Erbin Crowell, Executive Director, Neighboring Food Co-op Association and Adam Trott, Staff, Valley Alliance of Worker Co-ops; Worker/Member, Collective Copies share examples of co-op conversion for business success. Co-ops are a great model for business succession, retaining jobs, and rooting businesses in communities. Why go co-op? How do co-ops strengthen our regional food system and economy? Learn about the process of conversion, and hear from representatives from a variety of businesses that have converted to the co-operative model.

1. Co-­‐op
Conversion
for
Business
Success:
Why
Go
Co-­‐op?
Erbin
Crowell,
Neighboring
Food
Co-­‐op
AssociaBon
(NFCA)
Adam
TroG,
Valley
Alliance
of
Worker
Co-­‐operaBves
(VAWC)
NOFA
Summer
Conference,
15th
August
2015
University
of
Massachuse?s,
Amherst

2. Your
Presenters
Erbin
Crowell
• ExecuBve
Director,
NFCA
• Equal
Exchange,
Co-­‐op
Fund
of
New
England,
Co-­‐operaBve
Development
InsBtute,
VAWC
• Vice
President,
New
England
Farmers
Union
• Board
of
Directors,
NaBonal
CooperaBve
Business
AssociaBon
• Master
of
Management,
Co-­‐
operaBves
&
Credit
Unions
Adam
TroG
• Staff
Developer,
VAWC
• Worker/Member,
CollecBve
Copies
• Board
of
Directors,
Valley
Co-­‐
operaBve
Business
AssociaBon
• Vice
President,
Co-­‐operaBve
Capital
Fund
(CFNE
sister
fund)
• Former
Community
and
PoliBcal
Organizer
2

3. Workshop
DescripBon
•
Co-­‐ops
are
a
great
model
for
business
succession,
retaining
jobs,
and
rooBng
businesses
in
communiBes.
•
Why
go
co-­‐op?
•
How
do
co-­‐ops
strengthen
our
regional
food
system
and
economy?
•
Learn
about
the
process
of
conversion,
and
learn
from
the
experience
of
a
variety
of
businesses
that
have
converted
to
the
co-­‐
operaBve
model.
3

4. Outline
1. Our
Context
2. What
is
a
Co-­‐op?
3. Why
Co-­‐ops
are
Good
for
Local
Economies
4. Case
Studies:
Co-­‐operaBve
Conversions
5. Suggested
Guidelines
6. Discussion,
QuesBons,
Ideas
4

5. 1.
Our
Context
• A
Broken
(Unaccountable)
Food
System
• Crisis
of
Global
Economic
System
• Unemployment
• DramaBc
Inequality
in
Wealth
• Diminished
Democracy
in
PoliBcal
Systems
• Hunger
for
AlternaBves
• Corporate
consolidaBon
of
food
system
• RelocalizaBon
&
Regional
Economies
5

6. The
Challenge
of
Succession
• Sole
proprietorships
rarely
pass
to
the
next
generaBon
• Winding
down
of
a
business
represents
lost
community
social
and
financial
capital
• Closures
impacts
the
wider
community
(workers,
producers,
local
government,
etc.)
• ConvenBonal
path
for
successful
business
is
selling
off
to
a
larger
business
or
to
investors
• Community
investment
in
the
success
of
these
local
enterprises
is
unrecognized
6

7. What
If…?
• There
was
a
business
model
that...
• …was
democraBc?
• …was
accountable
to
the
people
it
served?
• …was
rooted
in
our
local
communiBes?
• …was
part
of
a
values
based
movement?
• …put
common
good
before
private
gain?
• …was
flexible
and
innovaBve?
• …was
successful
and
more
sustainable?
7

8. England
in
the
1800s
• DislocaBon
of
local
economies
• DramaBc
shigs
in
wealth
• ConcentraBon
of
economic
control
• Poor
working
condiBons
• Contaminated,
low
quality
food
• Birth
of
the
Co-­‐operaBve
Movement
8

9. Rochdale
Society
of
Equitable
Pioneers
• Founded
1844,
Rochdale,
England
• Weavers,
Unionists,
Community
AcBvists
• Member-­‐Owned
Store
• Pure,
Affordable
Food
• Basic
Co-­‐op
Principles
9

10. 2.
What
is
a
Co-­‐operaBve?
A
co-­‐operaBve
is
an
autonomous
associaBon
of
persons
united
voluntarily
to
meet
their
common
economic,
social,
and
cultural
needs
and
aspiraBons
through
a
jointly-­‐owned
and
democraBcally-­‐controlled
enterprise.
10

11. In
Other
Words…
A
co-­‐op
is
a
legal
business
that
is
equitably
owned
and
democraBcally
controlled
by
its
members
for
their
common
good,
the
good
of
the
community
and
to
accomplish
a
shared
goal
or
purpose.
Any
surplus
(usually
called
profit
in
private
firms)
is
distributed
among
members
in
proporBon
to
their
use
of
the
business
(purchases,
labor,
or
supply),
as
a
discount
on
purchases,
or
is
reinvested
in
the
enterprise
for
the
mutual
benefit
of
members.
11

12. Co-­‐operaBve
Business
Principles
• Voluntary
&
Open
Membership
• DemocraBc
Member
Control
• Member
Economic
ParBcipaBon
• Autonomy
&
Independence
• EducaBon,
Training
&
InformaBon
• Co-­‐operaBon
among
Co-­‐operaBves
• Concern
for
Community
12

13. Values
Based
Business
“Co-­‐operaBves
are
based
on
the
values
of
self-­‐
help,
self-­‐responsibility,
democracy,
equality,
equity
and
solidarity.
In
the
tradiBon
of
their
founders,
co-­‐operaBve
members
believe
in
the
ethical
values
of
honesty,
openness,
social
responsibility
and
caring
for
others.”
13

14. A
Flexible
Business
Model:
Purpose
• Provide
Employment
and
a
livelihood.
• Purchase
needed
products
or
services
as
a
group.
• Produce
a
product
or
service
together.
• Process
and
add
value
to
raw
materials
produced
by
members.
• Market
products
produced
by
members
or
by
the
co-­‐op.
14

15. A
Flexible
Business
Model:
Industry
• Agricultural
Co-­‐ops
• Fishing
Co-­‐ops
• Worker
Co-­‐ops
• Food
Co-­‐ops
• ArBsan
Co-­‐ops
• Housing
Co-­‐ops
• Credit
Unions
• CommunicaBons
• UBliBes
Co-­‐ops
• Health
&
Insurance
15

16. A
Flexible
Business
Model:
Stakeholders
• Worker
Co-­‐ops:
Owned
and
operated
by
the
people
who
contribute
their
labor
to
the
business.
• Consumer
Co-­‐ops:
Owned
by
the
people
who
purchase
goods
or
services.
• Producer
Co-­‐ops:
Owned
by
producers
who
purchase
inputs,
process
and
market
their
products.
• Community
Co-­‐ops:
Owned
and
governed
by
members
of
community.
• MulBstakeholder
Co-­‐ops:
Owned
and
controlled
by
combinaBon
of
member
types.
16

17. Basic
Co-­‐op
Structure
17
MEMBERS
BOARD OF DIRECTORS
EMPLOYEES
Elect
Hire
Hire
MANAGEMENT
Worker
Co-­‐op
CONSUMERS OR
PRODUCERS
Consumer
or
Producer
Co-­‐op
Product or Service
A
MulBstakeholder
Co-­‐op
includes
a
combinaBon
of
member
types
in
ownership
and
governance.
CollecBves
fla?en
organizaBonal
layers,
emphasizing
consensus
and
group
decision-­‐making.

18. 3.
Co-­‐ops
are
Good
for
Local
Economies
…are
more
common
than
we
think
•
1
billion
members
worldwide
(1
in
3
in
the
US)
•
More
people
than
own
stock
in
mulBnaBonals
•
Majority
of
US
farmers
are
co-­‐op
members
…are
innovaBve
•
Healthy
food,
organic
agriculture,
Fair
Trade,
relocalizaBon,
regional
aggregaBon
and
distribuBon
…are
successful
•
30,000
co-­‐ops
in
all
sectors
of
US
economy
18

19. 2012:
UN
InternaBonal
Year
of
Co-­‐ops
Co-­‐ops
“in
their
various
forms,
promote
the
fullest
possible
parBcipaBon
in
the
economic
and
social
development
of
all
people,
including
women,
youth,
older
persons,
persons
with
disabiliBes
and
indigenous
peoples,
are
becoming
a
major
factor
of
economic
and
social
development
and
contribute
to
the
eradicaBon
of
poverty.”
19

20. 2014:
UN
InternaBonal
Year
of
Family
Farming
20
“The
importance
of
agricultural
co-­‐operaBves
in
improving
the
lives
of
millions
of
smallholder
farmers
and
their
families
cannot
be
overstated.”

21. Co-­‐ops
&
Local
Economies
• Community
ownership
&
control
• Focus
on
service,
meeBng
needs
before
profit
• Develop
local
skills
&
assets
• Ability
to
pool
limited
resources
• Regional
economic
efficiencies
• Difficult
to
move
or
buy-­‐out
• Root
wealth
in
community,
not
markets
• Member,
customer
loyalty
• Low
business
failure
rate
&
are
long-­‐lived…
21

22. Co-­‐operaBves
are
Resilient
• Because
they
are
community
owned,
co-­‐
ops
root
jobs,
wealth
and
infrastructure
locally.
• Because
they
are
more
resilient,
co-­‐ops
contribute
to
more
stable
local
food
systems,
infrastructure,
employment,
services,
and
economy
over
Bme.
22

23. Neighboring
Food
Co-­‐op
AssociaBon
• 35
Co-­‐ops
&
Start-­‐Ups
• 90,000+
memberships
• 1,700+
employees
• $42+
million
in
wages
• $240+
million
revenue
• $30+
million
in
local
purchases
• Investment
in
educaBon
on
business
model
23

24. Valley
Alliance
of
Worker
Co-­‐ops
• 7
member
worker
co-­‐ops
in
Western
MA
&
Southern
VT
• 70+
worker
members
• $7.5
million
revenue
(2014)
• Member
Supported
&
Owned
Loan
Fund
• Supported
six
conversions
in
six
years
• CollaboraBon
with
other
sectors
–
VCBA,
etc
• UMass
Co-­‐op
Enterprise
CollaboraBve
24

25. 5.
Case
Studies
•
Co-­‐ops
in
New
England:
•
1,400
businesses
• Food
co-­‐ops,
farmer
co-­‐ops,
worker
co-­‐ops,
credit
unions,
etc.
•
Locally
owned
by
5
million
members
•
Earn
$9
billion
in
annual
revenue
•
Employ
22,000
people
•
Pay
$1
billion
in
wages
• Source:
h?p://reic.uwcc.wisc.edu/
25

26. 4.
Case
Studies
in
Co-­‐operaBve
Conversions
26

27. The
Mondragón
Co-­‐operaBves
• Located
in
Basque
region,
Spain
• First
co-­‐op
in
1956
(Started
with
5
employees,
now
has
8,000)
• $22
Billion
in
Sales
(2009)
• 103,700
Employees
(2009)
• Premised
on
Import
subsBtuBon
and
social
entrepreneurship
• System
includes
agricultural
and
retail
grocery
co-­‐ops
27

28. Case
Study:
Simple
Diaper
and
Linen
• Sole
proprietor
driven
conversion,
remains
a
member.
• 3
year
process
supported
by
VAWC:
Conversion,
loan
applicaBon
with
Co-­‐op
Fund
of
New
England,
planning,
new
equipment,
business
planning.
• New
locaBon,
state
of
the
art
machinery,
new
services,
expanded
delivery
region.
• 2
worker/members
going
on
4
28

29. Case
Study:
BraGleboro
HolisBc
Health
Co-­‐op
• HolisBc
health
business
owner
moving
on
• Six
current
tenants
organize
to
form
a
co-­‐op
and
take
on
business
• VAWC
support
includes
assembling
financial
resources;
facilitaBng
loan
applicaBon;
meeBng
support;
Member
rights
and
responsibiliBes;
benefits
development;
ArBcles
of
IncorporaBon
and
Bylaws.
• Massage,
chiropracBc,
acupuncture
and
herbalist
services
along
with
an
apothecary.
• 6
worker
members
• Currently
entertaining
expansion
29

30. Case
Study:
Broadfork
Permaculture
Co-­‐op
• Two
potenBal
worker/member
joined
current
sole
proprietor
in
converBng
to
worker
co-­‐operaBve.
• VAWC
support
centered
on
structure
and
governance;
formulaBon
of
markeBng
and
adverBsing
programming;
co-­‐op
movement
history
and
connecBon;
facilitaBng
purchase
from
sole
proprietor.
• Broadfork
seeks
to
assemble
permaculturists
in
a
format
of
collecBve
co-­‐
operaBon
over
individual
compeBBon
in
their
industry.
Long
term
support
for
business
co-­‐ownership
and
financial
literacy
are
important
aspects
to
assert
in
the
establishment
of
the
co-­‐op.
• 3
worker/members
30

31. Case
Study:
Real
Pickles
Co-­‐op
• Founded
as
sole
proprietorship
in
2001
• Naturally
fermented
foods
(pickles,
sauerkraut,
etc.)
• Incorporated
as
a
worker
co-­‐op
in
2014,
with
5
founding
members,
including
original
owners
• $500,000
outside
investment
raised
to
fund
transiBon
• $700,000
revenue
annually
• Core
goals:
PreservaBon
of
mission,
local
ownership
and
control,
retenBon
of
staff
over
Bme
31

32. Case
Study:
Old
Creamery
Co-­‐op
• Founded
as
dairy
co-­‐op,
1886;
Rural
grocery
since
1930s
• Recent
owners
operated
for
12
yrs
• Converted
to
co-­‐op
in
2010,
NFCA
food
co-­‐ops
provide
peer
support
• 670
members
• 40
employees
• $1.5
mill
revenue
(‘13)
• $150,000
in
local
purchases
32

33. 6.
Suggested
Guidelines…
For…
•
ConverBng
an
exisBng
business
•
Launching
a
new
co-­‐op
33

34. ConverBng
an
ExisBng
Business
Basic
QuesBons:
• Is
there
a
willing
seller?
• Who
are
the
potenBal
member
owners?
• Will
the
owner
stay
on
as
a
member?
• Is
the
business
viable
and
sustainable?
• What
does
the
transacBon
look
like?
• Is
there
a
plan
for
ongoing
investment
in
educaBon
and
training?
• Is
there
a
support
system
among
exisBng
co-­‐op
networks?
34

35. PotenBal
Challenges
• Financing
and
capital:
Is
business
sustainable
over
Bme?
What
will
the
transacBon
look
like?
• Is
the
current
owner
supporBve?
Will
they
stay
involved
or
will
the
business
lose
their
experience
and
experBse?
• Shig
from
sole
proprietor
governance
to
a
co-­‐
operaBve
culture.
• Lack
of
member
financial
literacy,
governance
experience
and
management
experience.
• Expensive,
irregular
and
ogen
bad
advice
from
professionals
unfamiliar
with
co-­‐operaBve
model.
35

36. Launching
a
Co-­‐operaBve
AcBviBes:
• Define
overall
purpose
or
goal
• Create
steering
commi?ee
• Raise
pre-­‐development
funds
• Hire
a
coordinator,
if
possible/desired
• Conduct
feasibility
study
and
create
markeBng
plan
• Establish
the
founding
board
• Incorporate
and
adopt
by-­‐laws
36

37. Launching
a
Co-­‐operaBve
AcBviBes,
conBnued:
• Develop
a
business
plan
• Create
membership
agreements
• Recruit
members
and
equity
investment
• Access
necessary
debt
financing
• Hire
appropriate
management
• Open
for
business
37

38. Basic
Development
Process
Timeline
• 12-­‐18
months
to
incorporate
(varies
widely)
• Open
doors
–
2
yrs,
4
yrs,
12
yrs
• ExisBng
business
can
be
faster!
Resources
needed
• Commi?ed,
visionary
leadership
• Co-­‐op
specific
business,
legal,
and
financial
support
• Member
equity
investment
• Start-­‐up
financing
• Peer
support
&
guidance
38

39. Concerns
for
Co-­‐operators
• Understanding
group
dynamics
• FacilitaBon
of
process,
shared
vision
• Defining
roles
and
responsibiliBes
early
• Professional
standards
• ParBcipatory
but
focused
environment
• Recognizing
strengths
and
weaknesses
39

40. Concerns
for
Co-­‐operators
• Engagement
of
members
• Encourage
and
develop
broad
leadership
• Ongoing
training
in:
– Co-­‐operaBve
values
&
principles
– Board
leadership
and
accountability
to
members
– Fiscal
oversight
– Project
&
strategic
planning
– CommunicaBon,
facilitaBon,
conflict
resoluBon
40

41. Some
Guidelines
for
Success
• Strong,
commi?ed
member
leadership
• Set
realisBc
goals
and
focus
on
them
• Base
decisions
on
concrete
market
research
and
business
planning
• Invest
in
member
educaBon
and
keep
members
informed
and
involved
• Use
technical
assistance
from
co-­‐op
networks
and
reputable
co-­‐op
developers
• Join
regional
co-­‐op
networks
and
seek
out
peer
support
from
other
co-­‐ops
41

42. Co-­‐operaBve
Statutes
CT:
Conn.
Gen.
Stat.
33-­‐183
• Co-­‐operaBve
AssociaBons
• Co-­‐operaBve
MarkeBng
AssociaBons
• Workers
Co-­‐operaBves
ME:
13
M.R.S.
1501
• Consumer
co-­‐op
• Agricultural
MarkeBng
&
Bargaining
Co-­‐operaBve
• Employee
Co-­‐operaBve
CorporaBons
42
Growing a Food System
for the Future:
a manual for co-operative
enterprise development
Six States with One Voice at the National Table

43. Co-­‐operaBve
Statutes
MA:
ALM
GL
Ch.
157
• Co-­‐operaBve
CorporaBons
• Co-­‐operaBves
without
Stock
• Employee
Co-­‐operaBve
CorporaBons
(157-­‐A)
NH:
RSA
Title
XXVII,
Ch.
301
• Co-­‐operaBve
MarkeBng
&
Rural
ElectrificaBon
AssociaBons
• Consumers
Co-­‐operaBve
(Ch.
301-­‐A)
43
RI:
R.I.
Gen
Laws
7-­‐7-­‐1
• Producers
Co-­‐operaBve
• Consumers
Co-­‐operaBve
VT:
8
V.S.A.
31101
• MarkeBng
Co-­‐operaBve
• Consumers
Co-­‐operaBve
• Worker
Co-­‐operaBve
(Title
11,
Ch.
8)
Other
OpBons
• Incorporate
in
a
neighboring
state
using
appropriate
co-­‐
operaBve
statute

44. Why
Go
Co-­‐op?
Co-­‐operaBve
enterprises
are
a
model
for
business
succession
that…
• …retains
local
economic
infrastructure
• …are
accountable
to
their
members
and
communiBes
• …put
people
before
profit,
• …are
community
owned,
• …are
successful,
sustainable
and
resilient
businesses,
• …strengthen
local
economies,
• …build
a
be?er,
more
sustainable
food
system
and
economy.
44

45. 7.
Discussion
Your…
• QuesBons
• Feedback
• Ideas
for
Future
Workshops
45

46. Contact
Erbin
Crowell
erbin@nfca.coop
Adam
TroG
adam@valleyworker.coop
Neighboring
Food
Co-­‐op
AssociaBon
www.nfca.coop
Valley
Alliance
of
Worker
Co-­‐operaBves
www.valleyworker.coop
46