How Do We Start A Co-op?

Although each cooperative undertaking has its own specific development path, the helpful online co-op resource, Co-opzone, www.coopzone.coop , has mapped out some basics, outlined below.

 The BC Co-op Assocaition has also crafted a primer on developing a co-op, available here.

Please contact us to find out more about local technical advisory services to help your co-op get started.

PHASE I - DEVELOP THE CO-OPERATIVE BUSINESS IDEA

Step 1: Assemble a group of interested people

* Identify the needs to be met:
- unavailability or instability of work,
- unavailability of certain products and services,
- poor quality of certain products and services,
- products and services that are overpriced,
- market development.

* Identify professional assistance needed to launch the business:
- legal consultant,
- co-operative developer,
- feasibility study, business plan and financial consultant,
- accounting consultant,
- others

Step 2: Conduct a pre-feasibility study

* Conduct a preliminary market review    
* Identify available technical and financial assistance  
* Assess receptiveness to the co-operative business in the local community  
* Evaluate if the co-operative is the best legal framework to use or if the kind of co-operative selected is the most suitable  
* Define the intended benefits of the co-operative for members, (eg. quality, price) and characteristics:
- products and services offered (consumers' co-operative)
- or products and services marketed (producers' co-operative)
- or salaries and working conditions (workers' co-operative)  
* Evaluate the project's potential to attract the minimum number of members required.

If this study is not conclusive, the group should re-evaluate its business idea. If this study shows that the planned co-operative is feasible, the group can proceed to the second phase.

PHASE II - CO-ORDINATE THE PRE CO-OPERATIVE'S ACTIVITIES

Step 3: Hold an organizing meeting

* Choose the corporate name of the co-operative and the location of its head office  
* Define the co-operative's mission (objectives, purpose)  
* Elect a temporary board of directors and secretary to the board  
* Officially submit an application for incorporation as a co-operative from the provincial ministry responsible for co-operatives or from Industry Canada, if you are incorporating federally

Step 4: Conduct a viability study

* Obtain financing for the viability study from such sources as:
- internal financing by the members
- special grant
- and/or negotiate a technical assistance or business start-up agreement with a specialized organization.  
* Define the strategic objectives  
* Evaluate the various strategic scenarios, production costs, and human, material and financial resources necessary  
* Evaluate the various start-up financing scenarios  
* Do a preliminary projection of budgeted statements and of a cash budget (revenues and expenditures, investments by members in share capital, partners, credit union or bank loans, grants).

If this study concludes that, although the planned co-operative looks feasible it would not be financially viable, the group should consider terminating the project. If the study shows that the new co-operative will be financially viable, the group can proceed to the third phase.

PHASE III - ORGANIZE AND START UP THE CO-OPERATIVE

Set up ad hoc committees to distribute the workload among the members of the temporary board of directors. For example:

* planning committee  
* training committee  
* committee to draft by-laws

Step 5: Organize the association

* Decide on the association's structure and define the various categories of members, if necessary (consumers, suppliers, workers)  
* Determine the roles and responsibilities of the various democratic bodies (general meeting, board of directors, committees)  
* Establish the articles and by-laws  
* Recruit members  
* Organize and offer a program to train members in the administration and management of a co-operative, the chairing and running of annual meetings (eg. "parliamentary procedure"), the operation of a committee or board.

Step 6: Organize the enterprise

Step 6.A: Plan the operation of the enterprise

* Draw up an organization chart of the enterprise  
* Do the operational planning for the first year of activities  
* Negotiate contracts for the supply of necessary products and services (inputs) and, as required, sales or marketing contracts (depending on the kind of co-operative and the nature of the enterprise)  
* Devise and implement an accounting system  
* Define the duties and responsibilities of each position  
* Develop a salary policy  
* Select and recruit the person to occupy the position of chief executive officer/general manager

Step 6.B: Plan and organize the enterprise's start-up financing

* Determine the value of the membership share to become a member  
* Determine the value of the share capital on start-up and during the first three years of operation (in terms of the expected growth in the number of members)  
* Prepare the preferred share by-laws (if applicable)  
* Prepare the loan by-laws (if applicable)  
* Draw up the overall financing plan for the first three years of operation  
* Draw up the business plan  
* Negotiate the capital contribution of external financial partners (if necessary); venture capital corporations, private funds or credit union investment programs  
* Apply for a government start-up grant (if they are available and if required)  
* Negotiate medium term credit union or bank loans and a line of credit

Step 6.C: Recruit and train the enterprise's staff

* Select and recruit employees (responsibility of chief executive officer, except in the case of a worker co-operative where recruitment decisions are usually made collectively)  
* Organize and offer a staff training program  
* Organize and offer a co-operative training program

Step 6.D: Ensure the legality of the enterprise's operations

Take care of the legal formalities and obtain the legal authorization necessary to start up the enterprise's activities:

* federal: employer numbers for government discounts, for GST/HST) for, Canada Revenue Agency   
* provincial: numbers for the provincial revenue department, for provincial tax  
* co-operatives may also have to register with, or be licenced by, other legislation or federal or provincial departments  
* municipal: municipal permit, employer number, etc.

Step 7: Hold the initial general meeting

* Adopt the by-laws  
* Adopt the business plan  
* Approve the co-operative's membership in a sectoral federation or an intersectoral interco-operative organization  
* Appoint an external auditor
* Elect the members of the board of directors, and of any other committees (if the general meeting has the power to do this)