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Texas Rural Cooperative Center
Texas Rural Cooperative Center

TRCC Articles of Interest

 

Small Agricultural Businesses Increase Opportunities through Cooperatives

Small farms, largely thought of as a thing of the past, are now enjoying a resurgence in the local market including several popular farmers markets.  By utilizing a proven model to increase their market presence – cooperative formation, local small producers are finding that there is strength in numbers.  A cooperative is a business built, owned and democratically controlled by the very people who use its services, usually made up of several owners.  Cooperative formation allows these small farms to band together to create a larger entity that is competitive and allows members to take advantage of markets that they otherwise couldn’t access.

The Tip of Texas Agricultural Producers Cooperative, or TOTAP, is a local cooperative made up of small agricultural producers who all play a part in the success of the cooperative and enjoy the benefits of the association.  These small farmers raise natural, chemical free products, but individually cannot produce enough inventory to be commercially feasible.  As a group however, the members of this cooperative combine their production to create a sizeable inventory to supply local farmers markets with a wide variety of chemical-free vegetables and goods.  Additionally, TOTAP provides its members with a brand, a logo, and access to several markets that as individuals, each member wouldn’t be able to access.  TOTAP is currently open to and looking for new members. 

Cooperatives are not limited to agricultural producers, and cooperatives can be found in several industries.  Ace Hardware, REI, True Value Hardware, and Land O’Lakes are all cooperatives, not to mention several utility cooperatives well known here in the area.  The Black Star Cooperative, a micro-brewery in Austin, Texas, is a cooperative formed and owned by its members who enjoy the established cooperative business as both patrons and owners.

The Texas Rural Cooperative Center at the University of Texas-Pan American provides cooperative development assistance to those interested in pursuing a cooperative formation.  The center offers a broad array of technical assistance to start-up and existing cooperatives and mutually-owned businesses in order to improve their operating efficiency and their long-term sustainability.  This can include assistance with organizational plans, business plans, marketing plans, and capitalization plans.  There are several benefits of cooperative formation and they include better access to markets, purchasing power through the size of the membership, name recognition, and a greater presence in the local community, to name a few.

Small farmers looking to start their own cooperative can call the Texas Rural Cooperative Center for assistance.  The center is aware of small farmers exploring cooperative development and that are recruiting other interested farmers.  These cooperatives will not only capitalize on opportunities at farmers markets, but may also eventually act as a wholesaler to local restaurants and other establishments. 

Not a farmer?  No problem – purchasing, marketing, and retail cooperatives are also potential beneficial cooperative businesses that benefit their members and are not exclusive to the agricultural industry.  If you’re interested and have questions, The Texas Rural Cooperative Center can be contacted for assistance at (956) 665-7528.

Worker Cooperatives – An Introduction

Since the 1800s, cooperatives have had an incredible impact on the agricultural industry. Small farmers worldwide have come to experience increased profit margins and ease in business ventures through them. It’s an excellent option for those who have difficulty in collecting or selling produce on their own. Surprisingly, cooperatives appear to be a lesser known method of money making. They are immensely beneficial and are not limited to only farmers or agribusiness.

Cooperatives, or co-ops, are businesses that are owned, operated, and controlled by groups of individuals. These individuals are members who pool their products, resources, and/or services together for economic benefit. There are several types of co-ops and each differs by type of owner. One sort in particular is worker cooperatives. Worker co-ops have 2 defining characteristics: they are worker-owned and worker-controlled. Members of these co-ops enjoy the benefit of owning their jobs, having a stake in the local environment, running business in a way that satisfies all, and generating income through stable employment. Profit is distributed to members in equitable shares based on labor input after funds have been set aside for reserve and allocation to a collective.

Establishing a worker co-op takes careful planning and consideration. Whether it’s started from the bottom up with a group of like-minded individuals or from the top down with an organization that specializes in co-op developments, the steps to embark are all the same. First and foremost is to develop the group infrastructure and define its purpose. All members-to-be should be in accord with matters such as group goals, participation, processes for decision making, standards, and image. It would be wise to finalize everything on paper in a notarized contract or agreement.

The next step is to secure funds for the startup. This is likely the biggest hurdle for any sort of business. Co-ops raise capital from within (in the form of stock purchases or membership fees) while others seek out financial institutions for loans or grants (consider the legal structure and tax implications of the co-op for this option). Some groups use a combination of the two depending on estimated expenditures.

There are also local/state/federal government programs and numerous for-profit and non-profit organizations that function as loan sources.

If a business is assumed to exist indefinitely, then growth is an important aspect to take into account throughout. Recruitment of members and assignment of personnel is essential for both the co-op and investors. It has the effect of making them feel more comfortable with investing because management staff has been identified. The same applies for lenders who see competent management as the key basis in making a loan decision.

Finally, the business plans are put into action. Facilities should be well staffed and fully operational. Training should have also taken place in addition to coordination with contract holders for market products and services. It’s important to engage in sales and marketing and ongoing business development. The opening should have been publicized to create community awareness through name recognition.

Effective communication, participation, and decision making are critical to a co-ops success. Regular education and training can help to improve ongoing business functions. Two common problems that cause cooperatives to fail are insufficient funding and lack of business know-how. It would be wise to meet with outside directors or advisors who bring certain skills or expertise, such as financial or marketing capabilities, that are necessary to ensure sound business practices.

If you are interested and have questions, the Texas Rural Cooperative Center (located at the University of Texas-Pan American) can be contacted for assistance at (956) 665-7528.

 

 

Purchasing Cooperatives

The old saying goes, “You have to spend money, to make money.”, but what if there are no available funds?  In a world where everything seems to revolve around “$”, this is a dilemma that many small business owners face.  So, how can a small business owner make more money?  Two words, Purchasing Cooperative.A purchasing cooperative is when small business owners agree to team up rather than compete against each other.   To be more precise, a cooperative purchasing agreement is a formalized agreement between two or more entities that they will enter product purchase orders together, which increases economies of scale, reducing unit costs as well as shipping costs.

One example of a business which takes advantage of volume discounts is Wal-Mart.  Wal-Mart is able to purchase such large quantities of each particular good that it routinely receives volume discounts from its vendors. The more vendors sell the more they make, so they are more than happy to provide discounts to their best customers.  It is critical for businesses to keep in mind that the discount will keep on increasing as the number of units purchased increases.
The purchasing cooperative can gain access to volume discounts and negotiate from a position of greater strength for better delivery terms, credit terms, and other arrangements. Suppliers will be more willing to discuss customizing products and services to meet your specifications if the purchasing group provides them sufficient volume to justify the extra time and expense.  Of course, the larger the group purchasing supplies and services through the cooperative, the greater the potential for savings.

Greater savings are not the only reason to start a purchasing cooperation. Other reasons include;

  • Increased power within the market place (the bigger you are the more power you will have).
  • Local economy is enhanced (cooperatives generate jobs and salaries for local residents).
  • Best practices (team members can combine their knowledge and capitalize on their strengths).
  • Strategic Value (Some team members can take care of the business side that way others can just concentrate on their products)
The most critical phase of any purchasing cooperative is the start-up phase.  Like any creation of a new business, the start-up phase will take a lot of time and commitment from each party involved.  Effective communications among each party with an interest in group purchasing is an essential element in getting started and moving through the organizational steps.  This will also take a monetary investment from each party, but as mentioned in the intro, “You have to spend money, to make money”.  If the purchasing cooperative is run correctly, you are most likely to benefit from this business venture.

So, why not team up with other small business owners and receive discounts that would not have ever been available to you before?  It will be a WIN-WIN-WIN, for you, your team, and the vendors; which in retrospect is what business is all about.

It is always scary to think about joining a new business, participating in something that is new or “unknown”.  That is why we are here to help.  If you are interested in joining or starting a purchasing cooperative and would like more information feel free to contact us at; Texas Rural Cooperative Center (located at the University of Texas-Pan American) can be contacted for assistance at (956) 665-7528.