Building business value.
Susie Sutphin, Executive Director of TFH, and a close partner throughout the project.
Introduction
Tahoe Food Hub (TFH) is on a mission to galvanize the Tahoe community to build a regional, sustainable and equitable food system.
An angel investor eager to support TFH’s expansion wanted to see a plan for financial sustainability before cutting the check for a new location. We hoped to offer a new path forward.
Starting with a blank slate in September 2016, our small team sought first to understand TFH’s current situation. We then applied the Sustainable Management frameworks taught at Presidio Graduate School to identify opportunities for change and sustainable growth.
Project Overview
Team // Sasha Klein, Joe Nangle, Martin Uttley
Project Stakeholders // Susie Sutphin, Executive Director, Tahoe Food Hub; Tahoe region farmers; Tahoe residents
Deliverable // Sustainability implementation plan
My Role // Project management, stakeholder research, business modeling
The four core programs.
Getting Up to Speed
We kicked off the project by diving into the current state of operations at TFH. Susie graciously hosted us in Truckee for a day of interviewing, touring, and immersion into the values of TFH. We were able to see the existing Hub retail store in Alpine Meadows as well as the site that was under consideration as the organization’s new home. We had the opportunity to ask extensive questions about Susie’s vision going forward and what role she saw for herself as Executive Director. Her excitement and positivity was contagious.
But when we returned home and dove into newly shared documents and materials, we realized that the organization’s sustainable food wasn’t feeding its financial needs. Although the Farm to Market (F2M) program accounted for 99.8% of organizational revenue, it was operating similarly to the not-for-profit educational programs. With projections of nearly $700,000 in program revenue in 2017, the grant-dependant not-for-profit structure employed in the three education programs seemed misaligned with TFH’s growth path.
Solution Development
TFH was founded with a mission broader in scope than many traditional non-profits. In addition to fulfilling traditional NGO roles like reducing food insecurity and educating the local community, TFH has a core component of commerce in its programs. F2M has only risen in the share of revenue, and grew more than $100,000 annually between 2013 and 2016.
Susie confided that rapid growth in F2M revenue had outstripped organizational capacity and staffing, expanding the program’s relative importance in TFH’s financial and logistical structure as TFH struggled to keep up. Account servicing, order management, and delivery became challenging tasks to balance within existing structures.
Although they are aligned programmatically, running the F2M program as a not-for-profit alongside the Sierra Agroecology Center program threatened to constrain TFH’s long term financial viability. Nearly all growth in overall organizational budget was expected to come from F2M revenue, reducing underlying reliance on grants and donations into the next decade.
We began to reframe the very structure of TFH’s programs. It seemed that TFH could find greater success running the F2M program as a certified B-Corp, rather than a non-profit. Operating F2M as a B-Corp would establish a deeper, more meaningful, relationship between employees, farmers, restaurants, customers and the Tahoe region without sacrificing its positive impacts. As a profitable program steeped in its mission and values, F2M will be able to provide Tahoe residents with long term access to their regional foodshed.
SWOT Analysis guided our solution development.
Implementation Plan
We proposed that TFH certify the F2M program as a B-Corp, operating authentically as the for-profit arm of TFH. This new B-Corp would contain three revenue-generating groups: Wholesale, Direct to Consumer Sales, and The Food Shed. SAC would remain a nonprofit, primarily using grant and donor funding, with future F2M revenues adding support in later years. SAC would include three non-revenue-generating groups: Healthy Food Access, the Dome Raising Project and TFH Giving.
But becoming a B-Corp is not as easy as adopting a label and slapping the familiar logo on marketing material. Certification requires three key criteria:
Meet Performance Requirements - B-Lab, the certifying body of B-Corps, publishes the B Impact Assessment, a survey with detailed metrics divided into sections for Governance, Workers, Community, Environment. A score of 80 out of a possible 200 is the minimum performance standard eligible for certification. A preliminary assessment revealed TFH was well-positioned to reach this demanding standard.
Meet Legal Requirements - Whereas traditional 501(c)(3) not-for-profits place community benefit as the organization’s core responsibility and are granted tax exemption for surplus annual funds, and C-corporations consider shareholder return paramount, California’s Benefit Corporation structure allows for a hybrid path. B Corps are not obligated to the same profit motives of C-corps, and instead must consider all stakeholders, and may organize and advocate politically for those causes in the best interests of their stakeholders. Benefit Corporations can also access private capital for growth and provide returns, a core component of our plan for growth. Current Articles of Incorporation must be amended to formally become a Benefit Corporation.
Meet B-Lab Requirements - B-Lab’s requirements are the final check-box in the path to B-Corp certification. When completing the application for certification, TFH would adopt B-Lab’s Term Sheet and sign the B-Corp Declaration of Interdependence. With annual revenues of under $2,000,000, TFH would also pay a $1,000 annual fee.
Read the Full Report
For a more detailed look into our proposed implementation plan, take a look at the full report. It details the many new programs and initiatives that would nest within the B-Corp structure:
A margin-based, rather than flat fee, pricing structure for wholesale customers
Prioritizing growth in direct-to-consumer box sales (including delivery and pickup options) over wholesale accounts
The Food Shed - the new retail home of TFH
Relocating wholesale cold storage and distribution
Longer-term expansion via satellite hubs