Let's Talk About The Money for This Co-Op Plan

I've invested a considerable amount of thought into the money.  In return I've achieved substantial hair loss.
We need land and infrastructure, buildings and equipment, furniture and fixtures, bank accounts and documentation.  We need a big sack of cash just to get the enterprise off the ground and more just to pay the bills while we develop revenue streams.  Once we actually make a profit, there are investors who want it, workers who deserve it, and more projects that can absorb it.  While the mission of the enterprise is not exclusively about money, it is a vital element that makes everything else happen.

Getting started with a limited budget is the biggest obstacle in any business, and a co-op is no exception.  In order to draw as many members as possible, we need to keep the investment to a minimum.  My target is $500/person.  This does not allow much room for the big expense of buying property.  Renting is an option, but this has the effect of increasing monthly expenses.  Either way, we have to come up with the money.

For the land, setting up the framework for a Land Company looks like a possible solution.  After that, the challenge is attracting investors.  The purpose of the land company is to remove the land investment from the co-op, and bring the cost of purchasing land closer to the cost of renting the land by securing our own financing.  With the land cost out of the way, the rest of the enterprise is a simplified.

Establishing the co-op is the next major investment.  This is the framework under which we will operate.  There are 3 primary projects which, when combined, give us the range of potential to develop income, save money and work cooperatively: The Farm, The Kitchen and The Store.  

The Farm
The cash needs to develop a farm are considerably less than anticipated when I started putting this plan together.  Much of the inputs, tools, and needs can be attained by scavenging our backyards, sheds and garages.  Inputs such as compost and fertilizer can be produced on site from waste materials.  Tool requirements are mostly hand tools, although a tiller can give us a much needed boost at the start.  Operating organically, the farm would be labor intensive, with little need for mechanization in the growing area.  Fertility management relies heavily on natural inputs which are readily available and usually free.  Seed will be an expense, but if we do our job right, it is a one time expense.  Establishing irrigation would be our largest investment and there are ways to make do with what is available while a more permanent and effetive system is purchased and installed.

The Kitchen
The equipment we need to get started will cost anywhere from $10-20k, depending on the selection of new or used equipment, specific sizes and brands, and the direction the group wishes to proceed.  Major equipement will account for most of this amount.  A double stack convection oven will run $1500 while 50 bread loaf pans are 5 bucks each.  An oven and stove purchased used is quite reliable whereas used refrigeration brings maintenance issues that can quickly erode any initial savings.  If the oven breaks down, production stops.  If the cooler breaks down, you lose all the product inside it, ad this can exceed the cost of a new unit.  Starting with simpler equipment may be the direction to pursue to reduce the initial investment requirements.  Larger equipment is readily available, and there is a busy market for used equipment.

The investment in a functioning kitchen brings such a large opportunity that it should not be overlooked or postponed.  We'll need some equipment for cleaning, processing and storing products from the farm.  Being able to process 2nd quality products into Value Added Goods can result in higher returns.  As an example, fresh organic tomatoes with no blemishes will fetch $2/#.  Blemished tomatoes may go unsold.  Processsing those unsold blemished tomatoes into organic tomato sauce can fetch well upwards of $4/pound.  

Smallwares and specialty tools are a function of accumulation.  There will always be one more piece of equipment which will allow us to add another product to our sales line.  As a department, the kitchen would have a development plan which can be implemented and expanded as money becomes available.

The Store
This is a place to offer our product for sale to the entire world.  The plan uses sales to members to stay open.  Sales to the general public bears an income potential that can change the lives of the people involved.  Carrying an inventory will be expensive.  At the start, the store space would be used to service the needs of the Buyers Group.  Product would be purchase, move into the store for temporary storage waiting for pickup in short order.  The Buyers Group will operate on a basis of pay when you order, removing the need for inventory loading.  

In the early phases of operation, there will be limited product available from the farm and there will be no inventory.  Initial use of the space would be well served with products from the kitchen.  Breads, pies, and baked goods can make fine use of the space.  There would be some ingredients and supplies suitable for use as a retail product rather than hiding on a shelf out back.  

Display coolers will be an early need for the store.  Items such as milk, dairy, cold cuts, meats and cheeses are available for purchase, require little or no processing and handling, and would be rapidly rotated by the business volume of the co-op members.  Display coolers allow the group to immediately engage in cold food production, giving us essentially a deli operation.  The addition of hot foods, combined with the functioning kitchen puts a take out food operation in easy reach of our abilities.  We would immediately have the ability to produce subs, sandwiches, salads, soups, stews, entrees, full meals and do so with a relatively low ingredient cost which would be further reduced when farm production comes online.  

The kitchen-store combination can develop an instant cashflow as soon as the doors are opened.  If the cash situation is extremely tight, this is a means of bootstrapping the group to the next level.  If income and return on investment is the only objective, a food service operation can offer a low investment and a steady income.  Stopping at this point would ignore everything else the group can achieve and offer only a limited opportunity to the people involved.  By all means, set up a profitable business, but keep your eye on the bigger picture.

Using some of the store space for dining service is surely an option to pursue.  There are considerable costs involved: dishes, silverware, dishmachine with associated cleaning products, and condiments.  There would be infrastructure needs: hot water capacity, sewage grease trap, sewage capacity, water filtration, HVAC, dish storage, bathrooms, server stations, parking, and fire safety.  

Staffing a food service operation with co-op members has the tremendous advantage of no payroll.  While prices would reflect the existence of a payroll, that money remains in the general fund to further develop the enterprise.  The amount of staffing required would likely impact the required time contribution of the members.  If statutory employees are needed, this would bring payroll expenses, workers compensation insurance, and possibly healthcare costs to bear.  I am of the opinion that food service offers substantially greater opportunity for the group, particularly when the young people have limited job training and employment options.  


Cooperative Enterprise, Plan Outline