Co-op Business Planning

As groups explore the formation of a cooperative business, a business plan can help them understand and plan how the co-op will operate, be financed, and be governed. The business plan may also be used as information for potential members or as a part of an application for debt financing or other funding opportunities.

The U.S. Department of Agriculture publication, “How to Start a Cooperative,” describes a co-op business plan as “an organizational map for the new cooperative.”

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.

The following questions can help guide a co-op steering committee as they begin drafting their business plan.

  • 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.

Feasibility Studies, Member-Use Analyses, and Market Studies

Before determining whether to start a co-op, groups often need more detailed information to help with their decision making. It is recommended that groups complete a formal analysis of potential members’ needs, opinions, and anticipated use of the co-op, in addition to gathering other information that could be helpful for the steering committee. In addition, a steering committee should determine how their proposed co-op will fit into the marketplace using a market study or analysis. This analysis should help the co-op identify suitable markets for the co-op and to begin quantifying the market opportunities.

It is also recommended that a cooperative steering committees formally explore the feasibility of a co-op enterprise before moving forward with business planning and formation. 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.

“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)

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.