By Alan Langrall of Green Top Grocery
The four cornerstones are constants in the lifecycle of all co-ops, whether they are startups or stores that have been opened for some time. People often come to the table not knowing what they have to offer, or what is expected of them. Helping volunteers find the fit for their personal talents, and work within the group setting, requires thought and evaluation. When the right person is in the right job, the entire group benefits.
In 2012, Alan Langrall came to the fledgling Green Top Grocery (GTG) startup the way many people start at co-ops. He saw a poster for the first community meeting and was curious. “I still remember that poster featured a big stalk of broccoli with a light bulb base, and something about it really got my attention.“ He kept going to follow up meetings and became an owner at the first event when ownerships were offered. Not yet knowing what was involved in a startup co-op board, Alan volunteered for the first board. “I must have figured they all seemed to be smart folks and that we could just figure it out as we go “ With others, he has attended several Up & Coming conferences, and is excited to see GTG is now in the process of building their store. The staff of FCI is delighted that Alan is sharing his personal story of working to build a co-op, and he welcomes emails at email@example.com.
It’s all about the love, right? Good ideas naturally attract good people and good fortune, right? While certainly recognizing the maximum effort and the considerable time, energy, and hard work that has gone down, Green Top Grocery has indeed been very fortunate. Fortunate
- to have had that genuine, influential, community minded, original organizer who recognized the opportunity and first came up with the whole idea (Elaine),
- to be positioned early (through funds made available) to find and hire that someone with the unique passion and outreach skills needed to grow our owner numbers (Katie),
- to still have that uniquely talented and generous graphic artist as part of our original heavy lifting team (Melanie),
- to be close enough to that thriving, established, model co-op to be mentored and be supported in so many ways (Common Ground Food Co-op) and
- to have the consulting resources of FCI and CDS Consulting Co-op available that have played and continue to play a huge part in the success of GTG.
For me, these people and the gifts they bring really stand out. There are many more outstanding people involved, and other examples of the love and nurturing they bring to the task. May our good luck and fortune continue.
As an early owner and board member, I would often have conversations with new owners and others about our co-op. I came to see myself as working in the background of the organization. My contributions are valuable, but of a different nature than some others. They were the heavy lifters, and I was okay with that. We have had a wide range of lifters and levels of involvement over time as people come and go. I have happily done my share as needed, and at very least continue to show up. There were many times where my energies and skill set proved no match for the meeting organizing, document designing, newsletter writing, spreadsheet producing, or tech savvy contributions of others. At one co-op conference I was reminded that organizations benefit and even need people like me. My contributions are more on the order of balancing and calming in nature. I like to believe there have been times where that was needed.
I recall being part of the reconciliation process through two separate rough patches. Fortunately our consultants helped and their advice was well received. Who knows if my actions moved the pivot points, but it felt right and very necessary at the time. Feelings were indeed hurt each time. Both times, after a few tears and eventual forgiveness, we got back on track. Looking back, it probably made us stronger. I do recall how fragile the whole thing felt with nearly everyone being a volunteer. I wondered what really holds this thing together, and realized it’s really all about the love. You really do have to love it and believe in it. I still wonder occasionally, but now I see it and marvel. As we continue to grow, our momentum feels strong, and that feels pretty great.
Event planning and logistics have ended up being my co-op niche. I just signed on again for another annual meeting planning committee. There will be more events, and a store opening. Check lists! Phone calls! Meetings! Let’s go! We have things to celebrate.
I value this important thought from another co-op conference participant: “If it’s not fun, what’s the point?” Cheers, fellow startup co-ops! Party on!
FCI: Why We Like This: Right from the beginning, matching people’s skills and gifts to the tasks of starting a co-op is super important. The TALENT cornerstone is all about that—putting people to work, seeking out great workers for every task, and building them as steam and keeping the momentum going as the startup progresses. This personal story shows how one committed volunteer can find a niche, adapt to the changing needs of the group, and bring enthusiasm at every turn.
By Philip Trevvett, of Urban Greens Food Co-op in Rhode Island
When we published the two-part piece One Co-op Opts for Direct Public Offering, our readers had questions. Philip takes the time to answer them here. Part 1 centered on Planning and Implementing their DPO campaign, and Part 2 on Lessons Learned and Next Steps.
Food Co-op Initiative staff understands that a capital campaign can be one of the most stressful yet rewarding activities a startup undertakes. We offer many resources for startups planning a campaign, but in the last few years we have seen increased interest in the direct public offering (DPO) of shares. Our website and webinars are full of great info on running a successful owner-loan based capital campaign. For any type of capital campaign, you will find useful resources in our Capital Campaign Workbook. Our thanks to Philip for answering your questions and and to Urban Greens for sharing this information.
Question: Can you expand on the e-portal you used? Investors could complete the offering, but could they also submit the investment online via e-fund transfer? e-portal is very important for a DPO.
Answer: Wee worked with Cutting Edge Capital (CEC). They offered an e-portal at a fee of $300/month, which for our purposes was well worth it. We inserted a link from our site that redirected people to the actual portal page.
The portal page contained all documents we were required to submit as part of the offering memorandum, available for viewing or download, as well as areas for customization on the landing page:
We created the text describing the investment campaign for the landing page, and also including a slide deck. CEC also had a premade video about DPOs for small businesses that helps some up the message of why investing this way can be impactful.
One downside was that we couldn’t edit the portal pages ourselves. We had to submit our materials to CEC, and they updated our information.
The subscription agreement (investment form) could be completed through the portal. Once completed, payment instructions would be displayed. Payment, however, could not be made through the portal. We encouraged folks to pay by check, because there is generally a cost to wire transfers, and we didn’t want anyone transferring funds without realizing that and then being upset. If anyone asked about transferring, we shared the info and made sure they were aware of potential fees.
The portal also included an investment total tracking section. This was updated manually, based on a spreadsheet we shared with CEC through Google Drive. Because of the nature of a short campaign, we decided this total should represent pledged commitments, because there would inevitably be a lag on some deposits, and it was critical to build momentum. One challenge with this part of the portal is that the investment totals are manually updated by someone on the CEC team. Normally they do weekly updates, but for our purposes—building momentum within each week—it was critical that they updated it more frequently. They were able to support that, but it was a bit of work to establish a rhythm.
FCI note: We encourage startup co-ops considering a DPO and online options for offering them to first consult with a certified public accountant in their own state, as laws may vary. A local lawyer experienced with securities should also be consulted. Consider networking with other businesses in your area, not necessarily co-ops, to locate these resources. See also the final question, below.
Question: Do you have any idea how many of your owners actually bought shares through the DPO? And do DPO owners have any voting rights in the co-op?
Answer: DPO Owners do not have voting rights. They have liquidation rights above member-owners, which means if we go out of business, but can pay off all debt, preferred shareholders would be next in line.
The majority of our investors are also member-owners. We have had 88 investors to date, and around 80 are members. We found that when we actually connected to members during our phoning, we got pretty good results, but there were a couple hundred members who we were never able to connect with.
Question: You mentioned that doing a DPO give you broader marketing access. Can you explain this and give examples? Do you have examples of how you advertised your DPO?
When doing any kind of private offering (or traditional member loan or preferred share structure used by co-ops), you are not allowed to advertise. With a public offering (a DPO), you can advertise within any state where your DPO is registered, in our case Rhode Island. Advertisement language still may need to be approved by the state securities office, but as long as it’s based in the language you’re using in the offering docs, it shouldn’t be a problem. (As long as you’re being truthful about the investment, really).
We didn’t do a huge amount of advertising, but we did some, and equally importantly, we were able to be more direct in our messaging on facebook and in our eblasts to non-members than if this were a private offering.
In addition, DPO meant I can talk to anyone in the state about it. That is making a big difference, now as we’re working to fill our remaining gap through a few investment focused presentations that will include primarily non-members who are interested in impact investing and/or social entrepreneurship. In the case of a private offering, my understanding is that I would need to recruit someone to be a member and then invest. A while this is not necessarily a massive barrier, each step that slows the process to investment is less than ideal.
Question: Did you need an outside lawyer, accountant, and/or broker to help you get this started? How did you determine the cost per share?
Answer: Yes! We definitely needed lawyers. No matter what form of capital raise you do, you should have a lawyer working with you. Costs will vary dramatically by state and by structure of the investment. We got proposals from a few lawyers that Ben Sandell of CDS Consulting Co-op recommended, as well as from Cutting Edge Capital. Each quote had similar info and pretty similar prices: basically each said that it was not clear whether Rhode Island laws allowed for the most traditional type of member loan (where exemptions can be used at both Federal AND state levels). If it was possible, it would cost 5-10k, and if not, then the work to register with the state would increase costs to around 20-30k.
We decided to move forward with Cutting Edge Capital both because they had experience being a bit more hands on in the planning than a traditional lawyer would be, and because they offer an upfront evaluation for 1k, which would determine our paths, and the cost of which could be rolled into our full fees if we moved forward with them. (In other words, if we moved forward with CEC after the initial evaluation, then the 1k would count as payment towards the overall cost of services).
You website is the world’s window to your co-op. Whether you are a new startup with 100 members or an established one with 10,000, giving your site a regular once-over can help build traffic and interest in your startup or store. You may have an elaborate site, a simple Facebook page, or both. It doesn’t take a major overhaul on either to keep your site on track. Open your site/s and check for these five things right now!
- It quickly defines who you are what what you are doing. Be sure your site says you are working towards a RETAIL FOOD CO-OP.,Share how a COOPERATIVE business model is different. Tell why this is important for your group and your community. Startup committee members may be too involved with co-op organizing to remember that total strangers may find your site and want to understand just what is going on here. Sharing your vision and process in a clear way is vital.
- It tells people where you are, and how to reach you. This may sound obvious, but here at FCI we look at lots of co-op sites everyday. About one-quarter of them do not show the city and state they are located in. Even more use contact forms and never list an email address, or phone number. Be sure your “contact” area is not just a form, but also lists an email address for people who want to use it. Most startups do not yet have a location, but they have a town, county, state, zip code—something to tell people that they are in Springfield KY, not Springfield MO or FL. At the very least, show an email address and your city and state in your footer or”about” area. Better yet, get a PO Box and share that—it tells people you are a real entity in the community and they can reach out to you.
- Celebrate your ownership numbers. Nothing tells people that you are serious about building this co-op more than showing how your ownership is growing. Prominently showing your numbers, and keeping them current, lets prospective member/owners know that they are important to launching the co-op. It tells future lenders you are proving your ability to grow. This can be a simple text box stating “As of October 31, 2016, we are 321 owners strong.” Or it can be a fancy graphic showing your goal and where you stand this week. Keep the design easy to update.
- Show your co-op status with a .COOP domain. Don’t wait. Do it now. Only available for cooperative businesses, it puts you clearly in the co-op world. It shows you support the cooperative principles. It tells your community that you are community owned. It may even be less expensive than a dot com for you. Many startups shoot for a dot org in the beginning, but that domain is intended for nonprofit 501(c)3 organizations and charities. As a retail food co-op you will be a business working towards making a profit, and usually that profit will either be turned back into the business or shared with the owners. Extremely few co-ops operate on a truly nonprofit model, and they are usually partially supported by a nonprofit or charitable agency. . Check out our blog post 5 Reasons You Should be a coop from the beginning, and reach out to the author of that post to get started.
- Think like a produce manager—Keep It Fresh! Show you are an active group serious about bringing a retail food co-op to your community. Seeing membership numbers that are seven months old or a Facebook page that has not had a post in over a month can turn potential owners away pretty fast. Check your links—clicking on your website link in Facebook and winding up on an Error 404 page will chase people away. Update everything on a regular schedule. Share info and tidbits to keep your audience excited. Make your web presence your best tool for keeping your community informed on your process and progress.
Your website is THE best way to get the word out as you grow! For more ideas check out the resources on our website and webinar series for marketing, membership, and branding.
By SaraBeth Drybread of Columbus Food Co-op
The staff at FCI knows that the task of opening a new retail food co-op requires many partners. The sheer volume of things to do can sometimes overwhelm even the best startup team. We want to share this story of using community partners to build success, and how startups might benefit from Helpful Partners.
Columbus Food Co-op in Columbus, Indiana knows that the vendors and providers they wish to feature in the store can be their best helpers in promoting the co-op. Presently they are in the implementation stage, they have worked with many producers to bring more value to owner-members even before the store opens. While building excitement for the co-op, they are growing strong relationships with these wonderful partners. SaraBeth Drybread shares two great examples with us and shows how it is a win-win for all parties. Our thanks to SaraBeth and Columbus Food Co-op for sharing their own Helpful Partners with us. For more information about Columbus Food Co-op, email firstname.lastname@example.org. Reach the Food Co-op Initiative staff anytime at email@example.com.
“Before the Store Perks”
Relationships, relationships, relationships! That’s the co-op difference, right? As a startup, it’s important to keep owner-members engaged and feel like they’re benefiting from the time they join your co-op, especially since the process will be long. The co-op’s relationship with local producers and businesses is also key to growth and establishing yourself as an ally.
Our co-op offered “Before the Store Perks” at our farmer’s market. We reached out to local vendors (many of whom were owner-members) and asked them to offer a benefit to owners at the market.
Here are some examples:
- Nightfall Farm: 10% off pastured chicken
- Soapy Soap Co.: $2 off essential oils
- Indiana Craft Jerky: $2 off bag of jerky
- Fleming Family Beef: 10% off purchase
- Poster for participating vendor to display at the farmer’s market
- Owner-member Benefits Cards
- Link to vendor on social media, newsletters, website
- Weekly highlights of participating vendors & benefits
- Mentions on bi-weekly radio morning show where we have a spot
The goal was to show our support and introduce new customers to these local vendors and increase our membership because everyone loves to get a discount!
We had owner-members pick up benefits card our booth which was a great way to engage with them and make sure they were up-to-date on our progress. Are you reading the newsletter? Do you follow us on Facebook? Have any questions?
Sponsor Buy Local Week
Another way to build relationships with local businesses is to sponsor a Buy Local Week (BLW), much like Small Business Saturday. This was one of our earliest initiatives and helped connect us with like-minded business leaders. We got a few fellow sponsors (bank, insurance company, community center) and participating businesses offered a discount to customers and the co-op did the rest.
- Created index-sized cards with participating business logos on the back
- Put Buy Local Week window decals in participating businesses
- Created posters with info and list of businesses and placed all around town
- Bought an add in the newspaper
- Heavily publicized on social media, newsletters, website
The BLW index cards were passed out at the Farmer’s Market, a couple of restaurants put them in with people’s checks, and we put stacks in some of the businesses. People would take a card during BLW to a participating business for the incentive and get the logo initialed on the back. At the end of the week we had a big ice-cream social and gave away door prizes to people who participated and turned in their cards.
This was open to everyone, not just owner-members. All the promotional materials had the co-op logo, website, and social media contacts on them, so it was a great way to build awareness.
Keep reaching out to local growers/producers and businesses.
They are your greatest ambassadors! Growers who have small stores and/or participate in the Farmer’s Market might see the co-op as competition instead of growth potential as another outlet for their goods. This is where education and impact stories from existing co-ops is crucial. Check out the Impact Report from Common Ground Food Co-op, or the Annual Reports from River Valley Market and communicate that type of local sales growth to your membership and potential vendors. One of our market vendors had their best week ever when they offered the discount to owner-members!
Now is the time to start lasting relationships. Do what you can to build your relationships with local growers because they’re your suppliers, customers, investors, and champions for owner growth. Stronger. Together.
FCI: Why We Like This: This type of cooperative community building can excite vendors and show them that owner-members are serious about supporting local producers. It also gives owners a tangible benefit of joining, and joining early—before the store opens. A new retail food co-op’s success can hinge on this type of partnership between co-op, members, and producers.