Investing in Ecological Land Co-operative shares is not the same as investing money in a bank account as your capital is at risk and you could lose up to, but no more than, your entire investment.
The Board consider the key risk factors to be as follows:
- Refusal of planning consent: Including initial planning application refused, necessitating appeal process; appeal refused, necessitating recourse to High Court; possibility of total refusal of planning consent. We plan to mitigate this risk through working to reduce the likelihood of adverse planning decisions at all stages of the process including; opening dialogue with stakeholders, local and otherwise, and with the planning authority early in the process, through personal contact and presentations; addressing concerns raised by stakeholders; ensuring that, following the high standard exemplified by our first project, our subsequent planning application documentation is strong, comprehensive and evidence-based; capitalising on the success of our first project to build stakeholder trust and confidence; continuing to build our brand presence and credibility through strong reporting and PR, as well as networking and co-working within the sector, to further develop stakeholder confidence; and finally, through maintaining our relationships with our current planning solicitor and barrister, whose pro-bono support was invaluable in keeping costs to a minimum in our Greenham Reach planning appeal. In the case that we are refused planning permission at appeal (or if applicable, the High Court), we can rent the site for grazing, education or eco-tourism, and in time make a second or third application. If it became clear that we would never obtain planning permission on a particular site then we would sell the land. Any money recouped from such land sales would be used to purchase and develop new sites for ecological smallholdings.
- Failing to attract potential smallholders that suit our offering: Selecting the right smallholders is absolutely critical to our success. We need to attract smallholders with the skills, determination and tenacity to develop their business into a viable enterprise. We also need to attract smallholders who are interested in the wider objectives of the Co-operative; the smallholders must be amenable to the required site monitoring. They also ideally wish to host Work Days and more generally be advocates for and of the Co-operative. We will mitigate against the risk of attracting incompatible smallholders through the following measures: by developing a rigorous smallholder selection process, including defined selection criteria and involving the input of sector experts; through expanding of our already considerable network of contacts and supporters, ensuring that our opportunities are widely publicised within the community; initiating relationships with key groups of potential smallholders, such as with Soil Association Apprentices and Kindling Trust FarmStart Growers and inviting them to work alongside us at Work Days and in the office; and continuing with our programme of volunteer work days, enabling us to build relationships with potential smallholders.
- Failing to attract and retain suitable staff: As we grow, it is crucial that we attract and retain staff who share our collective vision and who are similarly inspired by and committed to the project. We also need to maintain a staff and Board team with a balance of skills, experience, and availability which ensures that our business has the right leadership and operational components to be a robust and sustainable organisation. A failure to attract and retain suitable staff members and successfully share and utilise the experience gained by our current team would impair our ability to deliver to our plan. Through this business planning process we have redefined staff roles and identified necessary changes that have been made to the Board and to decision making and lines of responsibility. These changes allow us to far more clearly communicate the work of the Co-operative to potential staff and Board members. We have carefully paced our projected rate of expansion to allow sufficient time for staff induction. We have also drafted a recruitment strategy aimed at facilitating a sense of ownership in new staff, and which allows us to pay Executive Board members for their work.
- Rising land prices:Our financial modelling assumes average land costs of £8,000 per acre, rising with inflation. If land prices rise sharply the cost of smallholdings could increase, potentially compromising our objective of providing affordable land. Our model can be applied anywhere in England, so we can develop clusters in the first instance in more affordable locations where there is also demand. We can also take the following steps: We can seek affordable bridging loans to enable us to buy larger sites at a lower cost per acre. We would then sell the unused portion and repay the loan; we can proactively seek land donations; if we need to increase the cost of smallholdings, we can support our smallholders in developing diversified business models to increase their income; we can take up any opportunities for grant funding that would either contribute to the cost of establishing new sites or to ongoing costs to the smallholders.
- Failure to attract sufficient financing: Our business plan requires substantial input of shareholder funds between now and 2020. If we cannot attract those funds, the viability of our proposition would be compromised. We intend to mitigate this risk through: Seeking out opportunities to diversify our financing. For example, once we are granted permanent planning permission, we can apply for mortgages and release share capital for the purchase and development of new sites; build long-term relationships with key potential finance partners, such as the A-Team Foundation and Esmee Fairbairn; continuing to grow our brand presence and credibility, attracting new potential investors through our networks, press coverage and track record; and staggering our funding drives into manageable chunks, balancing the costs of planning and implementing regular share offers with the cost of servicing shareholder funds held for long periods
- Higher than predicted cost of borrowing: Our business plan assumes average interest paid at 2.5% overall for share capital and 2% for debt financing. This is based on our actual figures for 2015 and 2016. We are fortunate to have a number of shareholders who have fixed their rate of interest at between 0% and 2%. We also have a committed charitable loan funder who has fixed the interest rate for their loans at 2%. If necessary, we can offset any increase in cost of borrowing by commensurately increasing the cost of holdings. The extremely low projected price of our smallholdings in comparison with market value means that we have some flexibility in the level of our lease price before our affordability aims are compromised. Over the long term, we will start to reduce the equity stake in the business through buying out shareholders who wish to exit using company profits, rather than investor churn. This will steadily reduce the total cost of borrowing to the business.
- Failure to meet grant targets: We have set ourselves realistic grant targets per site, based on our performance to date. We will continue to develop this income stream through further developing our fundraising strategy, and continuing to build relationships with key potential funders. Although a failure to reach grant targets would add to the cost of smallholdings by up to £10,000 per holding, and as such is to be avoided, this eventuality would not fundamentally shake the financial viability of our model, and our smallholdings would still be priced substantially under market value.