Co-Op Segregation of Funds

If all goes well there will be money floating around all over the place.  The farm will sell fresh produce.  The store will sell everything under the sun, and the buyers groups sells stuff they don't even have yet.  With the bills covered by the sharecroppers fee, the income from the sales should be going to replace what was sold and a profit generated ffor the company.  Sound fairly simple.  But let's gum up the works.

The sharecroppers fee is a targeted income source.  It's purpose is to pay the bills and ensure the survivability of the co-op.  If no sales are being made, we've got the sharecroppers fee to keep the ball rolling.  Eventually we should hit a point where sales will overtake the sharecroppers fee.  The argument will surface as to why it must be paid when the company is self-sufficient.  History shows beyond the shadow of a doubt that when enugh people reach into the cookie jar, eventually the cookies run out. 

If we remove the sharecroppers fee, the only requirement to join the co-op is the shareholders agreement.  Sign a piece of paper, do some work, earn money.  That's how it would work.  There is no risk.  The incentive to perform is reduced.  May as well put bunks in the barn.  With a farm involved there will be seasonal crops.  That means a big sack of cash coming in all at once.  Without an annual contract in place, less scrupulous characters may have a chance to jump on board just before the harvest, and vanish shortly thereafter, claiming some rights to the income pulse.  An annual contract spells out the compliance requirements which are in place specifically to prevent abuse and transient involvement.  

The tax man will do his level best to argue the case that the sharecroppers are employees.  Without a sharecropper fee in place and enforced, the case is strengthened.  The sharecroppers are a cooperating team of independent contractors sharing the work and expenses of operating the business for their own benefit.  maintaining this structure is essential.   I'd like to see the fee go away, it can probably go away without the gubmint having a conniption, but I'm not ready to work that into a business until that business is fully capable of covering all the bases.  If the fee does go away, new recruits ought to pay as much as the original sharecroppers.

The sharecroppers fee needs to be segregated from the general sales account.  This provides an operating budget only.  It is not to be used for a rotisserie oven or new rototiller.  It's for the rent or mortgage payment, property taxes, core utilities, insurance, and basic payroll.  Surplus from one month carries over to the next with the specificity applied.  We will encounter months with spikes in the bills.  We will encounter months with shortfalls in sharecropper fee receipts.  Building a balance ensures resilience.  If a surplus of significant size is generated, it will have taken many years.  If the sharecroppers fee is dissolved, the balance dries up within weeks, along with our resilience.

We've got a limited budget to work with.  This means we turn off the lights when not in use, fix water leaks, shop around for better insurance, and get that debt paid off.  The number of shareholders is not going to be a constant.  People come and go.  We'll have a lot of young people participating with the express purpose of learning skills so they can make a better life for themselves.  If we are doing our job, they will do just that.  Mom and Pop got involved as sharecroppers to give their kid an edge.  When the kid moves on, Mom and Pop may drift away.  Continuous recruiting will be a key part of keeping the enterprise going.  Having funds already in place when times are good helps us better weather the tough times.  

There may well be times when the bills exceed the fund balance.  The shortfall will have to come from the general revenues.  That means your sharecropper payout will be less, and your shareholder dividends will be less.  Keep the fee in place.  If business is going well, cutting an advance to the sharecroppers every 3 months would effectively offset the fee, but we would be spending money to write checks and add paperwork.

Our greatest struggle will be the first year.  We'll be starting with limited cashflow, huge investments in equipment, it will be a couple of months before the farm is productive.  The kitchen staff is expected to have low productivity.  We won't have any inventory in the store to speak of.  There will be people who throw in the towel and stop coming in because a year is simply too far away.  We'll have people who quit because they can't come up with the 25 bucks.  We'll have people drop out for every reason under the sun, regardless of the reason making sense.  If you are paid up and have complied with all other requirements of the sharecroppers contract, you get a payout.  If you are not paid up, you are not in compliance and you get nothing.  The incentive here is to pay the sharecroppers fee in full ahead of time.  This keeps the company going and ensures your place in next years team.



Cooperative Enterprise, Plan Outline