How to Start a Cooperative Business – REGENERATIVE.com

How to Start a Cooperative Business

A cooperative business is one that is owned and run by its members. These members could be simply a group of individuals who run the company, or constitute a larger membership, such as a customer base or organizations in the local community. The idea is that all the members of a cooperative have an equal say in how the business is run, and all share the profits. Typically, members will subscribe with a regular payment of money, or give an initial sum to help the business start, and receive an ongoing percentage of profit as the business operates.

Cooperative business are often set up by people who are disillusioned with the mode of capitalist business that dominates western societies, whereby individuals work for companies for pay, but have no say in how the business is run, and see all the profits going to the management and shareholders. As such, many co-ops are “green” businesses, seeking to trade while being more sustainable, having less impact on the environment, and being more community focused than traditional companies.

One particular sector that is seeing a substantial rise in the proliferation of cooperative businesses is food. Many people are fed up with the dominance of large supermarket chains that not only predominantly sell food that does not adhere to green principles – often being imported over long distances, being heavily processed or being treated with artificial preservatives – but use their market dominance to prescribe the products farmers grow (often on poor economic terms) and force smaller, local companies out of business. Food co-ops develop close relationships with suppliers to provide healthy, local food to the community. Similarly, co-ops will often establish themselves to serve a need in the community that is, in essence, in keeping with the principles of permaculture. For instance, in many cities, bicycle repair co-ops are becoming more common as people seek to limit their use of cars, while some people have even gone so far as to set up community owned energy supplies. If you are interested in setting up a cooperative business, here are some of the things to consider.

The service
As with a traditional business, you need to research the local community to identify a need that your company can provide. A co-op is still a business and as such needs to make money – the profits are how you reward the members for their investment. So you will need to conduct market research, talk with suppliers and potential customers to see if your idea is feasible and sustainable.

The members
You will need to decide on the membership of the co-op. As mentioned, there are lots of potential membership schemes that can be utilized. Besides those who run the business, or a customer membership scheme, a co-op could also involve several small businesses coming together to act cooperatively, or an agreement with community organizations such as prisons, which may provide capital in return for, say, training recently released inmates.

The workers
Who is going to work in your co-op and what sorts of security will you be able to provide them? This is often a question of financing, as people working at a co-op still need to make a living – it is important to remember that a co-op is not a charity. However, training new workers can also be an integral part of the co-op’s purpose, for instance by providing opportunities for marginalized groups such as ex-prisoners, underprivileged students or the disabled to gain experience, skills and a wage. Co-ops by their very nature also teach skills that the traditional business world often ignores in its works, such as the ability to make collective decisions for the benefit of the whole group, and to communicate in a non-hierarchical way.

The management
How will the management of the co-op take shape? In line with the ideas of permaculture that can be applied to the social sphere, cooperative businesses often institute systems whereby management is rotated among members, or different aspects of the business – such as finance, marketing, operations, etc. – are overseen by members with relevant experience who then, having listened to the people in their team – come together to make strategic decisions for the company as a whole. The idea is to move away from the strict hierarchical model used by most businesses, which removes decision-making power from all but a small minority, and develop a model built on consensus.

The finance
It is likely that you will need some form of capital to get your idea off the ground. Besides subscriptions dollar-exchange-rate-544949_640or seed dollar-exchange-rate-544949_640money from partner organizations, you may consider a loan from a bank, or from a credit union (which, being more focused on the local community than many banks, are typically more open to financing such initiatives, particularly if they provide a “green” service to the community and focus on local people). There may also be enterprise loans available from national or state authorities. It is worth considering starting out smaller to test the market for your idea before scaling up. For instance, if you want to run a shop selling local, fresh produce, would it be a good idea to start with a market stall before upgrading once you have developed a customer base. This means the initial overheads are smaller and there is less risk for the members.

The marketing
A co-op is all well and good, but it doesn’t really have much prospect if no one knows about it. Communication and marketing are a key part of setting up such a business, and should form part of your strategy from the very start. When conducting market research in the local community, for instance, you can start an email database of potential customers, so that you can inform them of developments and, hopefully, of the opening of the business. Online tools are increasingly important for marketing your business, and are particularly suitable for co-ops, which may not have a lot of working capital to pursue more traditional (and more expensive) forms of publicity. Create a website (there are hosts that offer website services for minimal costs and sometimes even for free) and connect with relevant online communities – such as permaculture groups!