How to start a cooperative?

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

#1. Identify the problem or opportunity and the broader interest.
A group explores the common need for a particular product or service and identifies a cooperative’s benefits. The core group reaches out to the larger community to measure the interest and define a common need. This group organizes informational meetings for potential members and uses these opportunities to recruit others with 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, the group will establish a committee of individuals. The committee further evaluates the cooperative business option by surveying potential members to determine the interest levels and possible 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 decision-making. The committee must consist of trustworthy individuals with good business sense who can put the group’s interests 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. The consultant must be knowledgeable about the particular business sector and have no vested interest in the study’s outcome. The first phase of a membership drive will be undertaken at this point so that seed money is available to pay for a feasibility study, consultants, and other related expenses. Other funding sources for a study might be available from existing cooperatives, government, NGOs, development banks, or not-for-profit agencies. The committee should share the feasibility study results with members or interested stakeholders and decide 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 a notary familiar with cooperatives should review them. The regulations specify basic facts about the coop. The initial bylaws, which describe how to govern the cooperative, may also be drawn up by the steering committee, acting as the interim Board. After that, statutes and bylaws must be adopted or amended by the cooperative’s members. Once the members establish the cooperative, the cooperative can open a bank account to deposit member equity payments and other funds.