Jacqueline Hannah from Food Co-op Initiative shares examples of why some start-up food co-ops fail. This was presented at NFCA’s New England Start-up Workshop Day at Monadnock Food Co-op on May 7, 2016.

1. Why (Some) Startup
Food Co-ops Fail:
Why great people with
the best of intentions
sometimes lose their co-ops.

2. What are the odds ?Let’s look at the data first.
Since 2008
122new retail food
co-ops have
opened.
Since 2008
29of those new
retail food co-ops
have folded.
That’s just barely
over
24%
of startup retail
food co-ops that
have opened in
the last 8 years.

3. So what’s the
good news?
There are clear patterns in these closures, we know
why startups close, which means we know what to
do for the best odds of success.

4. Why do startups fail?
We’ve studied our data on the closed startups twice now, in 2012 and 2016, and the reasons are consistent:
Poor location.
Too small for the
market. Inadequate
parking.
Under-capitalized.
Cut corners,
underestimated costs.
Pushed Timeline.
Moved forward too fast
with too few owners. Not
enough community
awareness and buy in.
Reliant on Owner
Labor.
Professional, trained
staff are a must to meet
customer expectations,
competently run the
store.

5. But every deviation is a risk. Be
honest with yourselves and
your organization.
• Innovation a great thing, too much of
it can sink your project.
• Is your innovation cutting costs or
development time? Those are often
not innovations but “special
snowflake” thinking.
• Test, test, and re-test. Is this deviation
worth the increased risk of failure? Is it
core to meeting your community’s
vision?
• Special snowflake thinking = it’ll be
different for us, though!
• Reality isn’t CAN’T – it’s reality. Being
clear eyed means being able to
properly assess and prepare for risk.

6. But the necessities for success still apply 99.9% of the time:
• High visibility
• A way to load large
amounts of food
safely and
effectively
• Adequate parking.
(No, I will not stop
saying it.)
• Market study
tested.
SITE
• Plan for at least
industry minimum
for
buildout/equipment
cost
• Cutting corners
rarely adds up to
long term savings,
often adds up to
trouble
COSTS
• Take the time to
grow owners to
recommended
levels – you’ll need
them!
• If you can’t grow
ownership pay
attention to that
canary in the coal
mine, something is
wrong!
TIME
• Professional staff
are often the line
between success
and failure
• A fiscal plan
dependent on
volunteer labor is a
recipe for crisis.
STAFF

7. Psst! 2 bonus reasons.
A few other things have been consistent in at least 75% of startups that closed:
Lack of Industry-Specific
Feasiblity Studies.
Proforma Financials:
• This is Bill Gesser of CDS Consulting
• No, really, we don’t know of a single startup that has
used proformas he “blessed” that opened and
hasn’t thrived.
• Yeah, it seems impossible to be right that often, but
he really is when it comes to food co-op financials. ;)
Market Study:
• Yes, they cost a lot of money. It’s really tempting to cut
corners here. Nope, we haven’t seen accuracy from
any providers than: Debbie Suassuna of CDS-CC and
Dakota Worldwide
• “$10K for just one number?! I feel like I could have
written this thing!” We’ve heard this before. But that
one number is what *everything* hinges on for your co-
op and you get what you pay for.
Disfunctional Boards.
The health, commitment, and capacity of your
board can make or break your co-op. Seriously.
Honestly assessing the health of your board regularly and investing in it is
critical. Things to look for:
• Founders Syndrome – one person or two persons who’ve been there since
the beginning and seem to have all the facts in their heads and have their
fingers in everything . . . to the point the rest of the board feels out of the
loop and disempowered
• In Name Only – “oh, we have a staff member now, our job is done!” OR
board members who are on the board for prestige/to express their opinions
only/for business opportunities.
• Know It Alls – “oh I have an MBA so we don’t need to pay any experts!” “I’ve
built a proforma before for my job, I’ve got this” Board members who are
engaged and willing to work are great, board members who think they
know and don’t need outside support are often TOXIC.
• Negative Nellies – “well, I just don’t feel convinced.” Doubt at times is a
good thing, testing ideas, etc. But people who sit on the board and never
express full support for the project and even spread doubt in the community
need TO GO.
• Low Energy – the board is not cohesive or focused, can’t gain or maintain
momentum