Each cooperative emerges from a unique economic, cultural, and social context and thus no start-up recipe exists that will work for all situations. The following steps provide an overview of the general process involved in starting a cooperative. An excellent on-line description of these steps can be found in Chapters 4-6 of Cooperatives: A Tool for Community Economic Development, located at http://www.uwcc.wisc.edu/manual/cover.html. Other useful formation documents can be found at www.uwcc.wisc.edu/info/i_pages/coopdev.html.
The process of forming a cooperative can be lengthy and arduous, but the rewards can be great when the cooperative business opens it doors and begins to provide service to its members. Leadership will be challenged to remain engaged and focused on tasks at each stage. Remember to bring in outside support as needed and to solicit advice from others who have already gone through the process of cooperative formation. The advice from others who have formed similar organizations can help you gain a better understanding of possible pitfalls as well as providing referrals to good advisors.
Is there enough interest to continue? Are there potential co-op members who are willing to serve in a leadership capacity?
This also serves as a tool to inform prospective members.
A key cooperative difference is the active involvement of its members. The potential members of a cooperative need to be clear about why they are forming and joining a cooperative. Possible questions to ask those at the exploratory meeting are as follows:
If vote is affirmative, elect a steering committee. The composition and qualification of the steering committee should be carefully considered as, often, the steering committee goes on to be the first board of directors.
This will identify major obstacles and opportunities for the cooperative along with an indication of the viability of the business. The steering committee often uses outside consultants or support people to complete this task.
Vote again on whether to proceed. This should be a major decision point The results of the feasibility study dictates whether the idea should be abandoned before too much time or money is expended. If the vote is to continue, another vote may be indicated on whether the steering committee should remain intact or whether changes should be made.
A typical business plan includes a description of the company, a market analysis, information on the co-op’s product or service, a sales/marketing plan, an organizational structure, and financial data (including projections). As appropriate, the steering committee should use technical assistance to formalize the business plan.
Vote on whether to proceed with incorporation.
Retain legal expertise if needed.
Good practice is to invite all potential members to ratify the bylaws. Elect a Board of Directors.
Assign responsibilities to implement the business plan.
During the organizational phase, potential members should be kept informed so that when the time comes to actually join the cooperative and “ante-up,” everyone is ready for action. This is another major decision point If the cooperative cannot obtain sufficient commitment as evidenced by membership and equity capital, plans to continue should be abandoned.
Virtually all cooperatives require member financing, usually in the form of membership fees (sometimes called stock purchases). This member financing provides equity for the cooperative and is the financial base that is leveraged to secure outside financing or investment. The business plan will contain a detailed strategy including the membership fee structure. The Board of Directors is responsible for implementing this strategy.
Sequence of Events