Starting A Co-Op

Starting a Cooperative Market:  a brief overview

The process of starting a cooperative is a long one, with lots of work to be done.  Fortunately for us, many people have tread this path before us, and we are happy to benefit from their wisdom and experience.  Further, there are now organizations like Food Co-op 500 and Cooperative Development Services, whose mission is to help newly forming co-ops get the best start possible.  (Please take a minute to visit these websites, if you can--there's a wealth of wonderful information available!)

This page will provide a very basic overview of what we expect the process to look like.  This framework, called the Three Stages Model of Cooperative Development, is one that has been created by Food Co-op 500 and CDS to help startups follow some of the best practices in food co-op formation.  These are not rules set in stone, per se, but they are solid recommendations created by people who have put a lot of time and effort into charting a good course for most startups.  We will be following this course as best as we can.  I have included the estimated time that each stage will take (quite a range, usually).  When possible, I have included where our startup is on the various stages.  So, let's take a look!

The Three Stages of Co-op Development

Stage 1:  Organizing (6-18 months)
The hallmark of this stage is, unsurprisingly, organization.  One or more people start with an idea, and begin to lay the groundwork for beginning the cooperative.  This stage includes:

  • Convening a core group:  we have had a functioning core group--now the Steering Committee--in operation since late 2007.
  • Assessing common interest and needs:  this is an ongoing process, even once the store is open.  We began this process by creating a brief survey for interested parties to take.  The survey was distributed via our website and at the Downtown Farmer's Market.  We wanted to find out what sorts of needs and issues community members had, and if a co-op could help address those needs.  The results from that survey can be found here [link forthcoming].  We will continue working to find as many ways as possible to make sure we are on the right path, and addressing the wants and needs of our community and all prospective member-owners.  Please contact us anytime with suggestions, general discussion, and so on.
  • Designing, supporting, and developing leadership:  we began this process in earnest at our first Community Meeting in January 2008.  At this meeting we officially formed our new committee structure, and discussed with those attending what the purview of each committee is, and how the committees would interact and support each other.
  • Building a shared vision:  always!  Also a continual process, we have a draft of our Mission and Vision statements available on this website (see sidebar, left).  These statements will be edited and modified to meet the needs of our member-owners, and then voted on at a future meeting.
  • Committing time and money:  yes, we're certainly doing that.  The members of the Steering Committee, and now the members of our other various committees, are committing time to make this project a reality.  Many of us will also be committing our money, in the form of donations and, eventually, payment of our owner equity, to help finance the project.  Those who cannot commit time may wish to commit money to this process, and we are working on ways to make that process very smooth.
  • Incorporating:  the Steering Committee has completed lengthy documents and questionnaires with the goal of making the incorporating process a smooth one.  We have now secured a lawyer familiar with cooperative statutes in Indiana, and he will be helping guide our way through the incorporating process.  Once incorporated, we can begin the process of offering owner equity shares, so that members of our community can become full owners of the store!

We have completed all of Stage 1: Organizing.

Stage 2:  Feasibility/Planning

  1. Feasibility (3-6 months):  This stage is essentially the commissioning and completing of a professional market study.  We are currently in consultation with a feasibility planner who will likely be our choice for performing this task.  Feasibility studies typically cost in the realm of $10,000, so there will be some fundraising issues to address as well.  The importance of a professional feasibility study cannot be overemphasized.  The feasibility study will include data particular to our area on such topics as site selection, recommended budgetary guidelines, expected yearly sales, demographic information, expected membership numbers, and so on.  This study will form the basis of our business plan, which is what will eventually be taken to the bank to secure additional funding for the project (which will be used in addition to member-equity and donations).  People who specialize in performing feasibility studies for retail cooperatives have a great deal of proprietary data at their disposal to assist in doing the study, and their recommendations are historically very solid.  Business plans based on these studies can be taken to the bank with confidence. 
  2. Planning (3-6 months):  Here, we take what we've learned from the feasibility study and turn it into a business plan and financial pro forma budget, which will include financing and operations.  This plan becomes the blueprint for everything that follows.  During this stage, site searching begins, and by the end of this stage, a site will be secured.  During this stage (and the following) serious negotiations begin with local farmers and other potential suppliers, as well as distributors.

We are near completion of Stage 2 (really, we're right in between Stage 2 and Stage 3). Our Business Plan is being finalized and the pro forma is being vetted by existing Co-ops for accuracy.  We are now pursuing an increase in memberships and, soon, launching a Member Loan Drive, as well as working with local banks and co-op funds, to finance the project.

Stage 3:  Implementation

  1. Preconstruction (3-6 months):  once a site has been secured, lots of things have to happen before construction can begin.  The site will be secured with contingencies.  Contingencies can and probably will include such things as being contingent on:  secured financing, satisfactory design options and functionality, environmental remediation, health and safety issues, and so on.  Preconstruction will include finalizing any external financing from banks, credit unions and other sources; commissioning a preliminary site design, and working with city officials to ensure that the new site is in compliance with all relevant codes.  Once this is done, and the contingencies have all been addressed, we can move to:

       2. Construction & Renovation (3-6 months):  Here is where serious work is done to take a secured site and turn it into            the store we've all been dreaming about (at this point, for over a year!).  This stage also includes constructing leadership

          and management for the store.  We will be hiring various department managers, as well as a General Manager,

          and other jobs.  The existing Board of Directors will begin the process of letting go of the day-to-day reigns, turning these

          over to the General Manager.  Many transitions happen during this phase.

       3. Preparation or Opening (1 month):  This is the really fun stage -- hiring and training new floor staff, stocking shelves, and finally getting to see the site take the shape of our new market.  Hectic, to be sure, with many things having to be done very quickly to meet deadlines, it is also exhilarating, as you know you are close to the big day.

       4. OPENING and Sustaining (first year and beyond):  Finally the doors are open and the store is available for the whole community to use!  In one sense, the job is finally done.  But in another, the real work has only now begun, as the new project becomes maintaining and sustaining a successful business for the benefit of the community at large.  If care has been taken at all stages of this process, and good practices followed, we can be confident that our store will have the best possible chance for success, and will become a cornerstone of our community for years to come!


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