You can think of the business plan for a cooperative, or any business, like a roadmap for the new enterprise that answers the big questions of who, what, why, and how.
As groups explore starting a cooperative business, a plan can help them develop a robust understanding of how the co-op will operate, be financed, and be governed. Depending on the needs of the group, a written business plan might be used as information for potential members, as part of an application for funding, or simply as a planning tool.
Business plans often contain information about the enterprise’s industry, personnel needs, management, governance, location, marketing, capital needs, and more. The business plan focuses on the actions the group needs to take to launch the cooperative.
What is Different About a Co-op Business Plan?
All kinds of businesses can use a business plan, so what is different about business planning for a cooperative?
Because the ownership of a cooperative is shared mutually among members and the cooperative is governed by a member-elected board of directors who are themselves members, the “who” section of a cooperative business plan can be particularly important. For example, the process of business planning for a cooperative often includes determining the potential users of a cooperative and their interest in cooperating as an early step.
Cooperative principles also influence the financial structure of a co-op business, and the financial sections of a cooperative’s business plan will likely look different than those of other businesses.
These questions can help guide a steering committee’s co-op business planning.
- What is the purpose of the co-op?
- What products or services does the co-op sell? For what market area and target audience?
- Who are the co-op members?
- What are the responsibilities of members, directors, and management?
- What are the co-op’s capital needs, including land, equipment, and cash?
- Which local, state, and federal regulations and taxes apply to the business?
- What are the industry characteristics of the co-op’s industry?
Various resources are available to entrepreneurs developing their business plans, including Small Business Development Centers and cooperative development centers across the U.S. The CFAES Center for Cooperatives provides business planning assistance to groups exploring the co-op model.
The Co-op Business Planning worksheet beginning on page 28 of the Co-op Mastery Workbook provides a “kickstart” for business planning for cooperative entrepreneurs.
Exploring the Feasibility of a Cooperative
Before determining whether to start a co-op, groups often need detailed information to help with their decision making. A steering committee may undertake, or engage a third-party expert, to formally explore the feasibility of a co-op before deciding whether to start a cooperative. For example, a formal, systematic analysis of potential members’ needs, opinions, and anticipated use of the co-op can help a steering committee anticipate potential business volumes, start-up costs, and operational needs. A market study or analysis can help a steering committee determine how their proposed co-op will fit into the existing landscape of competition in the marketplace and identify suitable markets.
“A feasibility study is an analytical tool used during a business development process to show how a business would operate under a set of assumptions.” (Matson 2000 p. 6)
A sound feasibility analysis, with information based on sound assumptions and data-backed information, can help the group determine whether the business is technically and economically achievable. The publication, “Vital Steps: A Cooperative Feasibility Study Guide,” by the U.S. Department of Agriculture provides more information about co-op feasibility studies.
References
Wadsworth, J. (2015). “How to Start a Cooperative.” U.S. Department of Agriculture Rural Development Business and Cooperative Programs Cooperative Information Report 7. Washington, D.C.: U.S. Government Printing Office.
Matson J. (2000). “Vital Steps: A Cooperative Feasibility Study Guide.” J. Brockhouse, Jr. & J. Wadsworth (Eds.). U.S. Department of Agriculture Rural Development Service Report 58. Washington, D.C.: U.S. Government Printing Office.