Frequently Asked Questions
What is the first thing to do?
The first thing is to identify a small group of like-minded people who share a common vision for how a cooperative could improve their economic well being. Often the small group becomes the steering committee if the cooperative moves into the development stage.
This small group needs to carefully articulate what services the cooperative could provide. Once this has been determined, then the broader group of possible members must be identified and contacted. See the development list of things to do in the previous chapter for further information.
Who should be involved in forming the cooperative?
Successful cooperative formation is dependent on a core group of members who can work both individually and together. The size and composition of this leadership group varies with each cooperative, but getting the “right” people to the table in the beginning can greatly enhance decision-making.
In addition, technical advisors and other support people should be identified as early as possible.This group could include extension personnel, advisors from business support agencies, and private consultants. Invite them to attend meetings of the small group. Try to get them engaged as early as possible. This guide will help you identify these people.
Who would “run” the cooperative?
The answer depends on the situation. The overall responsibility for setting policies and overseeing the implementation of the business plan resides with the Board of Directors who are elected representatives of membership. Day to day operations are generally the responsibility of a paid employee of the cooperative.
Why do members have to invest in the cooperative?
Virtually all cooperatives require member financing, usually in the form of membership fees (sometimes call stock purchases). This member financing provides equity for the cooperative and is the financial base that is leveraged to secure outside financing or investment. If members are not committed enough to the cooperative to invest their own money, financial institutions and outside investors will see this as an extreme negative. A cooperative is owned by its members and owners of a business always have a monetary investment in the business.
Will my personal property be at risk?
Your legal responsibility differs depending on if you are a director of the cooperative or not. Cooperative directors are charged with the ultimate responsibility of operating the cooperative by acting in concert as a board of directors to set policy, oversee the cooperative’s operation, and make top-level decisions affecting the welfare of the cooperative and its members. Directors can be sued by other directors, by the cooperative’s members, by third parties, and can be sued or criminally prosecuted by agencies of Federal or State Government.
Member liability is generally limited to the amount invested in the cooperative. Members can minimize their risk by keeping informed, electing qualified directors and monitoring the performance of the cooperative. Remember the cooperative is your business.
What is a feasibility study and why do we need one?
A feasibility study ends with a written report resulting from a process that examines critical opportunities and obstacles that might make or break the cooperative. A synthesis of all the information gathered is used to give an opinion on whether the cooperative will be successful as a business. Critical issues addressed in the study include the interest level of potential members, market issues, operating costs, start-up costs, and availability of capital.
Because putting together a business plan is a significant investment of time and money, you need to make sure there are no major roadblocks facing your business idea—a feasibility study identifies these roadblocks.
Why form a Cooperative business?
Cooperatives operate for the benefit of member-owners. In a cooperative, those with similar needs act together and pool their resources for mutual gain. But the returns are not just monetary. Members ensure that their cooperative business provides the best quality products and services at the lowest possible cost. Members control the business through participation in their cooperative; they extend democratic practice into their economic lives. Learn more about cooperatives in our resource section.
In the United States, cooperatives account for nearly $654 billion in revenue, over 2 million jobs, $75 billion in wages and benefits paid, and a total of $133.5 billion in value-added income. There are an estimated 350 million memberships in cooperatives which generate nearly $79 billion in total impact from patronage refunds and dividends. Nearly 340 million of these memberships are in consumer cooperatives. These people have organized to provide themselves with goods and services in nearly every sector of our economy. Their cooperatives may be organized in a number of ways and for many purposes.
Keystone Development Center