There has never been a better time for communities to start a food co-op. Not only is there a need for more community-owned assets, but people also see the value in ethical business practices and supporting local economies. Hundreds of towns and cities around the U.S. are actively exploring opening cooperatives. There’s a tremendous opportunity for startup food co-op groups to seize the moment during a unique time in our country’s history.
Along with this possibility is an understanding that opening a food co-op involves planning, organizing and fundraising—activities that may take some groups a long time to accomplish. Yet there are ways of going about it that can ensure that the process does not drag on and that the co-op, once open for business, will be successful.
Startup groups that systematically work on leveraging support for their projects have the best chance of meeting their goals. Stuart Reid, executive director of the Food Co-op Initiative (FCI), said that startup groups have two main goals. The first is to organize the community and the second is to create a sustainable business. “Creating a viable business often doesn’t get enough consideration,” Reid said. “Starting a grocery co-op requires thoughtful, professional level work.” The most successful groups seek out professional advice early on as well as use the resources available from FCI and CDS Consulting Co-op (CDS CC) to educate themselves and their community about starting a food co-op.
Marilyn Scholl, a cooperative development specialist, said, “Everybody starting a co-op is doing it for the first time. Starting such a unique business with a group of people who have a variety of business orientations could be a challenge.” That’s why she believes it’s important for startup groups to gain expertise that will help them organize and finance their project from the get-go. It can be easy to get derailed, she said, when groups don’t use proven best-practices and find themselves months or years later having to redo or regroup. Getting ongoing support not only prevents costly mistakes, but gives startups the benefit of pooled resources and experiences that will make the process smoother and more efficient.
Ben Sandel, a leadership development and startup food co-op consultant with CDS CC and a founding member of the Friendly City Food Co-op startup group, said that getting good information from the beginning was critical to their effort and saved them from costly mistakes. He also said the professional advice they received helped them create a strong foundation that has bolstered their long term vision for maintaining a flourishing food co-op in Harrisonburg, VA. Friendly City had a successful opening and is doing very well, thanks to the planning work of the founding group, co-op board, and general manager Steve Cooke. It’s what has inspired Ben to continue working with startup food co-ops, and to share his expertise.
Now Sandel is working on a CDS CC pilot project with fellow consultant Jeanie Wells to gather resources and offer ongoing support to groups in a way that is financially accessible to startups. A big part of the pilot is working with groups on board process like structuring meetings and decision-making, as well supporting development activities like organizing the community, capitalization, and recruiting members. Sandel and Wells are expecting that the results of the pilot will demonstrate that when groups are proficient right away, they have a better chance of getting the financing they need to open good stores. “Capital campaigns are also a big part of the process. It’s one of the keys to success as a startup. Opening on a shoestring is really dangerous. You want your general manager to have resources to make a great store, and you need money for marketing and outreach,” Sandel said.
According to expansion planning and development consultant Bill Gessner, the startups that fail or have problems after they open often adopt a do-it-yourself approach, don’t take the time to do business planning, and open storefronts that are not attractive to shoppers. Rather than take a gamble, groups need to do their research. Gessner stressed that before startups approach anyone for money or ask them to take on the risks of investing in a co-op, startup groups need to:
• Get training in leadership and organization
• Convey clearly the co-op’s goals and direction to the community at-large
• Keep good records for managing memberships and loans
• Demonstrate data that supports the co-op’s goals and direction
Most people don’t need to be convinced those are all good and necessary activities. Where the rubber hits the road is in how groups will pay for the assistance they need, and some people feel like it can be a Catch-22. They need just as much advice on how to raise money to begin with as they do for other startup activities. It’s true that fundraising is often a startup co-op’s first difficult and ongoing hurdle. “That’s a time when some groups will cease to make forward progress. People get frustrated and drop out,” Sandel said. That’s why he said having a strong decision-making process in place matters to forward momentum when things are challenging.
What people may not fully consider is that for every dollar they spend in market studies and professional expertise, they are going to get back so much more exponentially. “It’s hard to get over the hurdle, but some people will spend $500 and feel the return and that helps them go on,” Gessner said. It may cost a group $10–20,000 overall to launch an effective capitalization campaign, for example, but done well, can bring in one to two million dollars. That’s some return on investment!
Fundraising guru Kim Klein has stated in her book Fundraising for Social Change, that you already know all the people you need to know to raise all the money you need to raise. Gessner agrees. From his perspective, groups can engage in “stretching” exercises wherein for each stage in the Four Cornerstones in Three Stages development model, the budget for a project can be broken down into manageable goals.
The sooner groups embrace the need for good process and the necessities of fundraising, the quicker their startup will be on track for success. While you can’t talk about getting professional advice without talking about how to pay for it, Gessner also emphasized the importance of using expertise to promote the all-important work of building community and strengthening partnerships. “The energy for a startup comes from selling the vision to the owners. That builds energy and momentum and that fuels the whole thing.”