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A Food Co-op Business Plan Guide

This guide offers advice on the content you might use for a Stage 3 business plan—one that you will present to potential investors and lenders. It assumes that you have completed most or all of your feasibility and planning and have a contingent site commitment.

Before you reach this point in your development, you can draft preliminary business plans that include what you already know and your plans and assumptions for what comes next. Be sure to clearly distinguish between what is known and what is still in progress. You may also create a modified business plan that is focused on the needs and interests of your current and potential owners. Such a plan would include less financial detail and no potentially confidential or proprietary information that should not be made public.

Important Considerations The business plan document(s) should be neat and well-formatted. Get several people to review and comment before finalizing. Proofread carefully—at least twice. Watch for inconsistencies. If your Executive Summary shows projected sales of $3.4 million, your

pro formas better confirm it. Don’t make claims you can’t back up or inflate expectations. Lenders appreciate conservative

projections. Remember who your audience is. Bankers and investors may have different perspectives than

founders and co-op owners.

This guide was written by Stuart Reid and is intended to help food co-op organizers prepare the best possible business plan presentations. The author and Food Co-op

Initiative are pleased to share this work, but cannot take responsibility for inadvertent errors or the success of business plans modeled on this guide.

1st Edition, March 2018

[Your Name] Food Co-op

[your name here] Food Co-op

Business Plan

Version 2

Updated May 2018

Prepared by A. Fyne Wrighter and Ivana KopeWith input and support from Food Co-op Initiative, the CDS Consulting Co-op,

and the Greater Hometown Economic Development Council

2Version 2, updated May 2018

Header & Footer: Starting on the 2nd page (skip the cover), put your co-op’s name in the header and page numbers in the footer. you may want to note the revision date in the footer as well.[Your Name] Food Co-op

ContentsExecutive Summary.......................................................................................................................................3

Business Overview........................................................................................................................................4

Industry Analysis...........................................................................................................................................5

Market & Customer Analysis.........................................................................................................................6

Competitive Analysis.....................................................................................................................................7

Marketing Plan..............................................................................................................................................8

Operations and Management.......................................................................................................................9

Organizational Structure.............................................................................................................................10

Financial Plan..............................................................................................................................................11

Critical Risks................................................................................................................................................12

Appendices..................................................................................................................................................13

A. Market Study.............................................................................................................................13

B. Floor Plans, Site Plan, Map, etc.................................................................................................13

C. Pro Forma Financials.................................................................................................................13

D. Board and General Manager Bios..............................................................................................13

E. Lease or Contracts.....................................................................................................................13

F. Articles of Incorporation and Bylaws.........................................................................................13

G. Survey Summary........................................................................................................................13

H. Brochures and Advertising Materials........................................................................................13

I. Media Coverage........................................................................................................................13

J. Industry or Marketing Studies...................................................................................................13

K. Key Consultants.........................................................................................................................13

L. Owner Capital Campaign...........................................................................................................13

M. Any other materials needed to support your claims in the business plan.................................13


A good table of contents is important. Use Word’s automatic Table of Contents tool to create an attractive page with interactive links (for people reviewing the business plan on-line.) As you modify your business plan, you can automatically update the table to show correct page numbers.


Executive Summary

The executive summary is a concise, compelling snapshot of your business plans. It should quickly engage the reader, provide a clear description of your business, and specify what you want the reader to do for you (usually provide capital!) The following sections of the business plan will provide space to go into detail, so limit yourself to the most important points. Remember that your mission and cooperative structure are important and should be included, but unless you can convince the reader that your business plan is financially viable, nothing else matters. This section should be 1-2 pages.

Write the Executive Summary last! Come back after you have written the detailed sections so you can extract the most important parts for this summary.

Things to include:

Business opportunity or, Why are you doing this?

Describe:

o The products and services your business will provideo How your co-op fills customer and community needso What your competitive advantage will be o Who your target customers areo Goals you have for your co-op o How you will be viable and profitable

Sources of support (both developmental and financial) Financial potential of your business (sales, profits) Financing (capital) need


Think of this section as the advertising trailer of a movie—all the exciting highlights that make you want to see the whole film.

Remember:It is important to show enthusiasm and commitment, but the bottom line is the bottom line—a sustainable and profitable business.


Business OverviewThis is where you will convince your audience (e.g., potential lenders) that you have a well thought out plan for a co-op that is needed and wanted and can be financially viable. Much of the content in this section will overlap with other sections in the business plan, so stick to the most important aspects of what defines your co-op as a business and leave the detailed explanations to the appropriate sections.

What is a co-op? Why is it the business model we chose?

Explain your mission and vision in the context of the community and market needs you will meet.

Provide a brief timeline of your development and history.

Introduce the consultants and advisors that have provided professional guidance and give your plans and projections credibility.

Describe any significant partnerships and how they have or will benefit the co-op.

Outline the products and services you will offer, especially those that differentiate you from your competition.

Describe the location and site of the co-op, emphasizing their suitability for your plans. Discuss key lease or purchase agreements.

Include a site plan, floor plan, artists rendition and/or photos if available (don’t overdo it here—additional documentation can go in the appendices.


Sources of Industry InformationThere are numerous reports and studies on the internet that you can use for background. Some are listed below. Be careful, because things are changing fast and you don’t want to cite old reports. Use footnotes or in-text citations to show where your data came from.

National Cooperative Bank’s Grocery Industry Update (available on request from FCI) Cooperative Grocer magazine and web site https://www.grocer.coop/ Food Dive https://www.fooddive.com/topic/grocery/ A daily summary of important news from

the grocery industry with commentary and analysis. Co+op Stronger Together http://strongertogether.coop/why-co-ops Consumer-oriented

information about food co-ops with good background material. National Grocers Association https://www.nationalgrocers.org/ (“The voice of the independent

supermarket industry”) Supermarket News http://www.supermarketnews.com/ Progressive Grocer https://progressivegrocer.com/ The Shelby Report http://www.theshelbyreport.com/

On-line searches can result in a wealth of information on what is happening in the world of grocery. Try subjects like:

“new trends in grocery retail”“trends in natural and organic foods”


Industry AnalysisIn the Industry Analysis section, you will provide an overview of the trends in the grocery marketplace, with special emphasis on market areas and store formats that most resemble your own. For example, if your plan is to offer a natural and organic product mix, you would need to use background information and data on natural food retailers. For a product mix that resembles a traditional (conventional) supermarket, you would look for trends affecting mainstream markets and independently-owned grocery stores. Data specific to food co-op financial and operational results may not be readily available to you, as there is no public reporting. However, Cooperative Grocer magazine reports on trends and other news in our sector.

Remember!

Cite your sources and use only credible data.

Be concise. Ask yourself what a potential co-op investor would care about and which trends are most likely to impact your co-op’s viability.

Address specific trends that will influence your choices of products and services.

Charts and graphs may add interest if used judiciously.


http://www.theshelbyreport.com/

https://progressivegrocer.com/

http://www.supermarketnews.com/

https://www.nationalgrocers.org/

http://strongertogether.coop/why-co-ops

https://www.fooddive.com/topic/grocery/

https://www.grocer.coop/


Market & Customer AnalysisIn the Market and Customer Analysis section you will document the market potential for your co-op. The primary source for this information is your professional market study. The executive summary from that study would be a good place to start, but feel free to edit it to focus on the results of the research. Identify the market researcher (and firm) along with their professional credentials. Key information here will be projected sales revenue and the extent of the co-op’s market area. Describe the market area you expect to serve. Include a map showing its parameters, the location of your store and locations of competitors. The market study should include demographic information and customer analysis, but you may need to supplement this with your own research or community survey highlights. Describe how the customer analysis has informed your plans for the products and services your co-op will offer, and explain how those choices address your community’s needs and how they will contribute to the co-op’s success.

Full versions of your market study and survey results should be included as appendices.


Checklist :

Source of data and credentials

Projected sales and growth trend

Defined market area

Owner/community survey results

Community characteristics

Product and service offerings

Local market trends and issues


Competitive Analysis

This section deals with the competitors and trends in your own market area, vs. the broader grocery industry. It shows that you have considered the impact of other grocery outlets in assessing the feasibility of your plans. Your professional market study may contain a lot of this information.

Who are the current and future competitors in your market area? Consider on-line grocery providers as well as brick and mortar stores in your community. What are their strengths and weaknesses? How will the co-op differentiate itself and compete effectively?

Are there any local trends in food retail that differ from the national trends already discussed? A SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis can be a good tool for

discussing competition. What is the co-op’s competitive advantage? Be clear and strong with the answer!


Things to Consider:Many startup food co-ops neglect to fully develop a marketing plan before they open, resulting in (at best) delays in getting an effective marketing effort underway, and (at worst) falling far short of the sales volume they projected. This, in turn, results in less working capital and pressure to reduce expenses-- such as the marketing budget(!)

Lenders need evidence that you will be able to conduct effective marketing!A full marketing plan lays out the strategies for promoting the co-op with timelines, budgets, and those responsible for executing it. If you have a proper marketing plan, be sure to call it out here and consider including a summary in the appendices.


Marketing Plan

This section outlines how you will ensure that potential shoppers know about and are drawn to the co-op. During development, much of your marketing has been focused on attracting owners. As you get closer to opening, marketing plans should include the broader community with the goal of motivating people to come check out the co-op and become shoppers.

In the business plan, you will want to address your current marketing efforts and your plans for pre-opening and post-opening (longer-term.) Having a strong marketing plan with the right people behind it is a critical part of early business success.

Explain who is responsible for the co-op’s marketing plans and execution, including experience and skills. If you do not have staff yet, what are your plans for ensuring this work is done?

Outline how you want the community to perceive the co-op (its “brand”) and how you will convey that image.

Summarize how and where you will promote the co-op through advertising and other means.o Pre-opening-- to build awareness and excitement and to reinforce your brand imageo Post-opening-- to entice owners and other shoppers into the store and build loyaltyo Include plans for in-store signage and promotions

Describe the ways in which your co-op will differentiate itself from your competitors. For example:

o Local productso Unique product lineso Cooperative ownershipo Customer serviceo Commitment to educationo Support for the community

Describe your pricing strategy. How will you maintain a positive image of affordability while still achieving the margins you need to be successful?

Explain the co-op’s commitment to education and how that will be a competitive advantage. If you are planning to promote the co-op’s accessibility to people of all income levels, describe

the programs and strategies you will use to accomplish it.


Important !A highly effective, trained board of directors and an experienced, skilled general manager are critical for successful startups. If your board or GM are not quite there yet, include your plans for mentoring, training or other support that will be provided. Readers may ask how you will make sure the co-op can meet its projections if people in leadership positions are not fully prepared for their roles. You need to have an answer!


Operations and Management

In this section you will talk about how the store will be managed and run on a day to day basis. Your goal is to show that you have secured a suitable site, have strong leadership from the board, experienced and talented management and appropriate operational plans. There is a lot to cover, so remember to keep it concise!

Describe the location and site you have secured, or if you have not made a commitment yet, discuss your search plans and criteria. Explain how the site fits your business plan and customers’ needs. Include any special features or unusual requirements you face. You can include photos, a site plan or floor plan illustration. Use only what contributes to the reader’s understanding and do not use too much space. If there are a lot of things that need to be illustrated, consider moving those images to the appendices.

Introduce the co-op’s leadership o Describe the board’s governance systems with emphasis on how it will oversee the

store’s manager and monitor finances. Bios for the board members and others who are making unique contributions to the co-op’s success are usually included in the appendices; however, if there are well-known people on the board whose presence could make a positive impression on your readers, you can mention them here.

o If you have a project manager, describe her roles and responsibilities and accomplishments on behalf of the co-op.

o Your general manager will be one of the key contributors to the co-op’s future success. Lay out all the reasons why yours is the best person for the job. If you have not hired a GM yet, describe your recruiting plans and timeline.

Summarize your staffing plans with estimates of the number of full-time and part-time staff, key management positions and recruiting strategy. Explain how you will find the right people and retain them as employees. Pay and benefits, training, employee participation policies, etc. may be important inclusions. You can show an organizational chart if you have one.

Identify your primary distributor and other key suppliers, including mention of your commitment to local growers and producers if applicable. If you have any unique product lines that will help differentiate the co-op from competitors, be sure to mention them.

Explain any special plans that will be implemented within the store, such as in-house bakery, juice bar, cooking classes, etc.

Indicate your planned hours of operation.


Important !A highly effective, trained board of directors and an experienced, skilled general manager are critical for successful startups. If your board or GM are not quite there yet, include your plans for mentoring, training or other support that will be provided. Readers may ask how you will make sure the co-op can meet its projections if people in leadership positions are not fully prepared for their roles. You need to have an answer!

Consider:Your readers are likely to ask why you chose the co-op model instead of a more traditional business. You can take the initiative and address this question here, but if you don’t, be prepared to be asked!


Organizational Structure

Many, or even most, commercial lenders will not be familiar with the cooperative business model. In this section you will describe how your co-op is incorporated and how cooperative ownership contributes to your strength. Your goal is to help potential investors and lenders understand your governance and ownership structures and give them confidence.

Things to include:

Explain the concept of consumer ownership (or worker, hybrid, etc.), how it contributes to the co-op’s strength and why it was the best option for this business. If you have a hybrid model, be careful to explain the relative governance rights and investment requirements clearly.

Explain the motivation for people to become co-op owners, including the benefits to the greater community, special deals, patronage rebates, etc.

State how many people have joined the co-op, your goals for owner numbers and plans for future owner recruitment.

Clarify the important role owner equity plays, including owners’ investments in preferred shares or loans.

Describe your governance structure and how it protects the interests of the owners and ensures accountability of management.


Caution:In reviewing dozens of co-op business plans, I have seen few that do not contain one or more discrepancies in reporting financial expectations. Make sure all references are consistent and reflect your final (or most current) projections. It does not inspire confidence if you talk about first year sales of $2.8 million in the Executive Summary and your pro forma shows $2.65 million.

Important:Changes in the budget and financial projections will happen as you get new quotes, unanticipated extra costs, etc. Make sure your business plan has the most current and accurate information. Clearly identify every new version of the business plan with a version number and/or date of the revision to prevent confusion.


Financial Plan

The financial plan section presents your budget projections and the assumptions that support them. They should show that your co-op is a feasible business proposition and that the readers’ loans or investments will be safe. Your goal is to present realistic and credible financial projections that answer the readers’ questions and concerns. In the body of the business plan you will include top-level summaries with narrative explanations. Full financial pro formas are included in the appendices.

Summary Financial Projections should show projected sales, expenses, profit or loss, cash flow and balance sheet results for 5-10 years. Sales projections used in the pro forma are usually lower than in the co-op’s market study to ensure that the co-op can be viable even if things do not go as well as anticipated. Be sure to note this and other ways that you have ensured your projections are conservatively stated. Include a cash flow analysis and the co-op’s plans to manage working cash.

Your Sources and Uses budget is an essential part of the business plan, detailing the cost of opening the co-op and how your capital will be used. The Sources section shows who has invested in the co-op and your other sources of capital. Lenders will want to know how much of your capital is debt vs. equity and who has claims on the co-op’s assets in the case of default.

A major part of your startup capital is probably coming from your owners. Describe your Owner Capital Campaign, how much you have raised and your goals. If you have not reached those goals yet, what are you doing to get there?

Finish off the section with a specific request for the financing you seek. How much do you need, when do you need it, and what will you use it for?



Critical Risks

You might ask why you would end your sales pitch with a list of the things that could go wrong. Full disclosure is important when asking people (and banks) to trust you with their money. Securities regulations require that you disclose any known risks when soliciting loans and equity investments through owner or public capital campaigns. Most of the risks you will report are common among all similar startup businesses and should not raise undue concern if you have shown that your business planning has taken those risks into account and that the co-op has limited its exposure whenever possible.

Typical risks include:

Inability to raise all the capital needed A suitable site cannot be found The co-op is unable to recruit a highly talented general manager and/or other key staff The nature of the grocery industry is inherently competitive and is changing rapidly New competitors may enter the market that were not foreseen Lack of community awareness and understanding of co-ops



Appendices

[recommended]

A. Market Study B. Floor Plans, Site Plan, Map, etc.C. Pro Forma Financials, [including S&U Budget]D. Board and General Manager BiosE. Lease or Contracts

[optional]

F. Articles of Incorporation and BylawsG. Survey SummaryH. Brochures and Advertising Materials I. Media Coverage J. Industry or Marketing StudiesK. Key Consultants (bios and credentials)L. Owner Capital Campaign (key documents)M. Any other materials needed to support your claims in the business plan


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