share price X members 33-50% of budget ??? At least 48% of total startup budget.

17. Other Sources Landlord Contribution Landlord Contribution Vendor Credit Vendor Credit Free Fill Free Fill City/community funds City/community funds Total External/Subordinated $15 - $25/ft 2 (maybe) 25% of inventory 15% of opening orders $150,000 ???? 10-20% of total startup costs

18. The Last Source Bank Debt 0 – 45% of total, typically 25% or less

19. A “Typical” Scenario Let’s assume… We will lease a site We will lease a site We need 4,000 ft 2 of retail (about 6,000 gross) We need 4,000 ft 2 of retail (about 6,000 gross) Our first year sales projection is $2.4 million Our first year sales projection is $2.4 million

20. Example Uses Acquisitionn/a Leasehold Improvements$420,000 Equipment$390,000 Inventory$160,000 Fees$146,000 Operating/Admin prior to Opening$15,000 Start-up Promotion$12,000 Start-up Staffing$80,000 Holding/Site Costs$32,000 Interest during project$12,000 Post Opening Professional Support$30,000 Working Capital, allowance$144,000 subtotal Uses$1,441,000 Overrun Allowance$216,150 Total Uses$1,657,150 Total Cost: $276/ft 2

21. Example Sources: Cash from benefits, donations$15,000 Grants$35,000 Member Equity$150,000 Member Loans$600,000 Miscellaneous/other equity0 subtotal Owner's Contribution$800,000 Landlord Contribution$105,000 Vendor Credit$40,000 Free Fill$24,000 City/Community$150,000 subtotal External/Subordinated$319,000 Bank Debt$538,150 Total Sources$1,657,150

22. Reality Check Startup costs equate to long-term benefits in the image and marketing of the co-op Startup costs equate to long-term benefits in the image and marketing of the co-op Higher initial costs save money in operations through efficiency and effectiveness Higher initial costs save money in operations through efficiency and effectiveness Cutting costs ultimately costs more. Cutting costs ultimately costs more. – Delays and mistakes (hire a pro!) – Energy and repair costs – Higher labor – Lower customer satisfaction Startup costs equate to long-term benefits in the image and marketing of the co-op Startup costs equate to long-term benefits in the image and marketing of the co-op Higher initial costs save money in operations through efficiency and effectiveness Higher initial costs save money in operations through efficiency and effectiveness Cutting costs ultimately costs more. Cutting costs ultimately costs more. – Delays and mistakes (hire a pro!) – Energy and repair costs – Higher labor – Lower customer satisfaction

23. Reality Check Member investment is a good measure of future support (i.e. Sales!) Member investment is a good measure of future support (i.e. Sales!) Member investment leverages all other capital Member investment leverages all other capital Member loans are cheaper and much more flexible than bank loans. Member loans are cheaper and much more flexible than bank loans. Donations are not the answer (sorry) Donations are not the answer (sorry) Angel investors are hard to find. Angel investors are hard to find. Member investment is a good measure of future support (i.e. Sales!) Member investment is a good measure of future support (i.e. Sales!) Member investment leverages all other capital Member investment leverages all other capital Member loans are cheaper and much more flexible than bank loans. Member loans are cheaper and much more flexible than bank loans. Donations are not the answer (sorry) Donations are not the answer (sorry) Angel investors are hard to find. Angel investors are hard to find.

24. What if Something Changes? It will! The S&U Budget is not static The S&U Budget is not static Updates are ongoing as more information becomes available Updates are ongoing as more information becomes available Keep Sources & Uses in balance Keep Sources & Uses in balance Reconsider options Reconsider options It will! The S&U Budget is not static The S&U Budget is not static Updates are ongoing as more information becomes available Updates are ongoing as more information becomes available Keep Sources & Uses in balance Keep Sources & Uses in balance Reconsider options Reconsider options

25. More Information http://cdsconsulting.centraldesktop.com/cbld/doc/5469096/w-Fc500WebinarArchives The Food Co-op Initiative/CDS Consulting Co-op Webinar Series http://cdsconsulting.centraldesktop.com/cdsvideo/doc/6654794/w-SourcesAndUses

26. More Information The Sources & Uses Template: http://www.foodcoopinitiative.coop/sites/default/files/Sources%20and%20U ses%20Template.xls http://www.foodcoopinitiative.coop/sites/default/files/Sources%20and%20U ses%20Template.xls http://www.foodcoopinitiative.coop/sites/default/files/Sources%20and%20U ses%20Template.xls The Food Co-op Initiative YouTube Playlists Recorded Webinars from 2013 Recorded Webinars from 2013 “Startups in Action” “Startups in Action” Uploaded Videos Uploaded Videos Co-op Marketing Videos Co-op Marketing Videos https://www.youtube.com/playlist?list=PLA2749DE9E2C56641

27. Tell Me More! Food Co-op Initiative Food Co-op Initiative is a non-profit foundation that was created to provide resources and support for communities that want to start new food co-ops. We can offer you support, referrals, and access to training material so that you will have the best chance for a creating a successful co-op. www.foodcoopinitiative.coop stuart@foodcoopinitiative.coop