Capital Campaigns: One Co-op Opts for Direct Public Offering, Q & A

By Philip Trevvett, of Urban Greens Food Co-op in Rhode Island

ug_logo_green_trans_cmyk_100

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 fug_key_v300-01or 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).

ug_yourstoreyourinvestment-01We 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).

Advertisements

Helpful Partners: Engaging Members & Local Producers/Businesses

By SaraBeth Drybread of Columbus Food Co-op

columbus-logo

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 info@columbusmarket.coop.  Reach the Food Co-op Initiative staff anytime at info@fci.coop.

“Before the Store Perks”

benefits-posterRelationships, 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

soapysoapsocialmediaThe co-op provided the following:

  • 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.

The co-op:

  • 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

buylocalweekcardThe 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. 

Capital Campaigns: One Co-op Opts for Direct Public Offering, part 2

By Philip Trevvett, of Urban Greens Food Co-op in Rhode Island
ug_logo_green_trans_cmyk_100
Read Part 1 of this series HERE, and check out the following Q & A here.
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. Any type of capital campaign will find useful resources in our Capital Campaign Workbook. This post gives us a glimpse into a successful DPO by a startup co-op.
Urban Greens Food Co-op in Providence, Rhode Island is in the implementation stage, with groundbreaking for their co-op in Fall 2016. The group has been working through many community-based efforts to bring a retail food co-op to their community, but chose to reach out to a larger audience to support their capital campaign. Philip Trevvett has been on of the leaders of this effort, and welcomes questions via info@urbangreens.com. Our thanks for Philip and Urban Greens for sharing their story.

Part 2:

Lessons Learned:

1) Local knowledge has value. This was true in many areas:

  • We decided not to hire externally for a coordinator position: In planning and prioritizing call lists, personal emails, etc., my knowledge of our member list was incredibly helpful. It would have taken more hours to transfer that knowledge to someone else, and made our call list organization less efficient. This of course was possible because of my time availability, but the key point: whoever is most familiar with membership has a lot to offer in planning call lists. All board members also reviewed our full list of members and noted members they knew, connections and context.
  • We choose to hire a local fundraising consultant on a limited basis. While donation-based capital campaigns differ from investment-based ones in some ways, we gave our consultant a clear outline of our plan, and were able to benefit significantly from her local knowledge. As we reported on various conversations and connections, she’d give us background on members with potential capacity that we were unaware of, or general techniques and strategies to help build stronger relationships with specific supporters.
  • Customizing specific aspects of our messaging. Key lesson here: know your members. as well as your capacity. In some ways our messaging went against the standard, advised messaging rules. We did not emphasize that we needed to reach our full goal by our target date in order to open. In fact we emphasized that, above our lower threshold of 100k, we would be able to move forward with the building by taking on more debt if needed. This was the right decision for us because of our particular history. Urban Greens has been on a long startup path. At one point we had to opt out of an earlier publicized site at a fairly late stage, then had several more years working towards our current site. It was critical to several investors that they know the co-op was ‘really happening’ this time. Multiple investors felt much more comfortable knowing that the store was definitely moving forward, and that our planning was solid even if we did not reach the full target by the end of June. 

2) Going Digital & “Remote.”  More than most, our campaign was almost entirely remote, via emails and phone calls. Because we had an e-portal set up through which investors could complete the offering agreement, there was often no need to meet people in person. We always offered in person meetings,  but a high percentage of investors were happy to have a phone call and then complete the online form. Because we were registered publicly, and able to promote directly on our facebook page, this also meant a number of individuals invested without having conversations at all. (While this wasn’t a large proportion of our raise, it did speak to the impact a strong social media campaign could have.)

3) Open communication among team members is key. There is a lot of communication happening during a capital campaign. We were strong in some aspects but weak in others.

One of our biggest challenges was keeping board members on task, especially those less immediately involved in the campaign. In both the quiet and public campaign, we had trouble getting several board members to follow through on their commitment to having pitch conversations. We had predicted significant investment from several sources where direct connections existed, but in the end were only able to reach out to them through cold calling. In some cases this made little impact, and we still received investments. In other instances, this likely led to less or no investment. Key points:

  • It is critical that members of the board are fully aware of, and “buy in” to, the work that needs to be done for the capital campaign.
  • The coordinator needs to be able to focus on efficiently managing the entire campaign. Board members should be the top supporters of the coordinator, and help in every way possible. Understanding their own accountability for the campaign outcome is important.
  • Big picture: if the coordinator find it is a challenge to get board members to actively participate, it risks making the larger goal (and the coordinator’s job) feel impossible.

Keeping morale up among callers was also difficult, but we did better on this aspect. Many evenings most callers would get no commitments, and only reach a handful of people. Figuring out how to keep callers engaged and feeling good is key. Some campaigns have the capacity to focus on the callers with the best success rates. We did not. We had a limited set of callers, and needed everyone. It was imperative to emphasize how important everyone was no matter the results they were seeing. Many messages left would result in follow up email exchanges with me as the coordinator, and to eventual investments. Callers needed to understand that just because they didn’t reach someone, that did not mean the call was pointless.

4) Create a strategy for accessing the funds before you start. There seem to be multiple strategies here: locking funds until full financing is reached, allowing a percentage to be used, or designating a lower minimum “raise threshold.” We designated a minimum threshold of 100k. We had to justify it in our Offering Memorandum, but this put us in the comfortable position of knowing that—even if we did not raise the entire amount by July—we would have a significantly larger budget towards raising additional capital if needed.

5) People invest for many different reasons, and understanding those various reasons and when to emphasize each, will strengthen your pitch.

This means listening to, and learning from investors, or investors from other co-ops, to hear what they found important. We also made sure all callers were sharing what investors found compelling.

6) Prepare investors for the campaign well before launch. The capital campaign has been part of our plan for several years, and we have been open about that with members. That meant that many members were ready to listen, and ready to invest.

Next Steps:

flashmob

Members celebrate the Urban Greens future site.

Our goal is to not run a second phase of public campaigning, and phone-banking numbers either this fall or next spring.

The avenues we are currently focused on:

  • Quiet’ presentations, and house parties, organized by a few current investors. (The public offering makes it very easy for us to talk directly about the campaign in these presentations, even if not everyone is a member.)
  • Foundation/institution support–Social impact investing as a form of mission based endowment investment. Foundations are increasingly looking into this, and we are currently in the review process towards 1 such investment large. What is small for an endowment can be huge for a co-op
  • Small/likeminded business support: We plan to reach out to numerous independent businesses in the neighborhood that will benefit from the customers that the co-op brings to the area.

Overall, we’ve been extremely happy with our capital raise to date, and look forward to continuing our raise quietly this fall.  We worked hard to use guidelines and strategies outlined by the Capital Campaign Toolbox, while also trusting our local knowledge of where slight adjustments would benefit us. The biggest lessons for us from this campaign:

  • It’s important to trust the plan, but also trust your knowledge about when the plan needs modifications.
  • Open communication is important.
  • The better you know your members, the better you will do.
  • Designing the investment structure for your needs can have a huge impact on your success.

Running a Capital Campaign as a startup is one of the hardest things a startup has to do.  You won’t know how it will go until you’re in it. It feels like a big leap of faith to plan on raising large amounts of capital like this, but we found what many other co-ops have as well: that it can work, and have a huge impact.  

(We know you will have questions as you read this post!  Please share them below and we will get a follow-up post out soon to answer as many as we can.)

FCI: Why we like this:  Clearly Urban Greens put a good deal of thought and research into this process.  A DPO may not be right for all co-ops, but in this case it really increased the range of available investors for the startup. Consult your legal and accounting advisors to ensure compliance with your own state laws. We encourage you to talk with your consulting team as well, and to reach out to other co-ops who have taken this step.

Capital Campaigns: One Co-op Opts for Direct Public Offering, part 1

By Philip Trevvett, of Urban Greens Food Co-op in Rhode Island
ug_logo_green_trans_cmyk_100
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. Any type of capital campaign will find useful resources in our Capital Campaign Workbook. This post gives us a glimpse into a successful DPO by a startup co-op.
Urban Greens Food Co-op in Providence, Rhode Island is in the implementation stage, with groundbreaking for their co-op in Fall 2016. The group has been working through many community-based efforts to bring a retail food co-op to their community, but chose to reach out to a larger audience to support their capital campaign. Philip Trevvett has been on of the leaders of this effort, and welcomes questions via info@urbangreens.com. Our thanks for Philip and Urban Greens for sharing their story.

Urban Greens closed out our initial capital campaign at the beginning of July. We are excited to share our process, results, lessons learned ,and next steps with other start-ups. Running our campaign on a tight budget, and with very tight volunteer support, we were able to have a really successful campaign,. Now we are in great shape to reach our full goal through additional quiet conversations this fall.

Planning Our Campaign:

As we embarked on our community capital campaign, we had a few key decisions to make. First, we decided to register our campaign as a direct public offering (DPO), meaning that it was a registered security, where anyone in the state could invest, rather than a more traditional startup Capital Campaign, in which the co-op can only promote to and receive funds from members. Running our campaign as a public offering allowed us to do a couple of things that we felt were key to us, in our circumstance:

Our capital campaign would not be limited to members:as a DPO  we could reach out to anyone in the state of Rhode Island, where we were registered. This was important because our store’s trade area is notably mixed income, and a major part of our mission is to bring a grocery store to an area currently lacking food access–many of our members are able to afford member-ownership, and future shopping in the store, but do not necessarily have the means to invest in a capital campaign. By registering publicly we could ‘pitch’ folks who may not be potential owners or customers, but who may be motivated to support the project and its impact on food access and local food infrastructure, and excited about the opportunity for hyper-local “impact investing.”

Registering publicly also meant we could publically advertise the campaign. This allowed us to spread the word more broadly and through a variety of channels (both to non-members, and to members who may not regularly read our newsletters or follow us on social media!).

urban-greens-food-co-op-site-renderingNext, we decided to structure the investment as preferred shares, a non-voting form of stock, as opposed to loans. We chose to go with preferred shares for two reasons:

  • This lowers our total debt. (Even though member loans may be considered subordinated debt, they are still generally listed as debt, and having less total debt helped our overall financial projections.)
  • Whereas with loans, a part of the principal would generally have to be paid off each year, the preferred shares are structured for us pay out only interest until the shares are redeemable (after year seven). This significantly lessens our expenses in early years.

Implementation:

For our implementation plan, we essentially followed the format laid out in Ben Sandell’s Capital Campaign Plan (see the Capital Campaign Workbook) with only a few differences as noted. Our basic plan was as follows:

Begin with a Quiet Campaign in May 2016Quiet Campaign Goal: 100k

  • Reaching out via emails, phone calls, and direct conversations with 30 long-time and “inner-circle” member-owners, and past/present board members.

Launch publicly at end of May, with a public goal of 600k. (Internally, assumed a high probability that we would need a second public phase to reach 600k)

  • Kick off public campaign with a written letter to all member-owners.
  • Advertise on public radio throughout the public campaign
  • Pitch and promote campaign heavily through our eblasts (not just to members, but full email list of anyone interested in Urban Greens)
  • Robust public social media campaign.
  • Phone-calling to every member-owner, on Monday– Thursday & Sunday schedule, leaving two messages when no one was reached, and one direct follow up email.

Staffing/Support: We had a Community Investment Campaign Planning Committee, which met regularly through April and May. After interviewing candidates for a campaign coordinator position, we decided against hiring one. Our plan was to used the money saved on a local fundraising consultant who could do both advising and coordination. In actuality, one board member (me) took on the coordinator role.

The local fundraising consultant support served us in an advisory role.

Six callers participated in calling members in June: three callers committed to two nights per week, and two callers committed to three or four nights per week. As our main caller, I called four or five nights per week. While being the coordinator and main caller was challenging and demanding, it helped streamline communication channels and organization immensely.

Taking pledges and payments: We also paid for a digital online portal for investment agreements, including digital signatures. This significantly lessened the need for in-person meetings with already committed investors, or in depth follow-up to make sure papers were signed.

Capital Campaign Result:

In May and June, we raised $338,500.00  in investments, from 84 investors. Since then we have paused, while planning for this fall, but still accepted a few investments, so that we are currently just over 350k, from 88 investors.

This has put us in a very strong position moving forward. We hope to complete the campaign this fall, but do have the option to complete any time before April 11 (last date of our public offering). While construction of the store will start late 2016, our development team is paying for construction, so outside of bringing on a GM, our major expenses will all come later next year.

To be continued: In part two of this post, Phillip shares the lessons learned, and next steps. You will find out more about the functional details, and hear why, in Philip’s words, “It feels like a big leap of faith to plan on raising large amounts of capital like this, but we found what many other co-ops have as well: that it can work, and have a huge impact. Read Capital Campaigns: One Co-op Opts for Direct Public Offering, part 2 and also the follow-up Q & A post..

Growing Pains: The GM Transition

By Heather Avella of Manchester Food Co-op

manchester logo
The staff at FCI knows that the path to opening a new retail food co-op is rarely a straight line. The potholes and unexpected turns can really shake up even the best startup team. We love to share stories of these Growing Pains, and how startups have overcome them, or what they would do differently.
Manchester Food Co-op in Manchester, NH has faces some twist and turns on their path. Now in the process of converting a store to a co-op, to open soon, they found the letting go process involved once a general manager was on board was a bit of an unnerving thing.  Our thanks to Heather Avelia, project manager at Manchester for sharing a bit about their own Growing Pains with us. For more information about Manchester, email info@manchesterfood.coop.  Reach the Food Co-op Initiative staff anytime at info@fci.coop.

Hiring your first General Manager. You see this topic on every start-up conference agenda, notice many references in CDS Consulting Co-op’s library, participate in a session or two about recruiting your GM, and gather tips how to make your co-op marketable to national talent.  We did all these things at the Manchester Food Co-op.  In hindsight we were not prepared for how difficult the process—and the transition it signifies—would be.

All of us who have experienced the simultaneous pleasure and pain of growing our food co-op from embryonic visionary state to the exciting and practical stage when a GM is hired know the sweat, tears, and triumphs involved in the adventure. The board, motivated by passion and a common cause, has its hands in everything from soup to nuts: when the GM is hired the shift can be surprising.  The board’s role and feeling of empowerment will change. They will be giving up control over pieces they have been intrinsically involved with, pieces that are also very near and dear to the mission.   At Manchester we found that, although you can be prepared from a textbook kind of sense, you may be surprised the wave of emotions that arise during this transition.   At least we were. We are happy to share our challenges and some tips with you.

Biggest Challenges

Separation Anxiety

We now have a fantastic General Manager who has over a decade of co-op experience. We feel very fortunate to have been able to hire such talent as a start-up!  However, no matter what type of rock star GM you hire, the challenge can be likened to parental separation anxiety.  Suddenly you have the loss of input into anything involving operations.  Our board consisted of members with grocery, HR, and architectural experience. They now had to now withhold their expertise to allow our GM to build his own plans and establish relationships. This is a tough letting go process. Board members who felt their value was in these skill sets now felt uncertain of their contribution. What do you mean I don’t have a say in store design? How do I not pursue conversations with local producers and potential vendors? Why can’t I lend a hand in the staffing plan? Why does the DC want to deal with only GM’s or PM’s, and not any board members?  Board members may feel like the bricks that they have been stacking for years while building toward a store have now formed a wall and they are on the outside, looking in.

 Policy Readiness

manchester bldgThen there was the Policy Governance piece.  We intended to operate by Policy Governance, because that is what food co-ops do, but we really didn’t even know what that meant. Ends? Means? We were suddenly chasing these concepts after already hiring our GM, which was less than ideal. When we interviewed GM candidates, we stated that we would govern by Policy Governance but we weren’t well versed in these principles, and we should have been!

Our tips for other startups

Be Prepared for Change and Letting Go!

When your new GM comes on board, there will be a clear division between operations and capital. Your board will be responsible for raising capital. Your GM will be responsible for all things related to store operations, including store design, staffing, products, and pricing. Conceptually, we have found it easiest to understand in the context of our pro forma: the board is responsible for the sources, while the GM is responsible for the uses. For some board members this will be more difficult than for others. Recognize that this stage, when you are implementing your capital campaign and your GM is hired, is not for everyone. You may find some turnover in board membership during this period, and that’s okay. Keep the lines of communication open between all board members to avoid any tension or dips in morale. Recognize when a board member may need to move on because he/she is not suited for this developmental stage.

Don’t drag your feet on Policy Governance!

Engage your Policy Governance before you hire your GM.  Without digging into this prior to hiring our GM, we were not prepared to both communicate our ends and understand how the GM/board relationship would work within this framework. Use the CDSCC’s CBLD materials and programs—don’t re-invent the wheel as there are great governance templates out there. Get your draft done and understand this process so you are best positioned for a smoother ride once your GM comes aboard. Understand how the board’s role will be to govern by ends, and make sure you feel comfortable that your ends represent your vision. This will give you the confidence that the vision will be executed, while completely empowering your GM to make decisions.

If you don’t have a policy governance lover on your board, get one fast – one of our drawbacks was not finding someone who loves bylaws and policies, so it became one of the important things we would consistently avoid.

I’m sure there is no food coop out there that would say this stage is completely carefree, smooth and easy. As with many coop developmental transitions, it is sloppy and less than perfect. By keeping in mind the passion behind your project, and taking some of these preventative steps to prepare, you can set yourselves up to surmount the challenges.  The end result is establishing a great working partnership with your GM and successfully opening your doors.  Nothing is better than that.

At least, that is what we imagine. We all joke that we will be laying on the co-op’s floor, bawling impressive puddles of tears when our doors finally do open!  I am looking forward to seeing that scene manifest.

 

FCI: Why We Like This:  No matter how many terrific industry experts and consultants you work with, no one but a peer startup cooperator can tell you what it’s going to feel like to transition from a working board to the governing board of a co-op that’s about to open the store. To be a board leader at a startup food co-op is to get used to being on a roller coaster, but it’s always easier to enjoy the ride when you know that next twist is coming. Thank you to Heather for sharing with us a little bit about the track ahead from one who’s been there!