NW Co-op Development Center

Better Together: How Co-ops Can Strengthen Small Business

Oct. 25th, 2012

Teresa Young, Organizational Development SpecialistEric Bowman, Cooperative Development Specialist

1063 S Capitol Way # 211Olympia, WA 98501

360.943.4241

Presentation OverviewHow Co-ops Can Strengthen Small Business

1. Intro

2. Co-op Business 101

3. Development Process

4. Six Case Studies

5. Q&A

NWCDCThe Center

a 501(c)3 nonprofit which provides development services for new and existing co-ops

Our mission to foster community economic development through the co-op business model

We’rea team of co-op developers with skills specific to start-up and organizational business development

Co-ops 101

Investor owned:

Sole proprietor:

Co-ops are member:◦ Owned◦ Controlled◦ Benefited

Business Entity Types

Choose your business Structure:• Sole Proprietorship• Limited Liability Company• Cooperative• Corporation• Partnership• S Corporation

Internationally Recognized Principles

1. Voluntary and Open Membership

2. Democratic Member Control

3. Member Economic Participation

4. Autonomy and Independence

5. Education, Training and Information

6. Co-operation among Co-operatives

7. Concern for Community

Corporate Structure of Co-ops

Co-op Role

U.S. Facts:– 250 purchasing co-ops procure for 50,000 businesses– 3,000 farmer co-ops market 30% of farmers’ products– 8,000 housing co-ops provide 1 m homes– 7,500 credit unions provide services to 90 m members– 1,000 rural electrics operate ½ the nation’s distribution– 29,000 co-ops serve 43% of the population

Top 100 co-ops’ 2010 revenues = $194 Billion!

Ownership

Member-Owners can be

– Consumers– Producers/Farmers– Workers– Other Businesses

Co-op to Co-op Supply Chain

Why Cooperate?

…to access resources not individually achievable

Advantages of Being a Co-op• Net margins (i.e. surpluses) are returned to members• Provide stable jobs where money is kept local• Develop members rather than exploit them as a resource• Less income tax expense• Those who use the co-op own it, control it and benefit

from it.

Disadvantages of Being a Co-op

• Patronage record keeping• Lack of capital investment; limited financing options• Lack of technical assistance providers• More cumbersome governance• Not suited for ventures that require:

– Higher risk– High return on capital

1.Identify a need a co-op could meet2.Form Steering Committee3.Research Feasibility 4.Review Findings (Go/No Go)5.Membership Drive6.Planning and Financing7.Begin Operations (Go/No Go)

Co-op Development Stages

Any questions so far?

Case Study Models

1. Shared services: Certified Guides Co-op

2. Worker: Circle of Life Homecare

3. Purchasing: Key Choice Collision Center Network

4. Ag processing: Puget Sound Meat Producers

5. Artisan Gallery: NW Fine Woodworking

6. Worker: WAGES

• Management:– Part time E.D.

– Also a guide

• Members: >45 guides

• Membership equity: $1,000

Services to member:• Negotiate permitted access• Specialized insurance

CGC Members

• Individual businesses (e.g. LLCs)• 5 distinct certifications• Career path:– Start as employee with service– Take on book of clients– Go into business– High admin costs

“The desert is calling - the Co-op can help you build fall season work with permits in Moab and Indian Creek”

“A co-op is a business model that allows a group of people (in this case guides) to combine their resources to achieve their goals”

Questions?

• Comments?• Anything you’d like to add?

2007 started organizing

2008 opened doors for business with just 4 caregivers, volunteer staff

2012 gave out first patronage checks

Doubled growth from 2011 and 2012

Now have 21 caregiver members and paid staff

Memberships:

• $300 equity

• 3 mo probation

• Board approved

• Qualifications

• Responsibilities

Questions?

• Comments?• Anything you’d like to add?

Purchasing Co-ops

• Retailer Co-ops– Increase purchasing power– Shared marketing

• Members are:– independent and locally owned– More competitive

Purchasing Co-ops

Generic start up:• Year one operating: $375k• Service fee on sales: 2%• Volume: >$20m• Co-op receives private rebates

Key Choice Collision Center Network

• Started with 18 non-competing auto body shops in MN

• Based on NADA 20 Group model• Info sharing:– On process and products– Individual technicians suffered from “we’ve

always done it this way syndrome”

• Members: single location, sole proprietorships

“Cooperation leads to higher efficiency”

• Paint commonality saves on:– Input costs– Training– Network problem solving

• Assists dealing with insurance companies

• Collective problem solving enabled “lean” manufacturing practices

Questions?

• Comments?• Anything you’d like to add?

Puget Sound Meat Producers Co-op

• 2007 ranchers, farmers, butchers, restaurants owners came together to plan

• 2008 incorporated and started selling ownership stock

• 2009 began operations

Plans Change

At start up:

Six paid staff, a manager, a site coordinator, a lead butcher and several assistants

Now:

No employees

Contract butcher

PSMPC board members manage scheduling and bookkeeping

Challenges

• 2011 only 20% of membership used the Mobile Slaughter Unit

• Not feasible to take unit to each farm• Animal prices are up at the farm gate

Member income is up 5-500%

Questions?

• Comments?• Anything you’d like to add?

Artist Co-ops

• Members: artists• Artist-owned facilities– Exhibition galleries– Workshops– Equipment

Splash Gallery

Northwest Woodworkers Gallery

• Opened in 1980• Venue for superior handcrafted woodwork• 21 active member-owners

Questions?

• Comments?• Anything you’d like to add?

Incubated Worker Co-ops

Mission statement:Women's Action to Gain Economic Security (WAGES) builds worker-owned green businesses that create healthy, dignified jobs for low-income women.

WAGES• Founded in 1994• Today – approximately 90 women• Five eco-friendly housecleaning co-ops • Co-ops use LLC structure and distribution of

profits• 80 hrs of training 50/50 between:

– preparation for ownership – eco-friendly cleaning techniques

Benefits

• Over 70% increase in household income• All have checking accounts• Health insurance• Disability insurance• Paid time off

Questions?

• Comments?• Anything you’d like to add?

So what can co-ops do for microenterprises?

They can potentially increase:• Income• Efficiency• Buying power• Scale• Support

Thank You!

Eric Bowman | eric@nwcdc.coop Teresa Young | teresa@nwcdc.coop

Northwest Cooperative Development Center1063 Capitol Way S # 211 Olympia, WA 98501

360.943.4241 | www.nwcdc.coop

Fostering community economic development through the cooperative business model