Outlook for Growth and Establishing New Co-ops

IMG_0080The good news about the current environment for food co-op expansions and startups is that there’s continued planning for growth among established stores, and ongoing organizing activity for new co-ops.  If there is a downside to the present situation, it’s that costs of real estate, construction, and equipment continue to rise.  This has put pressure on all types operations and community groups to be more efficient with their time and resources, and implement projects that provide strong value in goods and services offered.

Ben Sandel is a consultant who works with startups on leadership development and capitalization.  He said, “More groups are facing the reality that projects could be larger, more costly and time-consuming.”  In order to contend with some of the issues that come with those challenges, Sandel thinks that creating solid systems and processes for making decisions will keep groups focused, positive and productive.

He pointed out that the food co-op sector offers a suite of services at every stage of development:  proforma financials, budgeting, governance, store design, human resources and market research.  “The support we and other co-op development groups are providing is based on data,” he said.  Sandel said getting needed information and support keeps groups from feeling overwhelmed and tempted to cut corners.

“Sometimes groups stop following the plan when things get hard.  A ‘just do it your own way’ attitude may put member investment at risk,” he noted.

Sandel also thinks that part of what draws people to the co-op model—the fact that it is not investor-driven capitalism—can also cause groups to chafe at ‘best practices’ and ‘plans.’  “In order to achieve the best possible results, to have a quality store, you have to do it right in terms of raising enough capital and securing community support.  The successful ones follow great plans, and it pays off in the long run,” Sandel said.

Every project has what Sandel said are ‘knowable decisions.’  There will come a time when every co-op group has decisions to make about real estate, budgets and project leadership.  “Know that you will have to prepare for decisions and get ready to learn and become more informed,” he said.

Bill Gessner, expansion planning and business development consultant, added that the Four Cornerstones in Three Stages model offers startups a framework for planning and working with others to carry out their goals.  “Groups need to look at the larger picture.  Getting assistance for planning and budgeting is money well-spent because it supports the overall stages and timeline,” he said.

Gessner also works with established cooperatives on expansion planning and said that the same business principles apply.  For those food co-ops, creating pathways to growth will include realizing greater efficiencies in labor and expenses that don’t compromise good customer service.  He said a continuous improvement mindset focused on current performance, building cash reserves, and adhering to a long-term vision will serve cooperatives and their communities well in the years to come.

What about co-ops that want to grow and get assistance, but find themselves stressed by finances or competition?  What’s the best use of their limited resources?  Gessner’s step-by-step advice is both simple and profound:

  • Classify areas of financial loss
  • Pinpoint weakest areas for improvement
  • Identify equipment inefficiencies and fix or replace them
  • Correct disorganized operational systems

“Invest in those things you need to strengthen,” he said.  In particular, he thinks training and coaching offer the biggest bang for the buck, most especially for the general manager and middle management.  “Co-ops need to attract and retain the best talent.  We need to pay for that, and if you hold people accountable, you’ll get a good return.”

If there’s one thing all food cooperators wish for it’s a beautiful store full of amenities for shoppers.  Nicole Klimek is a store planning and design consultant for expansions and startups, and she said that from her perspective, realizing that dream starts with a proper site and solid financing for it.  “Investing in a good site makes for better store design,” she said.

Like Gessner and Sandel, she believes groups that invest in their own growth and development are more committed to their plans, and ultimately more successful.  “You have to have the right person do the market study and the proforma.  For most things, I advise people to go to co-op professionals for advice.”

When co-ops are preparing to look at sites—that means long before picking one—it’s important to engage with a store designer who can help identify pros and cons that can impact efficiency and cost money into the future.  Klimek cited an example an operation that didn’t provide enough room for a good trash accumulation site.  After calculating the time and steps it took staff going back and forth to take out the trash numerous times a day, over a year’s time it came to $20,000.  “Most retailers would rather have that money going into the bank,” she said.

These are efficiencies that a retail design expert can point out, and demonstrate how the store operates as whole.  Considering the cost of good advice versus a $20,000 annual expense for years to come, it is clear what the better deal is in the long run.

In her work with retailers, Klimek sees a stronger emphasis on addressing these issues.  “When you are starting to see lines, or things are cramped, that can reduce shopping frequency, and that needs to be addressed.”  Around the country, more retailers are focused on just those places where lines form—meat and deli counters, juice bars, the front end—and re-evaluating how people can be moved quickly and easily through those spaces.  Not only that, well-designed kitchens, backrooms and meeting spaces, all contribute to a co-op’s functionality.

Certainly efficiency is an important way to save money, but Klimek also thinks that it is equally important to consider the human factor in all these projects—when people feel comfortable in a great space they also relax and feel welcome.  It builds community, and it’s the reason for expanding and starting new co-ops in the first place.  “The community is so important,” she said.

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By |July 6th, 2016|Categories: Articles, Solutions|Tags: |

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