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, University of Wisconsin Center for Cooperatives, and North Dakota Association of Rural Electric Cooperatives

2. 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.

3. Four Cornerstones in Three Stages An overview article of the Food Co-op 500 Model is available at: http://cdsfood.coop/fourcorner

4. 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

5. 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

6. 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

7. 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

8. 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

9. ‘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.

10. ‘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.

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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)

20. 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 ____________ & ____________& ____________&____________

21. 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

22. 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

23. 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

24. 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.

25. 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!

26. 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.

27. 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.

28. 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.

29. 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.

30. 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+.

31. 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.

32. 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.

33. 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).

34. 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).

35. 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.

36. 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.

37. 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 BillGessner@cdsconsulting.coop