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Developing a Budget for Creating a Food Co-op

Developing a Budget for Creating a Food Co-op. Bill Gessner, Visionary Stuart Reid, Presenter. What’s in Your Wallet Budget?. Introductions Who we are and what we do. What kind of budget are you using now?. Mobilizing Community Assets. Vision Talent Capital Systems.

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Developing a Budget for Creating a Food Co-op

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  1. Developing a Budgetfor Creating a Food Co-op

  2. Bill Gessner, Visionary Stuart Reid, Presenter

  3. What’s in Your Wallet Budget? Introductions Who we are and what we do. What kind of budget are you using now?

  4. Mobilizing Community Assets Vision Talent Capital Systems

  5. Vision What does your community need and want? What kind of storefront can meet those needs?

  6. Talent • Legal advice • Graphic Design • Web site and Social Media • Professional consulting: • Market research • Financial projections • Design • Project management • GM

  7. Capital How much will it cost to make your vision a reality? How much can community members contribute? What other sources of financing are available?

  8. Systems Can your systems help support this project? • Accounting • Membership and contact records • Legal issues

  9. What is the S&U Budget? • A financial plan (budget) for opening your co-op • Costs associated with starting a business • Including costs that continue after opening • Capital of all kinds to pay those costs • Planning tool • Helps clarify organizing goals & vision • Shows stakeholders where there money will go • Establishes milestones and targets

  10. What the S&U Budget is Not An indicator or feasibility or future success An operating budget (pro formas)

  11. The Sources & Uses Budget

  12. Assumptions • Lease or Buy? • How big? • Retail square footage is about 65-70% of gross • What are your expected sales levels?

  13. Gathering Info • What are lease rates in your community? • Real estate taxes? • Insurance? • Common Area Maintenance? • Off street parking? • Date of possession: • Date of opening for business:

  14. Uses • Acquisition • Leasehold Improvements • Equipment • Inventory • Fees • Consultants, architect, design, legal, financing, etc. Market rate $70 - 80/ft2 $70- 100/ft2 $35 - $45/ft2 12% of the above plus $30,000 for Project Management

  15. More Uses • Operating/admin, pre-open • Startup Promotion • Startup Staffing • Site holding costs • Interest, pre-open • Post-open support • Working Capital • Overrun Allowance Estimate actual costs .5% of year-one sales GM for 6 mo.’s, staff for 1 Deposit & pre-open rent Based on rate/draw Recommend $30,000 6-8% of year 1 sales est. 15% of ALL the above

  16. Sources • Donations & Fundraising • Grants • Member Equity • Member Loans • Other equity Total Owners’ Contribution $15,000 ? $35,000 ?? Share price X members 33-50% of budget ??? At least 48% of total startup budget.

  17. Other Sources • Landlord Contribution • Vendor Credit • Free Fill • City/community funds Total External/Subordinated $15 - $25/ft2 (maybe) 25% of inventory 15% of opening orders $150,000 ???? 10-20% of total startup costs

  18. The Last Source Bank Debt 0 – 45% of total, typically 25% or less

  19. A “Typical” Scenario Let’s assume… We will lease a site We need 4,000 ft2 of retail (about 6,000 gross) Our first year sales projection is $2.4 million

  20. Example Total Cost: $276/ft2

  21. Example

  22. Reality Check • Startup costs equate to long-term benefits in the image and marketing of the co-op • Higher initial costs save money in operations through efficiency and effectiveness • Cutting costs ultimately costs more. • Delays and mistakes (hire a pro!) • Energy and repair costs • Higher labor • Lower customer satisfaction

  23. Reality Check Member investment is a good measure of future support (i.e. Sales!) Member investment leverages all other capital Member loans are cheaper and much more flexible than bank loans. Donations are not the answer  (sorry) Angel investors are hard to find.

  24. What if Something Changes? It will! The S&U Budget is not static Updates are ongoing as more information becomes available Keep Sources & Uses in balance Reconsider options

  25. More Information The Food Co-op Initiative/CDS Consulting Co-op Webinar Series http://cdsconsulting.centraldesktop.com/cbld/doc/5469096/w-Fc500WebinarArchives http://cdsconsulting.centraldesktop.com/cdsvideo/doc/6654794/w-SourcesAndUses

  26. More Information The Sources & Uses Template: http://www.foodcoopinitiative.coop/sites/default/files/Sources%20and%20Uses%20Template.xls The Food Co-op Initiative YouTubePlaylists • Recorded Webinars from 2013 • “Startups in Action” • Uploaded Videos • Co-op Marketing Videos https://www.youtube.com/playlist?list=PLA2749DE9E2C56641

  27. Tell Me More! Food Co-op Initiative is a non-profit foundation that was created to provide resources and support for communities that want to start new food co-ops. We can offer you support, referrals, and access to training material so that you will have the best chance for a creating a successful co-op. www.foodcoopinitiative.coop stuart@foodcoopinitiative.coop Food Co-op Initiative

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