Starting a cooperative Phase 3: Plan to action
The purpose and need of the cooperative have been identified and a business plan to meet the needs developed. Now for the hard part: gathering the resources and implementation.
A newly incorporated cooperative with a sound business plan and a newly elected Board of Directors remains only an idea until implementation. Moving from the plan to action needs careful preparation and attention.
At the first meeting, the Board of Directors, as governed by their recently approve cooperative bylaws, should elect officers, and appoint committees. The officers and committees will set forth the implementation plan to make the cooperative work. How to accept new members and setting target dates for achieving mileposts established in the business plan are only a couple of the decisions that need to be made..
Expanding the membership beyond the original organizing group is important, and should consider the membership qualification requirements and individual equity investments. Fully understanding the target goal spelled out in the bylaws will be necessary to make the cooperative profitable. Housekeeping items should include obtaining insurance and establishing banking relationships. If not spelled out in the bylaws, authorization to sign checks and loan documents should be established by board action. Stock certificates also should be issued at this time.
Should the membership equity drive not obtain the necessary capital to meet the needs as expressed in the business plan, additional capital strategies will need to be undertaken? One method is to sell preferred stock (not voting stock) to members and non- members (if allowed in the bylaws). Legal counsel should be engaged in this process to avoid a breach of securities laws. Lending institutions can be approached, but it should be remembered that a beginning business is only as good as its business plan including the patronage of the cooperative membership. Personal guarantees can help to overcome this difficulty, however prudent caution should be exercised.
Hiring a General Manager to begin the business process and to run day to day operations is the duty of the board. An experienced manger should have cooperative experience along with a proven business track record. The board should communicate the approach to the business as set out in the business plan. An executive committee of the board, as expressed in the bylaws, can assist the General Manager in between board meetings. However, it should be remembered that day to day operations are the prevue of the General Manager.
Using the business plan as the blueprint, and with adequate funding in hand, asset accumulation can begin. Facility location should adequately meet the needs of the membership, not just an available (and inexpensive) space. Machinery and equipment that meets the purpose of the cooperative need not necessarily be new, but at a minimum serviceable. Funds for marketing and communicating the advantages of the cooperative along with sufficient cash to provide a cushion of safety is essential until the business can generate cash flow to meets its needs.
It is also vital to continually communicate with the membership of the progress being made, from how much capital has been raised to the successful opening for business.
Michigan State University Extension educators work with the MSU Product Center’s Michigan Cooperative Development Center can provide assistance with helping guide groups of potential cooperatives through this process.
Other articles in this series:
- It is not an easy task to organize a cooperative: Phase 1
- Starting a cooperative and developing a business plan: Phase 2