NW Co-op Development Center

Eastside Chapter – NW Biodiesel Network Feb. 11th, 2009

Eric Bowman; Cooperative Development Specialisteric@nwcdc.coop

1063 S Capitol Way # 211Olympia, WA 98501

360.943.4241

Presentation Overview

1. Intro; the Center2. Co-ops 101 & Benefits of Cooperation3. NW Co-ops in biofuels4. Consumer-owned models5. Group dynamics6. Mechanics of Developing a Board7. Q&A

Forming & Running a Successful Biodiesel Co-op

NW Co-op Development Center

The Centera 501(c)3 nonprofit which provides development services for new and existing co-ops

Our mission to foster community economic development through the co-op business model

We’rea team of co-op developers with skills specific to start-up and organizational business development

Co-op 101

A co-op is any corporation, that’s member:◦Owned◦Benefited◦Controlled

Top 100 co-ops’ 2007 revenues = $150 Billion!◦Ag & Grocery◦Energy/Communications◦Finance◦Hardware/Lumber

Ownership

Member-Owners can be◦Consumers◦Producers/Farmers◦Workers◦Other Businesses

Co-ops in NW Biodiesel

Biodiesel◦Production/marketing

Pendleton Grain Growers◦Joint-ventures

Inland Empire Oilseeds, LLC (Odessa Union Warehouse Co-op, Reardon Grain Growers, Reardon Seed Company)

◦Consumer-owned Bend Biofuels Co-op

◦On-farm consumption/co-op production

Consumer Co-ops Models

Together consumersBrewDistributePurchase

◦Equipment◦Feedstock◦Wholesale Biodiesel

Bend Biofuels

200 member buying groupDistributor-owned card lockNegotiates w/ wholesalers

COCC Biofuels Club◦educational◦brewing non-ASTM spec

Flower Power – Salem, OR

60 MembersSeQuential B99 at cost plus:

◦OR/Fed Road taxes ◦delivery fee ◦$.05 co-op overhead

Pringle Creek:◦waived rent/utilities◦Building garage

Residents in Eliot, ME

65 homeowners and small businesses

Co-op bulk purchase HHO, “bioheat”

Average savings ~$300locked-in price

◦capped "downside protection" ◦always pay the lowest price

RIP

Many I-5 collectives and co-opsTacoma Biodiesel Co-opOlyBiofuelsGoBiodiesel – Portland

◦Biodiesel Weasel

Why Cooperate?

to access resources not individually achievable

Marketable Co-op Benefits; “Goodwill”Keep profits, ownership and control local AccountableTrusted

Unique Characteristics of Co-ops

Owned/controlled by members, not outside investors Exist solely to serve membersReturn surplus to members based on use, not

investmentPay taxes on income kept for investment/reserves;

surplus revenue returned to members who pay taxesEconomy of scale = valued added

Distributed Energy Production

Distributed Resources = Distributed Opportunity• Many small sources• Diseconomy of scale• Rethinking

infrastructure

Co-op Development Stages

Identify a need a co-op could meet

Form Steering Committee Research Feasibility Review Findings (Go/No Go) Membership Drive Planning and Financing Begin Operations (Go/No Go)

How We Can Help

Facilitate identifying mission and goals

Train founding Board members Market and feasibility research Assist with organizing Professional, 3rd party

perspective General business consulting

Project Lifecycle

Organization

Why all the process?◦Going into business is hard and complicated◦Risking your money and your neighbors

Need an agreed upon roadmap

If you don’t know where you are going, any road will get you there – Wizard of Oz

Why form entity at all?

CreatingSomething bigger and beyond oneselfFormal structure to work together

(governance/conflict resolution)Solid foundation for growthLegitimacyCommitmentLimited liabilityEconomy of scale

Why not LLC?

LLC = tax flexibility of a partnership + limited liability of a corporation

Pros (primarily flexibility)◦ More attractive to capital (if you need a lot)◦ Make quick decisions to respond to market pressures◦ Members can include persons, other LLCs, S-Corporations

Cons◦ Legal costs◦ Power can concentrate with management or Board◦ Model is new; sometimes liability isn’t so limited◦ Governance (Board/operating agreements not always required)

Co-op to Co-op Supply Chain

Relationships and Authority

Management

BusinessBoard

Membership

Elects

HiresOperates

Services

Start-Up Board Development

Shifting functions1. Steering Committee or Exploratory Board2. Founding Board3. Working and/or Managing Board4. Governing Board

◦Post-hire role more strategic

Board’s Circle of Responsibilities

1. Represent members2. Establish policy3. Supervise top management4. Oversee asset development5. Preserve co-op character6. Assess performance7. Inform members

From USDA’s Management Tip Series by James Baarda (CIR6)

Recruitment

OngoingCandidates don’t just appearBe strategic

◦ i.e. PlanPlan for attritionThe future!

The U.S.

The Entire Universe

Co-opBoard

Members

Regional FuelConsumers

BiofuelConsumers Input

Providers

Go

vern

men

tS

take

ho

lder

sNGO

Stakeholders

Group Dynamics

Forming individually focusedStormingopening upNormingbuilding trust Performing interdependent

-----------------------------------

What next?Adjourning, Mourning, re-Norming or Transforming

Forming

Norming

Storming

Performing

Creating a Shared Vision

Strategic PlanningWorld is ever changing Requires sense of where you’re goingVisioning Process:

◦Agree on participants/roles◦Design process◦Conduct process◦Format statements◦Keep it alive!

“Opportunities for improvement”

Dysfunctional group dynamicsDisengaged membersUncertain of rolesFocus on triviaLack follow thru

Solutions

This is a relationship, treat it as such◦Cultivate◦Maintain◦Socialize

Your job = hold each other accountable◦Avoid or move beyond unhealthy

dynamics◦Follow through◦Focus on what works, not what

doesn’t!

More Solutions

Conflict◦Necessary & productive◦= relationship building◦Deal with creatively

Seek out trainingFocus on vision Behave with maturity

Why do it?

Compelling economic interestGuidance exists

◦Everything we just discussedBe a part of a teamExperience challengesOpportunity to serve & build something together:

◦Collective equity, rather than private◦Accountable business

Personal prestige, pride & satisfaction

Thank You!

Eric Bowman

Northwest Cooperative Development Center1063 Capitol Way S # 211 | Olympia, WA 98501

360.943.4241

eric@nwcdc.coop | www.nwcdc.coop

Fostering community economic development through the cooperative business model