How to start a cooperative?

Each new cooperative business (coop) situation is unique, and the manner in which the momentum, the people and the money come together will vary. The steps that are described here are typically part of a successful start-up venture, but they are only guidelines.

Identify the problem or opportunity and the broader interest. 
A group individual explores the common need for a particular product or service and identifies the benefits that a cooperative might offer. The core group reaches out to the larger community to measure the interest in the coop idea, and to further define a common need. This group organizes informational meetings for potential members and uses these opportunities to recruit others who have the skills and expertise required to start the cooperative.

#2. Form a steering committee and further explore the coop business option.

If there is sufficient interest in the idea of a coop, a committee of individuals is established. The committee further evaluates the cooperative business option by surveying potential members to determine the interest levels and potential business volume. The committee refines the business idea, initial mission, purpose and goals of the cooperative business. The steering committee will be responsible for financial matters, handling confidential information, and leading the decision-making process. It is important that the committee be made up of trustworthy individuals who have good business sense, and are capable of putting the interests of the group before their own. Many potential cooperative members will base their support of the cooperative on the credibility of the steering committee members.

#3. Conduct a feasibility study and evaluate the results.

To determine whether the cooperative is a practicable business venture, the committee conducts a feasibility study. The feasibility study examines whether there is a market for the new coop’s products or services, and whether the proposed coop can generate enough revenue to cover the risks and costs of operating the business.

A feasibility study includes amongst others:
Development of the coop, and outside expertise may be necessary. Frequently the committee brings in a consultant to perform all or a portion of the feasibility study. It is important that the consultant be knowledgeable about the particular business sector, and not have a vested interest in the study’s outcome. The first phase of a membership drive is undertaken at this point, so that seed money is available to pay for a feasibility study, consultants and other related expenses. Other sources of funding for a study might be available from existing cooperatives, government, NGO’s, development banks or not-for-profit agencies. The results of the feasibility study are shared with members or interested stakeholders, and the committee decides whether to continue the cooperative development process.

#4. Establish the cooperative by adopting statutes and bylaws.

The committee, acting as the interim board of directors, may draw up the statutes and bylaws, but these should be reviewed by a notary familiar with cooperatives. The statutes specify basic facts about the coop. The initial bylaws, which describe how the cooperative is governed, may also be drawn up by the steering committee, acting as the interim board. Thereafter statutes and bylaws must be adopted or amended by the cooperative’s members. Once the cooperative is established, a bank account can be opened for the deposit of member equity payments and other funds.

Success Factors

SUCCESS FACTORS Successful new cooperatives share certain common characteristics that are often cited as requirements for effective operations. Successful new […]

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RISKS Potential risks to a new co-op include: Lack of a clearly defined mission, purpose and focus. Lack of member […]

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