A Few Essential Ingredients for a Purchasing Cooperative

Composting & Buying “Compostable” Paper Goods in Durham, NC

A local environmental leader, Crystal Dreisbach, Founder and Executive Director of Don’t Waste Durham, invited me to join her and two local restaurant and food truck owners to imagine how we could help them purchase biodegradable plates, cups, and carry-out containers as a co-op.

The basic problem? 

Tim Morris, owner and operator of Caffe Bellezza, started the meeting: “The compostable cups I buy cost 200% or more of what their paper counterparts cost.” He continued, “If it was just a matter of 15-25% more, it would be much more palatable.”  Joe Choi, owner of Namu, said, “I have to pay 45 cents per bowl. The compostables cost so much more, I have to increase prices. Fortunately, my customers are willing to pay more for the compostables, but it’s a lot.”

The frustration was clear.

While many of Joe’s customers are willing to pay a premium, he did feel like he had lost some sales over the increased prices. Tim, whose coffee shop is much smaller, is paying 30 cents per 12 oz coffee cup with a Java Jacket and lid. Whereas Crystal shared that a larger coffee shop, three-location Cocoa Cinnamon, is paying 15 cents since they buy 12,000 per month.  Buying at a much higher volume can make a difference for price.

 

Compost pick-up was another major pain point.

Joe shared this experience: “The service for compost hauling used to cost me $600 per month. They increased it to $900/month when I had to increase the service level. And then just a couple weeks ago, after Compost Now bought the smaller company I was using, they increased the price to $1,800 per month.”

 

Volume and Basic Feasibility Economics

We talked about how, between the 3 of them, they could easily come up with 100 restaurant owners and food trucks that they knew personally. We estimated an average spend of $4,000 on products that they might switch to compostables, if the price and quality was reasonably good. So we estimated $400,000 per year of purchases and a 2.5% rebate of $10,000 to coordinate & organize the effort.

For the compost hauling, we estimated that the average trash and recycling pick-up cost was $350 per month and the average compost hauling was $300 per month or about $7500 per year combined. Multiplied by about 30 restaurants we thought we could easily engage $225,000 per year with a 10% rebate of $22,500 to organize the co-op.

We quickly sketched a path to how this co-op for compostables and composting could begin to generate meaningful revenue to pay for the organizer entrepreneuer.

This vision relies on a few key assumptions:

  1. The facts are in our favor. With 100 buyers of compostables and 30 buyers for composting & waste pick-up and a cumulative participation of $600,000+ per year, this co-op could:
    1. Negotiate meaningfully better pricing and terms, so the value to the customers would be sufficient for them to join
    2. Find suppliers and vendors who would agree to our terms. They would offer relatively small order minimums, an easy path to affiliation with the co-op, reasonable delivery terms, payment terms, return policy, and they would agree to pay the rebate required to fund the co-op in an on-going way
    3. Tap into sufficient market competition. There are enough providers that want our collective business that we could use competitive negotiating to get what we’re looking for — or at least a minimum viable level to make it workable. Assessing the minimum viable level is one of the hardest parts of this calculation, but is essential to the early stages of a purchasing cooperative.
  2. The buyers trust that the opportunity is real and worth their time. The art of organizing this process relies on:
    1. Making sure we’re in close relationship with critical “early adopter” and “influencer” restaurant and food truck owners. Since the stakes are highest for them, they need to be at the table each step of the way to hear pushback from the suppliers and develop their own, more nuanced understanding of the market, so that they can make a compelling argument to their peers about why they need to organize.
    2. Having enough data from a variety of buyers, from small food trucks to large restaurants, to extrapolate total potential purchase volumes with reasonable accuracy, while still being conservative enough to earn credibility with suppliers when more than we said actually show up to make the first few group purchases.
  3. The suppliers believe us and are eager to serve us. When negotiating and talking with suppliers, providers, or distributors, they must feel that the opportunity with this group of buyers is viable. This occurs through sharing large projections of total spend that gets their attention, as well as specific anecdotes of real buyer needs and challenges that we’re solving through this process. We must present as established and prepared so the seller will believe that we’re going to be successful.
  4. Relationships are key. The art of this negotiation also relies on an iterative process of getting to know suppliers and what they can and won’t do for us at certain levels of market power, leverage, and percent of their total revenue. We have to make sure that we’re relating to a person who’s up high enough in the company that they can make decisions with their own discretion and values and be impacted by a human argument.

 

Next Steps: Organizing More Buyers

Recruiting buyers actually starts with talking to providers to get a sense for their constraints, openness, and interest. What volumes would make up a meaningful chunk of their business? What value could the co-op add to their lives to make their job easier?

After that, let’s say the critical numbers are around $300,000 and we think we can do that through 12 of the larger & more influential buyers. Can we get 12 buyers to believe this might be possible, such that they show up to a meeting and follow up by sharing their spend data, what would make it worth it to them to switch, and what would hold them back.Once the organizer builds a successful network of 12, then the growth of the co-op becomes a matter of scale. Do the same thing, just do it bigger!

Because ultimately, the person who is in the middle of coordinating all of this is the essential ingredient. Even if purchasers and suppliers are aligned, without the right broker, the opportunity could fail. This person needs to be an intermediary that can deliver trustworthy, believable, and disciplined follow-through, negotiate well with all parties, and balance relational instinct with ruthless savvy when it comes to the numbers.

None of these skills rely on natural talent. CPA Co-op is here to train and support “Organizer Entrepreneurs” who have the passion to make a difference and change our local economy.

This is Why I am Writing

I believe you have a hunch about your most important project. The one that if it really succeeds could really make a difference. It could contribute to something extraordinary.

I’m writing because I want to invite you into a caring community that has also glimpsed this part of themselves and knows they need more support and encouragement to work on this most important project.

As an organizer, I see my work as bringing people together, helping to create and hold the space where we can listen and help each other see what’s really holding us back.

In this blog, I hope to share some of what I feel might be my most important work — reflections on co-op economics, heterodox economics, better ways of thinking about our retirement and college investing and personal finance…Screen Shot 2019-02-02 at 11.17.34 AM

But also to share other ideas and reflections on what I’m trying to do with a young small organization that is desperately trying to find where it can have the most powerful impact — on the economy, in our schools, in our religious communities, in how we collaborate.

The journey has been way more emotional and rigorous than I expected. The stakes keep feeling higher and the fear and anxiety grow. But our potential to do good in a deep and meaningful way is growing as well. My missteps and shortcomings as a manager — something I once thought I’d be great at and really enjoy — are also giving me lots to reflect on. I believe that in sharing all this with you, you might have some advice and suggestions for me.

My hope is that by writing an invitation to you every month (and perhaps a couple other quick notes in between) will feel compelling to you — so much so that you’ll write back and engage.

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Once I hear from enough of you that you’d like to take a leap with me, I’d like to launch an intensive workshop. This would be a curated cohort that will combine the best of what I’ve been learning from a truly transformational leadership workshop I went on in early 2018, mastermind groups I’ve been a part of over the past year, a couple coaches and colleagues who have been shaping me, and my desire — my desperate desire — to see more of you deeply committed and ruthlessly pursuing what you feel might have the biggest chance at really making a very real and significant contribution.

Democratizing Economics: I believe

I believe our economics can embody a greater democracy.Screen Shot 2019-02-02 at 11.17.46 AM

I believe our economic institutions can be more democratic and fair.

I believe the plurality of thought in economics would bring great benefit to society.

 

I believe in culture and that our culture is the sum of the ideas floating around inside of it.

We all know it’s much easier to take in others’ ideas than it is to create and share the unique combination of ideas your experiences bring to bear.

Screen Shot 2019-02-02 at 11.28.26 AMI believe we need to be talking more about certain ideas.

I believe George Saunders rightly characterized our media situation with his essay, “Braindead Megaphone”.

 

I believe our most important work is really matters.

I also know how easy it is to be distracted.

I believe that you spending more of your time on your most powerful work will change you.

 

I believe that creating tension is essential to producing work and creating change.

In organizing, we call it an “agitation”.

Agitation is the art of challenging a person to be true to their values, true to self and to act on those values out of their own self-interest. It is the art of pointing out the contradictions between what a person professes and how she or he acts.” ~Gameliel National Training Manual

I also believe new kinds of connection are possible.

New curated cohorts learning together can cement new relationships that move us deeply.

I believe in coaching, good feedback, holding up a mirror, reflecting back to each other what’s most important and what we see.

 

This is the heart of it: Learning to see.

Learning to see inside ourselves.

Learning to see beyond the next turn.

Learning to really see the other. Be with them and help them see themselves.

Is that a gift you are ready to give?

 

I think our economics needs it.

I think our economy needs it.

Will you join me?

I want to be an artist

As I was walking with my 5-year-old daughter Micaela last night, I asked her:

“Do you still want to be an artist?”

She responded:

“I want to be an artist, a songwriter, a painter, and an art teacher.”

I want her to make good on that dream.

That’s why I’m here. 

I’ve spent the last 28 days doing the hard work of writing everyday.

The scariest thing I wrote was a letter to Micaela.

I knew I was doing something right because the morning after I posted it online, I wanted to take it down. I was scared of what I said. Scared of what I committed to doing.

Scared because it felt like the stakes were higher.

The motto of the workshop I’m just finishing is:

“Do the Hard Work First | Embrace Emotional Labor | Dance with Fear”

I didn’t understand this third part “Dance with Fear” until the feeling I got as I woke up on Sunday morning. The feeling of wanting to quickly revise and take down the letter. The feeling of uncertainty. Is that really who I am? Is that what I want?

What am I for?

Why?

Those are the questions I want to wrestle with here.

The clearer I get, the more I believe I’ll be able to make my art.