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Working with Producer Groups

Working with Producer Groups. Gerald Ely Cooperative Development Specialist USDA Rural Development (PA). Issues/Keys to Success. Recognition of Problem/Economic Need Leadership Group Commitment Understand Complexity of Market/Industry Different Business Structures Capitalization

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Working with Producer Groups

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  1. Working with Producer Groups Gerald Ely Cooperative Development Specialist USDA Rural Development (PA)

  2. Issues/Keys to Success • Recognition of Problem/Economic Need • Leadership Group • Commitment • Understand Complexity of Market/Industry • Different Business Structures • Capitalization • Understand & Plan for Variability • Common Development Pressures

  3. Recognition of Problem/Economic Need • It takes time to understand problem or economic need • Then need to reach agreement on solution • Time and effort increases with group size • Commitment requires group trust and confidence • Understanding and agreeing on expectations important for ultimate success

  4. Leadership Group • Appropriate Advisory Team • Clarify Roles and Expectations • Recognize Leadership will Change • Bottom Line - YOU NEED IT!

  5. Commitment • Commitment of those who will be participants in proposed business is Critical for Success • “Stop” points include: • Steering Committee • Producer Survey • Pre-Membership Agreement • Equity Subscription • Marketing Agreement

  6. Understanding Complexities of Market/Business/Industry • Desperation is a poor base for new business – yet this is reality • Markets/Business are Complex • Economic Phenomena of “supply/demand” “economies of scale” and “comparative advantage” are real & hard to defy • “Middleman” myth holds unrealistic promise

  7. Understanding Complexities of Market/Business/Industry (con’t) • Industry Concentration, world economy, political/regulatory issues are complex and create uncertainty • Must understand needs of customers and the distribution system • Regulatory issues complex, costly and difficulty to ignore • Learning/training is expensive

  8. Different Business Structures • There are alternatives to cooperative form • No matter what structure need to agree on mission, feasibility analysis, business plan, management • LLC’s may have advantage of “outside” capital but at what price • Stigma of cooperative failures resulted in increased interest in other alternatives – for wrong reasons

  9. Capitalization • Hi-tech facilities and equipment are hi-cost • Proper capitalization essential • Costs of “Doing it Right” are high • However, costs of “Doing it Wrong” may be higher

  10. Understand and Plan for Variability • Feasibility analysis usually based on “average” • Extremes occur in agricultural production frequently • Test the importance of variable factors on the project • “Plan B” can be critical for success – HAVE ONE!

  11. Common Development Pressure • Pressure to develop too quickly • Meet a crisis situation • Plant/facility/business closing • Market opportunity • Manager/staff availability • Business development steps are important to follow • Threat to competitors • Pressure to begin with minimal capital • Pressure to ignore pessimistic feasibility reports

  12. Role of Outside Agent • Important, but do NOT substitute local participants • Roles include: • Educator • Objective Observer/Skeptic • Project Champion • Technical Advisor

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