Feasibility Study
Proceeding through your co-op start-up checklist, your development and organizing committee has already completed the Co-op Self-Assessment. You've taken some time to think about the answers to the questions asked, and perhaps done some more homework, research... and soul-searching.
DETERMINING THE VIABILITY OF YOUR CO-OP
Once you have a clear idea of what your co-op will look like, you must determine whether the co-op will be viable by preparing a feasibility study. Your organizing group will also need to develop your business plan (which includes a marketing and financial plan). Together these plans will show how your business will run, and how it will finance and promote itself.
If you still feel confident that the co-op business model is the right thing for you and your group, the next step is to investigate its feasibility. You must determine your new co-op's ...
-
financial plan
- business plan
-
marketing plan
-
feasibility and sustainability
It can be challenging to transfer your ideas into something tangible. It's a good idea to get advice when developing these plans. Many resource groups, economic and business development offices and federations (including On Co-op and the umbrella federation for your co-op sector) offer consulting services.
THE FEASIBILITY STUDY
The Feasibility Questionnaire, available from the FastLink at right, builds on the work you did on the Co-op Self-Assessment, and delves deeper into the merits and challenges that your co-op enterprise will likely face. A Feasibility Study involves gathering, analyzing and evaluating information with the purpose of answering the question: 'Should the co-op go into this business?'
The Feasibility Study is something that can't be completed in an afternoon - you may have to do research, planning and discuss your ideas with people and organizations outside of your co-op planning group. It is designed for your group to share the work, have discussions and help you screen out business ideas that are likely to fail.
The process will also test the group's solidarity and productivity. Put it this way: if your group can't confidently and efficiently complete a feasibility study, it's not likely you'll be able to successfully start and operate a business together.
Click here to download the Co-op Feasibility Questionnaire.
When you have completed the Feasibility Questionnaire, and done your research, you should have written answers to the following points:
FEASIBILITY STUDY
For your feasibility study determine and outline:
-
the business ( members, type of co-op, size ,location….)
-
how much money you would spend
-
how much money you would bring in
-
how your co-op will work finally, based on these numbers
-
other businesses in your community or market that offer the same or related products and services?
-
will you be able to work together and compliment each other's services? Is there enough business for both?
BUSINESS PLAN
A. FINANCIAL PLAN
Starting a business -- even a co-operative -- requires money. You'll need money for start-up and money to sustain operations during the first few months until the business is able to generate revenue. Your financial plan is where you evaluate and describe: the costs of doing business; Projected revenues; and Sources of financing.
Determine all of your costs:
-
start-up costs including legal, financial, incorporation and other professional expenses
-
operating costs (income+ expenses)
-
cash flow
-
wages
-
equipment - from desks to refrigeration to pens and computers
-
hidden costs (such as delivery charges or deposits on equipment or utilities)
-
heating, hydro, office space rental)
-
loan payments (how and when you will pay them off)
-
financial projections
-
training expenses - what training you will need to start and to keep going
B. MARKETING PLAN
Marketing is the single most important concept in the business venture, because without customers, there is nothing. Marketing provides you with information and tools for building and maintaining a customer base. The basics behind a marketing plan are summarized by the 'four P's' Product, Place, Price and Promotion.
Your Marketing Plan will include:
-
your market (the potential buyers or users)
-
your members (see the information at the bottom of this web page)
-
the type and quality of services and products you will offer
-
what you will charge for your product or service
-
how you will promote the co-op
-
where you will promote the co-op
From your research and your discussions, create a written marketing plan. Click here to see a marketing plan outline from the Canada-Ontario Business Service Centre.
If it appears that your business would be viable (i.e. the need for your product or service is strong enough to support the co-op), you can continue forward in developing your co-operative.
Your well-thought out and well-written business plan will help you to secure loans and grants from funding agencies, government and financial institutions.
There are many organizations, software programs and websites which can assist you in creating a business plan once you have done your research. Click here to visit the Government of Canada's Interactive Business Planner.
CO-OPERATIVE PRINCIPLES
As you create the feasibility study and business plan for your business, remember that to be considered a co-operative, you must adhere to the 7 International Principles of Co-operation. Therefore, the plans for your co-operative must also include...
- open membership
- one member, one vote
- co-operative education
- no proxy voting for members
- limited interest on member loans
- limited dividends on membership shares
- to the extent feasible, members providing capital
- distribution of surplus funds to develop the business, improve common services and provide reserves
- to pay interest on member loans,
- to pay dividends on membership shares and investment shares,
- for community welfare, or
- for distribution among members as a patronage return