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by Renee Fellows

November 30, 2007— The Thanksgiving turkey rests on a platter and along side is your favorite dish, Aunt Nancy’s cranberry sauce. Did you ever think about all those small growers involved in making the holiday cranberry sauce? Of course not, but that’s one of the great secrets behind the power of a business cooperative, a group of business owners who have pooled their resources to buy or sell something in common. What can a cooperative do for your business? The possibilities are endless.

For the cranberry growers, Ocean Spray is the largest cooperative with over 650 cranberry growers in Massachusetts and New Jersey. They also tout over 100 grapefruit growers in Florida. The company posted fiscal 2005 gross sales of $1.4 billion and has more than 2,000 employees worldwide. Not bad for a little red berry with humble beginnings.

Cooperatives are user-owned, user-controlled and user-benefitted. The long and short is that co-ops are formed when the marketplace fails to provide needed goods or services at affordable prices. Cooperatives empower people to improve their quality of life and enhance their economic opportunities through self-help. Throughout the world, cooperatives are providing co-op members with financial services, utilities, consumer goods, affordable housing, and other services that would otherwise not be available to them.

Cooperative Facts

• More than 750,000 cooperatives serve some 760 million members in more than 100 countries.

• Cooperatives operate in virtually every industry

• Range in size from large enterprises including Fortune 500 companies to small local storefronts.

The National Cooperative Business Association (NCBA) founded in 1916 is the largest trade organization for cooperatives in the world. The NCBA is an umbrella organization that lists around 300 purchasing co-ops buying things from electrical power and health care to warehouse equipment.

Traditionally, says the NCBA cooperatives follow seven internationally recognized principles:

• Voluntary and Open Membership

• Democratic Member Control

• Member Economic Participation

• Autonomy and Independence

• Education, Training and Information

• Cooperation Among Cooperatives

• Concern for Community

Cooperative Benefits

One of the greatest attractions for small business to join a cooperative is the collective ability to pool resources and open access to products, services or markets that would otherwise be unavailable. Additional benefits can also include:

Networking - Cooperatives provide small businesses and farmers a larger platform for business networking. With opportunities for business mentoring to ways to improve profitability, networking can be a saving grace for independent micro businesses that would otherwise collapse on their own.

Information - Cooperatives provide a substantial platform for information sharing. From websites offering exclusivity to sharing resources on price points, best selling products and even the quality of their staffs, cooperatives help businesses prepare and manage growth.

Training - When small business cannot afford sales training programs, membership in a cooperative can open new doors to staff training and increased sales programs.

Improved bargaining power and reduced costs – The basic tenet of cooperatives is to utilize the strength in numbers necessary to support greater buying power and higher profitability. For consumers, think membership businesses dependent on energy sources like electric or fuel, cooperatives can provide cost-effective solutions.

Obtain market access or broaden market opportunities. Marketing can be a challenging expense for small business. To expand market share often requires a substantial marketing budget and implementation by advertising and marketing experts. By joining forces with a cooperative, such as Ocean Spray, growers are able to pool resources and market to a national or even international audience.

There are many different kinds of cooperatives. From Producer Co-ops like Land O’Lakes, to Purchaser Cooperatives like ACE Hardware and TruServ, these organizations team together manufacturing and resources in order to streamline processing, reduce costs and improve product availability. Cooperative Home Care Associates functions as a Worker Cooperative providing its employees with livable wages and benefits in an industry that is notorious for poor pay and high turnover. Amalgamated Houses is a Consumer Cooperative that provides housing for 1,500 families in 11 buildings in New York City, the nation’s most expensive housing market.

Questions to ask before joining a cooperative

No matter what type of cooperative you decide to pursue, there are some basic questions that can help you to determine if the venture will be successful and a good match for you and your business.

What are the potential returns of joining a cooperative? New venture cooperatives typically return financial benefits to members in the form of net returns from operations (cash and retained refunds) and equity stock appreciation. Talk with your financial advisors or accountant and work out budget projections for what your business can expect in the way of financial commitment versus expected returns on your investment.

What risks is the business exposed to? These risks can include construction and operating risk, market and price risk, technological risk, legal and social risk, and human risk. Most of these business risks have straight-forward explanations. However, human risk is commonly underemphasized. Human risk relates to selecting and maintaining high quality labor, management and board of directors. The people who are involved with the co-op are the ones who make it successful.

How will my lender view the cooperative relationship? Meet with your banker or investors and ask their opinion of the cooperative, its operations and whether or not joining will change the terms of your loans or investments.

How will the cooperative impact my business and financial goals? Make sure that you fully understand the mission, vision and values of the cooperative and that their goals will align with yours. Remember that first and foremost you must protect what you’ve worked to build and ensure that the business will be able to succeed and profit

As in any partnership, there are good cooperatives and ones that may not run as well as you would like. Watch for the red flags outlined below and remember, whatever decision you make, it must be in the best interest of your business and employees.

Cooperative Pitfalls

• Lack of a clearly defined mission

• Inadequate Planning

• Failure to use experienced advisors and consultants

• Lack of member leadership

• Lack of member commitment

• Lack of competent management

• Failure to identify and minimize risks

• Lack of financing

• Lack of communication

• Poor assumptions

Take the time to learn from others who have had successful ventures, ask questions, and seek assistance before making the cooperative plunge. To learn more about how strategic business formations like cooperatives can benefit your business, talk with a Fiducial Advisor by calling 866-FIDUCIAL or visit the web site at www.Fiducial.com .

Renee Fellows is the owner of ClearPoint Marketing Communications in Derry , New Hampshire . She works with small business clients to develop marketing and public relations strategies that bring business and customers closer together. She can be reached at 603-434-9433 or via email at Rfellows@oneclearpoint.com .

Whatever your small business needs, your Fiducial tax and financial professional can analyze your situation and recommend an appropriate action plan. To locate a Fiducial office nearest you on fiducial.com, see the Zip Code Locator located in the upper right hand corner of the page. Do you have a particular topic that we should be writing about that can help your business? Please send your suggestions to: Howard.Margolis@Fiducial.com.

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