Carrying the Load Together - Black Enterprise
Black Enterprise Magazine September/October 2018 Issue

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ENT_CobuyDuring periods of economic uncertainty, people tend to find ways to band together and minimize their fixed costs. Cooperative purchasing is like carpooling for small businesses. When you combine purchasing power with other businesses that have similar economic interests, you reduce costs and your money goes farther.

“A lot of [cooperatives] get started during economic recessions, because there is a real economic need,” says Paul Hazen, president and CEO of the National Cooperative Business Association. “Local store owners can remain independent in their communities, yet have the economic power of national buying, marketing, and advertising with their own brand.”

Cooperatives can help small business owners take advantage of cost savings on commodities, like food, office supplies, or janitorial supplies; and services, like high volume credit card or payroll payment processing, marketing and advertising, shipping, or wireless phone services. Also called shared services cooperatives, purchasing co-ops can even negotiate better terms on loans for members, helping them to lease or buy vehicles and equipment.

Co-ops are run democratically, members elect leaders, and each co-op adheres to a series of bylaws and governance procedures. Depending on how the co-op is set up, members will pay an annual fee or buy a one-time share and submit an application to join; some co-ops vote their members in. The payments provide the capital, which makes the bulk purchasing possible.

A purchasing cooperative is owned and controlled by independent small businesses, not stockholders, meaning that equity in a co-op comes from members, not outside investors. Since they are not formed to draw a profit, surplus revenue is reinvested into the co-op to help lower prices or return dividends to members.

However, purchasing cooperatives are not fool-proof.  Here are three advantages and disadvantages of joining or forming a co-op:

ADVANTAGES

Greater bargaining power with suppliers: “There isn’t a magic number, but you have to have economic clout to have an impact in the market place,” says Hazen, who has worked with the NCBA for 22 years. Some suppliers only sell their products in bulk, so they are incentivized to work with co-ops rather then individual businesses. Suppliers will also be willing to negotiate prices with co-ops for fear of losing the co-op’s large customer base to a competitor.

Opportunity to learn from others and maximize staff resources: Co-operative purchasing gives individual business owners the opportunity to leverage the knowledge and experience of the co-op community and procurement professionals. This releases them from the responsibility of dealing with the specific details of procurement contracts for every product they purchase, or from negotiating aspects of a contract that might be outside of their frame of knowledge. With purchasing responsibilities outsourced to the coop, business owners can redirect attention to other facets of their companies.

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Marcia Wade Talbert

Marcia is a multimedia content producer focusing on technology at Black Enterprise Magazine. In this capacity she writes and assigns stories to educate readers about social media; digital integration; gadgets, apps, and software for business and professional development; minority tech startups; and careers in STEM (Science, Technology, Engineering, and Mathematics). In 2012, she received two Salute to Excellence Awards from the National Association of Black Journalists and was recognized by Blacks in Technology (BiT) as one of the Top 10 Black achievers in the tech arena for 2011 at SXSW in Austin, Texas. She has spoken about technology on panels for New York Social Media Week, at The 2012 Rainbow/PUSH Wall Street Summit, as well as at Black Enterprise’s Entrepreneurs Conference and Women of Power Summit. In 2011, SocialWayne.com chose her as one of 28 People of Color Impacting the Social Web, and through crowdsourcing she was listed as one of BlackWeb2.0's/HP's 50 Most Notable African American Tastemakers in Social Media and Technology for 2010. Since taking on the role of Tech editor in September 2010, she has conceived and produced five cover stories on Technology and/or STEM and countless articles, videos, and slideshows online. Before joining BlackEnterprise.com as an interactive general assignment reporter in 2008, she freelanced with Black Enterprise beginning in 2003 while working as the technical editor at Prepared Foods magazine. There she further honed her writing skills and became an authority on food ingredients, including ingredients used in food fortification and enrichment. Meanwhile, her freelancing with Black Enterprise and BlackEnterprise.com helped her stay current on issues pertaining to the financial and business welfare of African Americans. As a general reporter for Black Enterprise she attended and reported on the Democratic and Republican National Conventions, where she interviewed Valerie Jarrett, senior advisor and assistant to President Barack Obama and U.S. Attorney General Eric Holder. Marcia has a Bachelor of Science degree in Agriculture with an emphasis in food science from the University of Minnesota, and a Master of Science degree in journalism from Roosevelt University in Chicago. En route to her secondary degree, she served as the editor-in-chief of the Roosevelt University Torch, a weekly, student-run newspaper. An avid photographer and videographer, Marcia is one of several employees at BLACK ENTERPRISE who interned for the publishing company as a college student. She lives in New Jersey with her husband, a food scientist; her seventeen-month-old daughter; and “The Cat”, but still considers Chicago home.


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