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Starting a Cooperative

January 14th, 2012 | Posted by Edible Economy Admin in General - (1 Comments)

Would you like to know more about what it takes to start a cooperative? You might be interested in taking a look at this presentation developed by the non-profit Cooperative Development Services (CDS) on steps for starting a cooperative. The Edible Economy Steering Group has also drafted a proposed timeline for a producer cooperative in Central Illinois. A sample survey for gathering input from potential cooperative members has also been posted to our website.  Additional information is available on our Links page under “Cooperatives.”

Here is a quick overview of the steps involved in starting a cooperative:

  1. Create a steering committee: the “dream team. “  Responsibility: To create the vision for the project and to hold it in trust for its future owners.
  2. Complete pre-feasibility analysis to increase the knowledge of the steering committee about the potential venture. This might involve internet research, visits to other similar businesses, gathering of other industry information and so forth.
  3. Incorporate to provide a “corporate shield,” providing the steering committee with legal protection from personal liability for reasonable business decisions.
  4. Perform business development to assess the viability of the business concept
    • Feasibility Study to determine if there is at least one set of conditions under which the goal can be achieved. Includes Market Feasibility: Market analysis, competitive analysis; Operational Feasibility: Management, labor, site suitability, materials supply, and other aspects of operations; Technical Feasibility: Proprietary technology, “tried and true”, intellectual property; Financial Feasibility: Pro Forma statements, including projected balance sheets, income statements, cash flow statements, sources and uses of funds, financial assumptions, and Return on Investment/payback.
    • Business Plan to describe the business and “the way” that the organization is intended to operate, including: A description of the company, business structure, owners and management; Assessment of the market, market entry strategy and competitors; Description of products/services, their attributes, and the value proposition to customers; Description of operations and systems; Financial projections, including sources and uses of funds, balance sheets, income statements, cash flows and ROI/payback.

    • Update Articles & Bylaws to ensure congruity between the organization’s base documents and its approved business plan.

  5. Perform education and outreach to support the business development process by increasing the knowledge and awareness of potential members.
    • Capital development to raise resources to support the business development process.
    • Co-op education to provide initialunderstanding of the co-op business model, and help potential members determine if this model appeals to them.
    • Awareness building to grow the potential, knowledgeable membership basefor the organization.
  6. Equity Drive to raise required equity (as described in the business plan) to capitalize the business. A “Go/Stop” Step: Insufficient equity is a “Stop” and requires the return of escrowed equity contributions. Sufficient equity allows the organization to break escrow, take on debt, and move to implementation.

  7. Cooperative formed!

Last semester, with financial support from the Illinois Department of Commerce and Economic Opportunity (DCEO), the Edible Economy Project engaged Illinois Business Consulting (IBC) at the University of Illinois to identify and recommend solutions that will help in establishing a local food hub in central Illinois.  According to the USDA, a food hub acts as “a business or organization that actively coordinates the aggregation, distribution, and marketing of source-identified locally grown food products from primarily small to mid-sized producers.”

The IBC consultants identified the following benefits of food hubs:

  • Creates jobs
  • Improves local economy
  • Improves health of citizens
  • Reduces energy consumption
  • Decreases impact on environment

To jump start food hub efforts, Edible Economy engaged the IBC, which is a program run by U of I students in the Business School that helps clients tap the University’s top student talent. A team of 8 students led by Senior Manager Megan Cook, a Senior in Accountancy & Finance, and Project Manager John Busch,  a Junior in Finance in Agribusiness, accepted the challenge and worked up a set of recommendations that would culminate in the formation of a business cooperative to develop the hub. The students presented their conclusions after sharing a market analysis and a business plan to the Edible Economy Steering Group on Dec 10. You can view the IBC presentation here.

With the roadmap provided by the IBC, the Edible Economy team is currently planning for next steps–including meetings with Central Illinois farmers and community members to explore establishment of a producer cooperative to own and operate a food hub network in our region. Watch this website for additional details as plans evolve.  If you would like to be involved in planning for next steps, send an email at info@edibleeconomy.org.

The following is an example of some of the key findings from IBC’s market analysis.

Angie Ackerman by Gemma BillingsNew EDIBLE ECONOMY Website Coming Soon!

The EDIBLE ECONOMY PROJECT has made great progress in the 18 months since we first started working to build a modern local food infrastructure in Central Illinois.  We are working on a new website to better share our vision and progress with local food advocates like you.   Thanks for visiting . . . and come back soon!

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