Co-Op: How Much Can We Make?

A frequently asked question is How Much Can We Make?  It's a question which deserves a thorough answer.  There are a great many variables involved in each project and each product.  I think we can beat minimum wage pretty easily and probably do a whole lot better than that.  Coming up with an exact figure is a challenge.  What I can do is come up with some estimates of what specific projects and products can do.  You can decide for yourself if these numbers are in the ballpark.

Sugar
200 families x 5 pounds per month x 12 months x 5¢/pound net =$600/year
This does not account for the savings from the Buyers Group buying in bulk.  This is only the profit realized by the company.  

Coffee
200 families x 1 can/month x 12 months x 25¢/can net =$600/year

Canned and Packaged Goods
200 families x 20 canned items/week x 52 weeks x .05/item =$10,400/year
While this includes cans, this is a catch all for items we can purchase in bulk.  Cream of mushroom soup, dry macaroni, whole kernel corn, green beans, sloppy joe sauce, tomato paste, ravioli, sweet pickle relish and apple sauce are but a few examples.  Some of these would eventually be made ourselves with products grown on the farm.  The effect would be to greatly increase the net per unit, and probably by an order of magnitude.

These three listings represent the potential of the Buyers Group.  We haven't actually made anything, just bought a lot, split it up.  The numbers are kinda small because there is not a huge amount of room to work with.  Let's take a look at goods we can make, starting with a bakery operation.

Bread
200 families x 2 loaves/week 52 weeks x $1/loaf    =$20,800/year
This blew the doors off the above listings all by itself.  Bread is a simple product to make, and with the right equipment, we can make it efficiently and inexpensively.  

Bagels
200 families x 1 dozen/week x 52 weeks x $3/dozen =$31,200/year
That's even more than the bread.  $3 for a dozen bagels is pretty low.  We can use the same figures for similar products.  Muffins, cookies, rolls, doughnuts, or honey buns offer variety and help account for the fact that not everyone eats a dozen bagels each week.

Pies
200 families x 1 pie/month x 12 months x $5/pie =$12,000/year

I know a place in Albany, NY that bakes a few hundred pies every day.  If 200 families, 200 pies per month seems high, consider the potential sales to the general public and sales to restaurants.  Looking at the bakery as a stand alone enterprise, these figures suggest it would be possible to keep the place going with only sales to co-op members.  Having a place that pays the bills makes more projects possible, some of which cost little or nothing to start.  This next set of items is dairy, requiring refrigeration.

Butter
200 families x 2 pounds/week x 52 weeks x 10¢/pound net =$2080/year
This will pay for running the equipment
                
Milk
200 families x 2 gallons/week x 52 weeks x 30¢ net =$6240/year
In a couple years, this will pay for the equipment

Cheese
200 families x 2 pounds per week x 52 weeks x $1/pound =$20,800/year
The markup on gourmet cheese is in the neighborhood of 50%.  This is about 5 slices of cheese per family per day.  

Ice Cream
200 families x 1 box every other month x 50¢ net =$600/year
How big is this box?  Did we make it ourselves or buy it?  I'm putting this is as an example of what a single frozen product can offer.  There are lots of frozen products we can offer.

Meat
200 families x 10 pounds/week x 52 weeks x $1/pound net =$104,000/year
That net of $1/pound is conservative, with a 30% markup being closer to reality.   Even so, it's an impressive result.  If this is all we earned on a pound of steaks, the general public would be lined up when the doors open in the morning.  

Cold Cuts
200 families x 2 pounds/week x 52 weeks x $1/pound net =$20,800/year                
This is equal to the cheese and enough for about a dozen sandwiches.  As with the meats, this is a conservative figure.  Instead of buying the cold cuts in bulk, we could bake our own.  In such a case, that net climbs substantially.

Up to this point I've not gotten into goods which we prepare for hot service or prepare to order.  So far it's a bakery, simple kitchen and a store.

Meatballs
200 families x 2 pounds/month x 12 months x $1/pound net =$4800/year
            
Take Out
200 families x once per week x 52 weeks x $5 net =$52,000/year
Take out pizza, take out meatloaf dinner from a supper house, take out baked chicken, take out lasagna for a family.  This listing is not specific as to exactly what item is purchased, and only accounts for a net of $5 per sale.  

Sandwiches
200 people x 1 sub/week x 52 weeks x $2/sub =$20,800/year
This works out to around 30 subs or sandwiches per day, including lunch and dinner.  

A deli operation easily becomes a sandwich shop.  A couple more pieces of equipment brings on the supper house.  The list up to this point is only looking at the kitchen and store.  Let's look at the farm.

Eggs
200 families x 1 dozen/week x 52 weeks x $3/dozen net =$31,200/year
This would pay the mortgage on a fine piece of land.  $3/dozen is a low price for organic, free range eggs.  As I discussed in the Chicken Section, the cost of keeping chickens can be low.

Vegetables
200 families x 15 pounds/week x 52 weeks x $2/pound net =$312,000/year
The area required to grow this volume in my USDA Zone 8b: less than 5 acres.  Labor required: the equivalent of around 10-12 full time workers.  

TOTAL OF THE ITEMS IN THIS LIST: $650,920/year

The farm accounts for over half.  Using our farm products as ingredients for items in the list serves to increase this figure.  The farm is limited to the space available, as well as the season in some areas.  The kitchen and store have no season, and are not limited by the amount of land available.  Sales to the general public can boost the kitchen and store to levels far exceeding what I have shown here.  

Lets do the math based on the proposed Distribution of Income.
    80-90% of net paid to the sharecroppers
    5-15% being reinvested into expansion, development and capital improvements
    5-10% going to the shareholders of the co-op.  

Sharecroppers, 80%, $520,736
With 200 sharecroppers, the average payout on this amount would be $2,603.68, about 50 bucks/week, or 200 bucks a month.  It's enough to make a difference to a lot of folks.  

Reinvest, 10%, $65,000
I went with the middle of the proposal.  Around here, this amount would buy a property with several acres, including a home and systems.

Shareholders, 5%, $32,546
200 shareholders with an equal payout = $162.73 each.  The investment of $500 just realized a return of 32.5%.  I'd say the shareholders can receive a handsome return on their investment, even using low end figures.

There's another 5% floating around somewhere.  Early on, this would go a long way towards bringing more projects online.  Set up as an LLC has the shaeholders handling the taxes on their own.  That reinvestment may not be deductible, instead being deferred as depreciation.  This sticks it to the shareholders and could actually see them pay a giant portion of their dividened in taxes.  The sharecropper payout is a business expense of the company and is deductible.  All the rest is taxed, and at the individual level, even if the shareholders are not paid a dividend.  The reinvested amount should not exceed, by more than 50%, the dividend paid out to the shareholders.

It's the shareholders who control these percentages.  They set the contract rate for the year.  They determine how much, if any, will be reinvested.  They determine how much they grab for themselves.  For these reasons, it is in the interest of the group to have only local shareholders, and preferrably shareholders also serve as sharecroppers.  

If 200 shareholders serve as 200 sharecroppers, and made no reinvestment, the average payout based on the figures above would be $3254.60.  I would consider this to be a minimally acceptable performance.  These figures do not account for sales to the general public.  It does no account for commercial products.  There is no estimate for classes, fairs, or events.  It does not include an estimate for savings from the buyers group.  It does not offer a value for borrowing items from the tool library.  There is no gauge for work crews, cottage industry, a repurpose shop, or workshops.  This is only the lower limit of our earnings potential.  I'm not able to offer an estimate of an upper limit, but if we increased this performance just a few times, we'll have offered a replacement in some cases for full time employment.

There is no metric for the experience gained by our young people or the scholarships offered to the community.  That's where the real value of the enterprise is found.  Sure, you can make a few bucks by getting involved.  We've got some youths who can take what they've learned here with them when they move out into the world.  The head start we offer them is incalculable.

 

Cooperative Enterprise, Plan Outline