Can it work?
The Feasibility Study and Business Plan
After you have a few people interested in the proposed products and services to be delivered, and keen to become members, it is important to carry out a feasibility study to determine whether the activities of the co-operative will enable the co-operative to be viable.
The feasibility study will take time to develop, so share the work among several of your proposed members; this will be another test to see if you can work together to start and operate your co-operative. Consider getting help from a consultant experienced in developing feasibility studies for co-operatives.
The feasibility study is not the same as a business plan, but it should be developed first and be the basis for the business plan. The size and cost of the feasibility study will depend upon the complexity of the operations the co-operative intends to undertake.
You might consider dividing the work into two stages, by conducting a pre-feasibility study first to look at:
Whether the co-operative model is suitable, and if so, whether the type of co-operative proposed is appropriate.
How many members are expected to join the co-operative.
How receptive the local community is to the co-operative business.
What the benefits to co-operative members are expected to be.
The market the co-operative intends to operate in, whether the market is large enough, whether it will pay enough, and whether it needs the products and services the co-operative proposes offering.
The availability and cost of technical and financial assistance.
If the pre-feasibility study casts doubt over the potential viability of the business idea, reevaluate the idea. If the study shows that the business idea has merit, develop a complete
A complete feasibility study requires careful research of the products, services and markets, planning and involvement of other people outside your proposed co-operative. The feasibility study should at least provide a clear view of:
The business structure: including the type of co-operative, the members, the size and location, and strategic objectives.
What the products or services are.
How products will be made, and who will make them; how services will be delivered, and who will deliver them.
How much it will cost to produce the products or deliver the services.
Who will be the buyers/users of the products and services? Where are the customers? How much will they buy? How much will they pay?
What are the risks, benefits, strengths, opportunities, weaknesses and threats?
Identifying if there are competitors who offer the same or related products and service, what they sell them for, and will you and they survive? Could you complement each other?
What it will cost to set up and operate the business, including premises, equipment, staff, insurance and operating costs.
How much money will need to be raised to make the co-operative viable, where will it come from, and when.
How much the co-operative expects to earn and when that money will be received.
Projected cash flow budget.
Taking everything into account, is it viable?
If the feasibility study indicates that the co-operative’s business ideas aren’t viable, consider whether they can be reworked, or whether the venture shouldn’t proceed at all.
However, if the feasibility study does suggest the business ideas are sound and are likely to be viable, the next step should be to develop a business plan.
OK. So you have a great idea and an excellent group of supporters and your feasibility study looks positive. That’s a good start, but that’s all it is. How are you going to get your idea to work? Not many successful co-operatives are based solely on a new idea, a feasibility study and great people.
How are you going to get a bank, prospective members and/or customers to back your idea with their money? It’s harder to sell a new idea than an old one. How are you going to convince them that you are serious about it, have thought through how it will work, that your members have the abilities to make it happen, and that there is a strong chance that you will be successful? And how are you going to plan and control the launch of the co-operative, and monitor and manage the activities required to make the co-operative a success?
You need a business plan: a practical and clear guide for your co-operative. It’s a bit like a GPS. It describes where you are, where you want to get to and the roads to take to get there.
A successful co-operative has a clear business plan outlining what it wants to achieve, giving a strong vision of where the co-operative will be at a particular point in time, and planning the directions to steer the co-operative’s actions to get there. It uses the plan to monitor and manage all the steps along the way to achieve its goals.
A business plan is more detailed than a feasibility study. How detailed it is will depend on the complexity of the activities that the co-operative will undertake, and the effort of the writers. It may be written by members or by a professional business planner. It might be a glossy 100- page book, or a plain 20-page handwritten document. Whatever the case, it is the input, depth of thinking, agreement, ownership and ongoing management of the plan by the members and staff that will make this tool work for you.
The business plan should describe in detail the co-operative’s products or services and their delivery, details of management and the organisation, the results of market research and marketing plans, the people involved, and the equipment, material and finance needed.
Developing the business plan will help you to consider most of the issues you will face when starting the co-operative, and help you to face most problems before they happen, giving you the power to deal with them quickly and more effectively. Of course, you won’t be able to anticipate everything you will face, but planning for most eventualities will give you more time later to deal with any unexpected surprises.
A business plan should be viewed as a work-in-progress. A co-operative’s first business plan should look at developing the opportunities for the identified primary activity or activities. With growth, a co-operative will need to change the plan to cater for changing or extending its range of products, services and markets.
A co-operative, like any other business, has a product or service to sell in a competitive environment. The business plan needs to clearly and quickly show how the co-operative’s product will be delivered, how it will fit into the market in competition with other products, and why the market will want that product.
Usually business plans look ahead at the actions required for the co-operative to meet its goals for the following year, but they are best designed if they are written as the first stage of a three-to-five year plan. In that way, not only can you check progress against the co-operative’s aims as the year progresses, and look back at the end of the year to ensure the goals are achieved, but also use it as a step in achieving longer-term, greater goals.
If the members decide to develop their own business plan, there are many resources to help beyond this manual. There are many websites and also software programs and industry research readily available to help you with the process. For a start, take a look at:
Appendix B of this manual gives step-by-step guidance in building your business plan. Take the time to make it a document that creates a good first impression; poor grammar and spelling, numbers that don’t add up, and a plan that is all over the place will spoil the impact.
Make it easy to read and understand quickly, and convey your enthusiasm. Don’t make statements that are vague or can’t be substantiated, avoid using jargon that people will struggle to understand, and don’t ramble. You may need to write a second business plan – the first for your co-operative, the second for
You may need to write a second business plan – the first for your co-operative, the second for investors, whose needs will be different to yours. Decide what information will be in the plan, and who you are writing it for.
Don’t write it alone; share the job with other members and staff so that everyone owns it, contributes, identifies priorities, and knows what they need to do to steer the co-operative to success. Include dates that particular responsibilities are to be completed by. Name the people who are responsible for each of the activities. Demonstrate the skills of your team to manage and market the co-operative.
Highlight the advantages and strengths of your structure; members are customers, and also have a higher degree of input and support of management, operations and products than most other business structures.
Make it clear in the plan that your business is user-owned, user-controlled and user-benefited, and that strong social values and principles are behind every decision and component of the co-operative’s business plan. (See Appendix B: Business Plan model).