Preparing to establish a Community Business

'Community business development' is the term that describes investments made by members of a community for the benefit of that community.

Businesses and organisations that are run by and for the community include community banks, neighbourhood houses, community sport clubs, child care centres, and caravan parks.

The premise on which a community development exists is that the community will come together for some sort of reward. That reward might be financial, it might be improved community health, or it might be related to leisure or convenience. It is generally a result of a need that is not being met in the community. Any profit from such operations is generally reinvested in the community or in the business.  

Such investment by communities usually results in closer-knit communities where people feel a greater sense of belonging. This has far-reaching positive effects for the people who support such initiatives, including greater happiness, greater feelings of wellbeing, and a greater sense of safety and security.   Nonetheless, a community business must also be successful as a business - it must pay its way and provide an efficient service.

A little bit of history

The first organised community businesses were co-operative stores ('co-ops'). They emerged because people were sick of receiving poor quality goods in inaccurate measures with little consumer protection. As a result people started pooling their resources and purchasing in bulk. In 1884 a group known as the Rochdale Pioneers started a retail co-operative in Rochdale, England. They sold only oatmeal, butter, flour, sugar and candles, and they operated under the pioneers' stated principles:
  • Open membership
  • Democratic control (one member, one vote)
  • Distribution of surplus in proportion to trade
  • Payment of limited interest on capital
  • Political and religious neutrality
  • Cash trading
  • Promotion of education
These principles set them apart from others who had tried similar businesses, and were the reason why the Rochedale co-op succeeded and the Rochdale Pioneers went on to open many other co-operative businesses. The Rochdale principles are largely the same governing principles that drive co-operatives today.

How can we develop community businesses?

For a community business to be viable it needs to serve a purpose - it needs to fill a void. How do you know where there is a gap in services? Examine your community and see if anything obvious is missing. Listen for complaints.  Ask around.  If there are no complaints, it may be that there is too little dissatisfaction to move people to participate in change - but this is rare. Conduct research. If you belong to a group whose members are dissatisfied with something, and if  you find that all of the members want to start a business to rectify the problem, find out if other individuals or groups in the community  feel the same way.  If they do, get them on board.

Once you have discovered a service or a need that is lacking in your area and have uncovered sufficient evidence to support your claims, seek wider support. A wider network of support could include prominent people in the community, local businesses, other community organisations, media, and links to individual volunteers.

When you have established that there is community support for your project and you have organised a group of people ready to go, you need to formalise the movement. You should establish a clear mission statement.  Define what you want to achieve and detail exactly how your new business will operate.  You must, of course, operate within the law, and you will need to become aware of any relevant local, state and commonwealth regulations that relate to your chosen business.

Who can assist you?

Make full use of the skills and expertise of your members. If you need expert advice to establish your business, try to get support and help pro bono from local experts:
  • Accountants
  • Lawyers
  •  Banks
  • Financial planners
  • Tourist associations
  • Government (local, state, federal)
  • Other community groups
  • Investors
To establish if you have the support of the whole community, hold a public meeting. This will also raise the awareness of your new business and build community links. Seek advice from other groups that have been through the start-up process recently. What worked? What did not work?

Find out if your organisation would be eligible for any grants; grant funding might be able to cover your set-up expenses, and could help with ongoing management costs.

How do you monitor your success?

Measuring your success depends largely on what your business is and what your stated goals are, although receiving community support and attracting a lot of membership would demonstrate that you are on track. Another way of determining if you have succeeded in offering something the community appreciates is seeing how much in kind support (services and products free or at cost value) you receive. The more help you attract, the more successful you should be.  

The output of your operations is plainly a relevant factor, and you should be able to monitor, record and report on all of your service's outcomes.  On the community front, of course, the creation of new jobs within the community would be a very positive outcome for any community business.  

Profit is obviously another measure of your success. If you run at a loss, this may be unsustainable.  If you run at a profit, however, other issues arise.  It is important to establish from the very beginning exactly how you will manage profit. Where will any surplus go? Will it be spent on physical facilities? Will you invest it on the stock market, or will you invest in staff or training (human capital)? Like the Rochdale Pioneers, you too should have business principles. Establish them at the start, and use them as a measure of your success.

The most important index of success, however, is survival.  If your organisation can fund itself while providing a needed service it will continue and may grow.

Words of warning

It is easy for great ideas to remain just ideas. If you are serious about investing in your community together with other committed people, then make sure you have done your homework. Make sure:
  • you have researched your idea thoroughly
  • you have established goals
  • spending is monitored
  • there are strict operational guidelines in place
  • you have established support
  • you have a business plan, and monitor your performance against this
  • you have a system of reporting business dealings

Remember, community development is a worthy and worthwhile investment. Not only are there economic benefits, there are many social benefits too. An increased sense of belonging can lead to a decrease in crime and an increase in civic pride. Community development benefits the residents because there are more resources (recreation, health, education, career development) and possibly more local jobs as well. Just make sure you are fully aware of the energy and commitment required to establish and sustain a community business and that the rules of business apply to your community enterprise as it does to any other.