Embarking on the cooperative journey is exciting, and an endeavor worthwhile. Though it can be intimidating, with many steps involved before opening day, there are many resources out there that can help. While there are many guides out there that break down steps for development, there is no substitute for professional guidance. If you are thinking of starting a cooperative, in order to do it right, and protect future members from any legal issues, seek the help of dedicated co-op developers and legal counsel.
Assess Interest and Layout Common Goals
The first step in creating a cooperative is for potential members to come together to discuss common goals for the enterprise. Whether there are 2 people interested, or 20 people, agreeing on the direction of the venture is important in establishing shared needs and potential value in becoming a cooperative.
During the beginning stages, a Steering Committee is formed to guide the project through to opening day. Care should be taken in electing committee participants; they should include future members that share a vision for the cooperative, as they will be instrumental in building the foundation of the organization.
Business Plan
Every potential company needs a business plan and a cooperative is no different. Once the goals of the group are agreed upon, several steps need to be taken to ensure the feasibility of the project.
Details of the services or products that the co-op will provide need to be hammered out. Included in this stage is market research, where the viability of the enterprise within the market is assessed. The research should include sales or distribution plans and potential marketing opportunities. Financial projections and a preliminary budget are important in this step as well, as it will show the potential timeline to profit.
Incorporation
Selecting the right kind of business entity for the cooperative is important. Laws governing cooperatives vary greatly state by state, so proper research is needed to determine the right entity to choose. Some states, such as California, allow a business to incorporate as a Cooperative Corporation, which offers many advantages. In most states however, a Limited Liability Company (LLC) is often the selection for new cooperatives.
Once the organization is a legal entity, it is time to layout the bylaws that govern the workings of the cooperative. The bylaws are a set of documents that outline the overall operations of the business including governance structure, size of the board of directors and the election process, meeting and voting procedures, and membership requirements.
Financing
Securing enough capital to start up may be the most difficult part of the building process, and the most significant barrier to entry cooperatives face. While traditional businesses often rely on outside investors, the cooperative environment isn’t well suited for this. Outside investors bring with them costly dividends and board seats that could otherwise compromise the internal integrity of the organization.
So cooperatives are forced to be more creative in raising capital. Initial funds are often secured from founding members and what savings they have, or by shares purchased by new members. However, this alone is unlikely to be sufficient to cover startup costs, so other means must be found through sources such as cooperative development funds, crowd sourcing, startup grants, or small business loans.
Education and Training
Once the foundation of the cooperative is in place and some startup capital raised, the recruitment, education, and training of new members can begin. This is an important step for any new co-op members to take so they fully understand their rights and roles within the organization.
Education is integral to a cooperative, and should be ongoing even for veteran members. An ever-growing expanse of knowledge for its members will allow the cooperative as a whole to grow and adapt to whatever internal or external issues may arise.
Member Meetings
As the doors open and the organization starts to progress, member meetings are crucial to a cooperative’s success. The frequency and structure of meetings should be outlined in the co-op’s bylaws, and participation is imperative. At meetings, members elect board members, discuss large financial decisions, vote on any major changes to the organization, and generally discuss the overall health of the cooperative.
Resources for Cooperative Development
There are many organizations out there that can help in developing a co-op. Here are just a few
Cooperative Development Institute