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.

How to Build Awesome Leadership Teams

Too often, I find myself unclear on what makes great leaders. And how I can help great leaders work well as a team.

This is a big problem for me, especially with the appetite I have to make change. If you’re building an organization, a movement, or care about making change in your school, community, or company, this framework and basics might help clarify your thinking.

Screen Shot 2019-08-22 at 10.25.35 AMThis post is based on my notes from a training I went to at the Ayni Institute last week.

What are the three key steps to building great leadership teams?

  1. Recognize Good Leadership
  2. Find & Enroll Good People
  3. Create Good Team Dynamics

1. How to Recognize Good Leadership

First of all, let’s start with a definition I recently picked up from Ayni Institute, building off of work from Marshall Ganz and the work of Metro IAF.

Leadership = accepting responsibility to create conditions that enable others to achieve purpose in the face of uncertainty.

We’ll come back to this, but I think the elements of (1) accepting responsibility, (2) creating conditions to enable others, and then (3) the focus on achieving purpose in the face of uncertainty are vital starting points.

In some contexts, we are hiring leaders, in other contexts, we’re recruiting and building teams of volunteer leaders.

For both contexts, I think there are 5 key things we should look for:

  1. Deep Motivation.  Do they know why they’re doing what they do? Why this work?  Why do they have this deep, intrinsic motivation? Can they articulate this?
  2. Vision. A sense of what they want / what they believe is possible.  Vision isn’t necessarily the ability to communicate this, but that they have a sense of the way things could be.
  3. Anger / Grief. Do they have a deep emotional connection to the work. The point being it’s not just in their head, but that they feel it in their heart. For example, I have grief about the state of school lunches, because of the daily struggles I face with helping my daughter make healthy eating choices.
  4. Patience and Sense of Humor. While anger / grief are a key component to why somebody is motivated to do the work, it’s also equally important that the person also has patience and a sense of humor, because things take time. There will be a lot of loss for most campaigns that are trying to make meaningful change. We want leaders who will be in it for the long-term.
  5. Accountability. Do they do what they say? One of the most important things you simply cannot train for. Recognizing when people are accountable to what they say is essential. Screen Shot 2019-08-22 at 10.25.54 AM

Since going to this training at Ayni last week, I’ve been seeing these five elements in leaders everywhere — from folks I work with to people I’m trying to recruit. It’s amazing how simple and helpful just having a clear sense of what makes a strong leader. How would you evolve and/or add to this list for your context?

2. Finding and Enrolling Good People

“Who you’re working with precedes what your working on.”

This jarred me when I heard it last week, but the more I think about it, the more it resonates.

It basically asks the simple, but essential question: Who are your people?

  1. Know Your Turf. What’s the geography? Who are the institutions? What’s the landscape you’re working in? Where might you find the kinds of people you’re most looking to work with Do you have a mental picture of the kind of person you’d like to recruit? I’d want the person to be just like so-and-so… because she is X, Y and Z.
  2. Play the Field. Don’t invite everybody to the team. Too often we’re tempted to do this. Set a high bar for who you invite. Do they do real work? Do they accept responsibility? You can try people out by setting low bar commitments. Who can you invite to come to this gathering? What kind of people do they bring? Who do they know? Can they think of a list of people they have good relationships with and how do they describe the work they’ve done together? Really take your time and do your assessment before you invite people to join the team.
  3. Look Behind People. Where do they fit into other things / departments / organizations / communities? You have to ask other people that know them or have worked with them? Try to make real assessments based on results in other contexts. Sometimes it won’t be obvious where to look or who to ask, but take the time to check around & see where they fit.
  4. Proposition Them. You have to ask them to lead with you. This can be the hardest and most important step. You need to make a real, intentional invitation. For this to go well, I’ve found you need to affirm and name what you’ve seen in them. Take the time to write down and share with them what you recognize about their leadership, their motivation, grief, patience, vision, and reputation of being accountable. Simply naming these things for them will be a kind of affirmation and also help them gain perspective on who they are and what you see in them. Then invite them to join you to be part of making this team. Tell them how you want it to be different and while it may be hard, why you believe in it. Also name what might be in it for them. “I want to invite you to this team, because I think this team can support you in this and that way and help you actualize more of your full potential.”

There’s an element of leadership that’s about spiritual awakening — allowing people and inviting people to reflect more deeply on why they’re here — their deeper purpose and mission — and inviting them to live into that more fully.

The idea in a good team is that it allows you to fulfill your full potential.

3. Create Good Team Dynamics

  1. Culture. Early and intentionally setting your culture might be one of the most important things you can do. What does this mean?
    1. Decision-making. How do the decisions get made? Do you use the advice process?  Or what is your process? Even if it’s simple, naming it together is better than not talking about this. Otherwise, the person with the most informal power will set the tone of the culture around decision-making for you.
    2. Rituals and Shared Practice. For us at CPA, we’ve gotten into the habit of quarterly retreats as a staff and making sure we do some improv exercises / games at each retreat as a way to be silly, have fun, and use more creative sides of our brains together. (And because we have a great team member who loves leading improv games.) Another practice is making intentional time to evaluate after each meeting we have. Even if it’s just 5 minutes, we try to make it a practice that we share one feeling word on how we felt the meeting went. We try to draw a few takeaways, lessons, things that could have been improved and ask ourselves: “Did we get the reaction we wanted?” An organizing mentor used to say: “If it’s not worth evaluating, then it’s not worth doing.” In other words, we’re creating a culture of continuous learning.  What are the shared practices that make up your ideal team culture?
    3. Screen Shot 2019-08-22 at 11.30.46 AM

      Find ways to Relationship Build. This is the bedrock of our team culture. Making intentional time to deepen our relationships with one another, and also taking time in our interactions with clients, investors, everybody — to build relationships. So often our culture focuses on the transactional, the tasks that need to get done, the project management to do list, the goals we have to achieve our bigger purpose. However, if we don’t take time for the relational, we miss the opportunity to form a deeper emotional connection that might be essential for the unexpected down the road.

  2. Accountability. What are the processes for holding each other accountable? How do you create space for mutual accountability? Is it team check-ins? Shared reflection on goals? A periodic write-up on the meetings/conversations we had and where our latest thinking is as a result of those? Did we do what we said we’d do on the timeline? If not, what happened? Why?
  3. Training. Doing a training together can be an interesting way to set a standard for the work and in a way be another form of accountability. It offers a great way to combat awkward power dynamics or experience differentials in a group. If everybody goes to the same training, agrees to the new, common set of expectations, then there is a new baseline.
  4. Meetings with Purpose. Ensure your meetings have purpose in a broader arc of what you’re trying to accomplish. Make sure folks know why they’re coming to your meeting, what the purpose is, the intended reaction(s), decisions to be made are ,and that they have all the necessary information / reports in advance so that the time in the meeting isn’t sharing information or something that could have been shared in advance. For example, the IAF “campaign cycle” goes through five stages. Your meetings might have more purpose if you fit them within your broader campaign roadmap:
    1. Relationship Building
    2. Research, Cut the Issue
    3. Strategy
    4. Action
    5. Evaluation

Here’s another example of a Campaign Cycle from Marshall Ganz at Harvard University.

Screen Shot 2019-08-22 at 11.31.08 AM

If you found this helpful, I recommend:

1. Checking out your local community organizing affiliate – with Metro IAF or otherwise

2. Learning more about Marshall Ganz and his online courses / trainings: https://online-learning.harvard.edu/course/leadership-organizing-and-action-leading-change

3. Checking out the offerings of the Ayni Institute and their research on social movements https://ayni.institute/training/

4. From a more business angel, the work of Seth Godin,  his blog, podcast and his Akimbo Workshops. For example here’s a post about how things can be different for your organization & how it starts not at the bottom, but at the foundation.

Or think about joining us at the Community Purchasing Alliance: CPA.coop!

 

Trust and Co-ops

Five years ago, I started the Community Purchasing Alliance Cooperative with a Steering Team of church leaders, a community organizer, and a few generous lawyers.

Today, we are 75 member-owner community institutions. We collaborate on $15,000,000+ in contracts each year. Yet the most important thing we’ve created doesn’t show up in the numbers.

It’s trust.

We’ve built an incredible amount of trust with our members. What’s surprising to me about this is that most of the trust-building has happened not because of anything the staff did, but because of the conversations we facilitated between members. When decision-makers are talking to peer decision-makers about a similar challenge, the value they create and insight they’re able to offer builds something special

Nathan Schneider talks about this same phenomenon in his most recent article for the Coop Biz Journal - Winter_2018_Journal_CoverNational Cooperative Business Association. Nathan starts:

“I’ve noticed some patterns that may become more common in the co-ops to come.”

He’s reflecting on his experience as a reporter:

“They will create value not just with the services they offer to members, but with the connections they enable among members—and the efficiencies members discover together.

This rings true for my experience. For example, at the founding meeting of our co-op in 2014, I remember sitting next to Troy Watson and her telling the room of 50 founding and prospective members and others gathered, “While the savings are helpful, it’s the connections I value most.”

I think this continues to be the experience many of our members have. While we help them manage risk and reduce cost in some of their contracts, it’s the personal connections we’re able to help them make with peers that they value most.

Nathan continues:

“Their specialty will be in fostering trust on trustless networks…”

As I think about where we grow next — whether through building out an online platform for users to co-create value and connection building on something like MARVL.org or whether through developing a new co-op using a similar model in another region — Nathan reminds me that the focus of our work must be in fostering trust.

That’s the specialty of what a co-op can offer and offer with great integrity.