Some of the world’s most successful businesses are co-operatives. If you are planning on starting a business and are looking at a co‑operative model, here is a simple guide to setting up a co-op.
Is a co-operative right for you?
The co-operative model is flexible. It works in sectors across the economy and can be organised in a range of ways. It enables businesses large and small to thrive, gives the people closest to the business a stake in it, harnesses their ideas and as a result boosts productivity. It is a tried and tested business model.
- Co-operatives are businesses owned and controlled by their members, who can be customers, staff, suppliers, local residents or a combination of these stakeholders
- Members have an equal say in how the business is run
- Members choose what to do with profits, whether distributing among members, reinvesting in the business or giving to the community
Before deciding whether or not a co-operative is right for your business, you will need to consider the answers to two simple but important questions.
Do you want members to own and control the business?
A co-op is a member-owned business. The members may be employees, customers, suppliers or local residents, but this shared ownership is central to a co-operative’s existence. If you want to limit ownership to just a few people, even as the co-op grows, then a co-operative may not be for you.
Have you got a viable business plan?
A co-op must be a viable business. As for any business, most co-operatives will aim to bring in enough income not just to cover costs but to make a profit, with members deciding on whether that surplus is reinvested in the business, distributed among members or given to the community. You need to be sure that your co-operative will generate an income from the goods or services provided.
After reading this, is a co-operative for you?
If you want to check that your business plan has all the right ingredients in order for it to operate as a co-operative visit the Planning your co-op page.
If your business plan works but you are unsure about which legal structure your co-operative should take, use our Select-a-Structure tool.