Top 23 Business Cooperative Setting Tips

Business Cooperative Setting Tips: Cooperative businesses are voluntary organizations composed of people united towards a common goal.

These members participate and share in the traditional business functions such as training and providing services.

In exchange for their participation, they all receive a share of the business’s profits.

Cooperative businesses have become increasingly popular in the United States.

Setting up a cooperative business is essentially similar to setting up any other kind of business.

Although a cooperative typically requires more planning at the outset for it to be successful.

Business Cooperative Setting Tips
Business Cooperative Setting Tips

Business Cooperative Setting Tips

1. Talk to potential leaders and members.

If you have the idea for a cooperative business, get together a small group of like-minded people who you think would be interested in working on the business with you.

Business Cooperative Setting Tips

2. Identify an economic need.

Like any business, your cooperative should be formed to meet a compelling economic need in your community. The more compelling the need is, the more likely your cooperative will be successful.

  • At its core, cooperatives respond to some need in your community, or exploit an opportunity that is available in your area. For example, you might want to start a co-op garden to provide fresh produce to people living in an inner-city community.
  • If you’re having trouble finding the need that your cooperative could address, consider connecting with a cooperative development program in your area.
  • Many nonprofit organizations and universities have programs or departments that are dedicated to cooperative development.

Business Cooperative Setting Tips

3. Schedule an initial meeting.

 Expect the initial meeting to consist mainly of a discussion of the advantages and disadvantages of a cooperative, and how the cooperative you have in mind could address the need or problem you’ve identified in your community.

  • If you’ve decided to start a co-op garden, for example, you might point out the lack of fresh produce in grocery and convenience stores in the immediate area.
  • The garden also would have important educational and environmental benefits for the people in the community, particularly children.
  • It may be a good idea to bring in an advisor or cooperative expert to talk during your initial meeting and answer questions anyone might have.
  • You’ll also want to discuss the basics of how the cooperative will be organized, what financial contribution (if any) will be expected, and create a general timeline to get the cooperative off the ground.
  • Keep in mind that it can take up to a year to get a cooperative up and running. One of the most important aspects of cooperative development is strong, well-researched plans. You also want to create a dynamic organization full of passionate, committed people.

Business Cooperative Setting Tips

4. Select steering committee members.

The steering committee will be the group of people who works on the business planning for the cooperative and its incorporation. The committee members thus should be people who have experience in business and law.

  • If at all possible, try to have at least one person on your steering committee who has previous experience developing or operating a cooperative. Their knowledge will be invaluable.
  • If you’ve already connected with a cooperative development program near you, they may be able to recommend someone who is willing to serve in this capacity.
  • You also want someone with general knowledge and experience in business start-ups and development, as well as an attorney or someone who has a broad understanding of business and corporate law.
  • Keep in mind that the members of your steering committee probably will end up being the cooperative’s first board of directors. Make sure those chosen are passionate and committed to your cause.

Business Cooperative Setting Tips

5.Hold follow-up meetings as necessary.

Over the course of your cooperative’s development, it’s important for all of your initial organizers, including but not limited to the steering committee itself, to meet frequently.

  • You can plan on sending periodic emails or other correspondence, but these are no substitute for everyone meeting in person on a regular basis.
  • During the planning stages, it’s important to ensure nobody feels they are left out of the loop. If anyone in your initial group loses interest or becomes alienated from the process, the co-op may fail.
  • Getting everybody together also enhances the democratic nature of co-ops and allows you to field ideas from diverse sources that may not otherwise be considered.


Business Cooperative Setting Tips

6. Conduct a feasibility analysis.

 A feasibility analysis is a broad term for a planning report, including member-use analysis and market analysis, that will ground the overall business plan for the cooperative.

  • The steering committee typically is in charge of conducting this feasibility analysis. Depending on the background and expertise of the committee members, they may want to bring a professional business analyst on board.
  • Cooperative development programs run through a university or nonprofit organization also can provide assistance and resources necessary to conduct a feasibility analysis.
  • The point of these reports is to determine the needs of potential members, the anticipated business volume, and where the cooperative’s goods or services would fit into the local market.
  • The feasibility analysis also should evaluate possible locations for the cooperative, and methods for delivering the co-op’s products or services to its members.

Business Cooperative Setting Tips

7.Outline the activities and purpose of the co-op.

After the feasibility study is complete, the steering committee will be responsible for drawing up a comprehensive business plan for the cooperative. One of the first parts of the business plan should describe what the co-op will do and why.

  • Primarily, you should use this section to describe the community need you have identified, and how the cooperative would address that need.
  • Describe the activities of the cooperative specifically, as well as its business objectives and how the two tie together.
  • For example, if you’re creating an agricultural cooperative, you would go into detail about the types of crops you planned to grow, the people who would help at various stages of production, and how the crops eventually would be divided among the members.
  • You also might go into detail about whether the crops would be available to the public, and the prices you’d charge to the general public versus members of the cooperative.

Business Cooperative Setting Tips

8. Identify managers and other key members.

The business plan should name and provide contact information for each of the members of the steering committee, as well as any other members of the initial group that will play a key role in the cooperative’s development.

  • In this section, you also should identify anyone who will play a significant role in the day-to-day operations of the co-op, including managers, directors, or foremen who will oversee production or the delivery of services.
  • If you have anyone selected – either as a member of the steering committee or otherwise – who will provide legal or accounting services to the co-op, they should be listed separately.
  • Provide background information about each of the people listed that is relevant to their position in the co-op leadership.

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Business Cooperative Setting Tips

9. Discuss pricing and market strategy.

One of the most important parts of the business plan is the discussion of how much the cooperative will charge for its goods or services, and how it will bring those goods and services to the people in your community.

  • Much of your content here will be based on the results of the feasibility analysis the steering committee conducted.
  • However, you also should plan on attaching the results of any feasibility or marketing studies you’ve completed to the business plan as well, making them a part of the overall package.
  • Provide information on how you plan to position your products or services in the marketplace, as well as any member recruiting strategies or marketing plans that have been devised.

Business Cooperative Setting Tips

10. Describe the co-op’s operations.

Cooperative businesses have diverse structures. Your business plan should lay out how you plan to run the cooperative, how decisions will be made, and who will be in charge on a day-to-day basis.

  • In this portion of the business plan, you will detail any manufacturing or service delivery plans you already have in place.
  • If these plans are still in development, explain what stage those plans are at and when you anticipate moving to the next stage.
  • If any equipment or land must be purchased to move your development forward, explain that as well and then include those costs in your section on funding.
  • Your operations section also should include any information about staff or training you plan to provide. If you’re using resources from a cooperative development project nearby, list the name of the cooperative development project and the resources they’re providing.

Business Cooperative Setting Tips

11. List funding requirements.

Start-up capital is one of the biggest hurdles cooperative businesses face. Your business plan needs a frank assessment of the cooperative’s financial needs, and how you plan to meet those needs.

  • If any of the initial members, or members of the steering committee, will be investing any start-up capital, this should be listed in your funding section.
  • If you have any fundraising plans, include an outline of those as well. For example, you may have decided to use an online crowdfunding site to raise money for the co-op.
  • You also may have evaluated loans from banks and other lending institutions, or grants from nonprofit organizations or government agencies, to meet your funding needs.
  • If you’ve decided to meet your funding needs by selling stock in your cooperative, explain your plan and how you anticipate setting up the offer. You’ll also need to describe any legal issues involved, such as securities regulations that might apply to your offer.

Business Cooperative Setting Tips

12. Include projections.

The ultimate goal of a cooperative, apart from advancing the values that motivated its creation, is to make money for its members. Your business plan should include conservative projections of how much profit the cooperative will make in its first years.

  • These projections typically will come from the feasibility analysis the steering committee conducted.
  • It’s important to keep your projections conservative, especially in your first years of operation. Keep in mind that most cooperatives do not make a substantial profit in their first years.
  • Your projections also will depend on the type of co-op you’re trying to set up. For example, if you want to set up a co-op garden in an inner-city neighborhood, substantial profit may be secondary to other community benefits such as education and investment in the community and its people.

Business Cooperative Setting Tips

13. Select a unique name.

If you intend to incorporate your cooperative, you must come up with a unique business name. Check with the secretary of state’s office in the state where you plan to open your cooperative.

  • The secretary of state typically will have a business name database. You also may be able to search this database from the secretary of state’s website.
  • Check your state’s regulations regarding what words must be included in your name. If you’re incorporating, the name must be followed by “Inc.”
  • Your state also may require you to include the word “cooperative” in your business’s name. Even if it isn’t required, it makes good business sense to include it.
  • Keep in mind that your name must not only be unique, but also not similar to the name of any other business in your state.

Business Cooperative Setting Tips

14. Hire an attorney.

Unless you already have an attorney on the steering committee, or otherwise involved in the formation of your cooperative business, you typically want to hire one to help you draft your corporation documents.

  • Keep in mind that corporate law can be fairly complex, and the procedures differ from state to state.
  • If you already have an attorney on your steering committee, they can complete the paperwork the co-op will need.
  • However, if you need to hire someone, try to interview two or three attorneys. Make sure the attorney you choose has the approval of the entire steering committee.

Business Cooperative Setting Tips

15. Draft the articles of incorporation.

The articles of incorporation is a legal document that formally organizes your co-op as a corporation. This document must be drafted with specific sections established by your state’s law.

  • If you’ve decided not to hire an attorney and don’t have one working with the co-op, you may be able to find a form or template online that you can use to draft the articles of incorporation.
  • Since state laws differ, make sure any form or template you use is approved for use in your state.
  • Generally, the articles will establish the name, location, and purpose of your cooperative and its date of incorporation.
  • It also will list and identify the roles of the incorporators – typically the members of your steering committee.

Business Cooperative Setting Tips

16. Create bylaws.

The bylaws are the organizational rules by which your cooperative will operate, including the procedures by which you will make and implement decisions. Your state’s law may dictate particular issues that must be addressed in your bylaws.

  • Keep in mind that while bylaws are not required by law, if you do have them they must comply with the guidelines established in your state’s corporate law.
  • This document essentially describes the rules by which your cooperative will run. This includes membership duties and requirements, responsibilities of various board members or other management roles, and operating procedures.
  • You also may include rules related specifically to board operations, including when various reports are due, how a board member can be removed, and how issues can be put to a vote.
  • The steering committee will need to meet to approve the bylaws and vote on the corporation’s first board of directors. Typically these individuals are drawn from the steering committee itself.

Business Cooperative Setting Tips

17. Register with the state.

You must register as a corporation in the state where your cooperative will be doing business. This typically includes filing your articles of incorporation with the secretary of state and paying incorporation fees.

  • The specific process for doing this varies among states. Typically you must file the articles of incorporation with the secretary of state and fill out state registration forms containing basic information about your business.
  • You also must choose an agent for service of process, who will be listed on these registration forms. Most corporations list their attorney as their agent for service of process.
  • When you file the articles of incorporation and other forms, you’ll have to pay registration fees. These fees vary greatly among states, and may be anywhere from several hundred to a few thousand dollars.

Business Cooperative Setting Tips

18. Get an employer identification number (EIN).

An EIN is a tax identification number. Your co-op will need a tax ID number to open bank accounts in the co-op’s name as well as filing state and federal taxes on behalf of the co-op.

  • You may technically need to get an EIN before you register with the state as a corporation, if the state expects you to include this number on your incorporation documents.
  • You can get an EIN instantly after answering a few questions on the IRS’s website. The IRS never charges a fee for this service.
  • The online service is only available Monday through Friday from 7 a.m. to 10 p.m. Eastern time.
  • Once you complete the online form, the online service will instantly generate your cooperative’s EIN. You’ll also receive confirmation through the mail.

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Business Cooperative Setting Tips

19. Open bank accounts.

To do business, your cooperative will need its own bank accounts in the name of the corporation. You may want to shop around to determine which bank is best, since some give discounts and other incentives to cooperatives

  • The bank accounts should be in the name of the cooperative, using the cooperative’s EIN.
  • If you plan to have employees, you probably will need a separate payroll account in addition to an operating account. Otherwise, you typically only need a single operating account.
  • Decide who will have access to which accounts, because they will have to complete signature cards to have on file at the bank.

Business Cooperative Setting Tips

20. Apply for licenses and permits.

Depending on the type of work your cooperative is doing, you may need to obtain state or federal licenses and permits before you begin operations. You also may need to have your facilities inspected by regulatory agencies.

  • For example, if you’re starting an agricultural co-op, you’ll need a federal agricultural permit, in addition to any state or local licenses or permits – which will vary depending on the type of operation you have and the level of production involved.
  • You also may need to get health and safety inspections, particularly if you plan on serving food for consumption on site.
  • Various manufacturing, production, and retail environments also may require federal inspections for worker health and safety.
  • If you’re not sure what state permits or licenses you might need, you can find out by visiting the website of the federal Small Business Administration (SBA).
  • There you will find a page with links to each state. Clicking the name of your state will bring up a list of all the licenses and permits required.

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Business Cooperative Setting Tips

21. Create a membership application.

Membership in a cooperative is voluntary, and typically is open to anyone in the community who wants to take part and is willing to take on the responsibilities of membership.

  • You’ll want to work with your steering committee to determine the criteria for membership. For example, many cooperatives require members to live in the same county as the one in which the cooperative is located.
  • Other cooperatives require members to live within a certain mile radius of the cooperative’s location.
  • You also may require cooperative members to work at the co-op a certain number of hours a week or month, or to pay a certain amount of dues each month in lieu of working.
  • On the application, you’ll need to include space for whatever information the cooperative needs about each member, including name, place of residence, and contact information.

Business Cooperative Setting Tips

22. Establish a social media presence.

Regardless of what other advertising and marketing strategies you have, social media is a quick and inexpensive way to connect with the community and get the word out about your cooperative.

  • You can create social media accounts for the cooperative free of charge – although typically you’ll have to pay for advertisements or to promote specific posts.
  • Encourage everyone involved in building the cooperative to “friend” or “follow” the cooperative’s social media accounts, and to ask their friends to do so as well.
  • Use these accounts not only to share information about the cooperative, but also to provide informative content based on the product or service your cooperative is providing.
  • If you’re not well-versed in social media, consider talking to a marketing or business professor at a nearby university. You may be able to get a student to work as an intern for the cooperative and create social media posts.

Business Cooperative Setting Tips

23. Hire employees.

If you plan to hire employees to work at the co-op on a regular basis, you probably want to make your initial hires before you officially open for business. That way you can complete full staff training before you begin full operations.

  • If you’ve found a cooperative development program near you, this is an opportunity to put their resources to use.
  • Most of these programs have extensive staff training programs available that you can adapt for your own employees.
  • They also typically have staff who will come to your co-op and give your new employees an introduction to the world of working at a co-op.

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