Your co-operative business model

By the end of this section, you will understand and be able to define each of the following for your co-operative:

  • Commercial activity
  • Member benefit
  • Social impact

A co-operative business model should have a combination of all three of the above elements. However, although these will be closely linked, you should be able to describe each in their own terms.

This isn’t the point where you determine what type of co-operative yours will be – this comes later on.


What is your commercial activity

Here you need to outline your outputs and inputs.

Regardless of why you are starting your co-operative, you need to set it up to make a surplus (even if you’re not intending to make a profit to share with members). Therefore, the outputs must generate more money than the cost of the inputs.

Your OUTPUTS

Your INPUTS

What goods and/or services you will be selling.

May include: products, specialist services, or, for knowledge-based enterprises, education or consultancy.

What you need to buy in order to produce your outputs.

May include: Goods, expertise, training, data.

You also need to describe processes:

  • How will your inputs become outputs? E.g. using machinery or other equipment.
  • How you will your business create value by making something that your customers will pay enough money for to cover the cost of your inputs.
  • How will your co-operative generate value for the foreseeable future?

Define your commercial activity

Using this Define your commercial activity template:

Work through the following:

  • Describe the outputs of the business: the products and services that will be sold; What are the inputs: the things you will need to buy to produce the outputs? Describe the processes by which the inputs become outputs.
  • Describe how your co-operative creates value: how it makes something that wasn't there before. Why don't your customers buy the inputs and do it themselves?
  • How will you ensure the continuing quality of your products and services, so that the business stays profitable in the future?
  • How will you develop your products and services so that they don't become obsolete?

What is your member benefit?

What do members get out of playing a part in owning and managing the business? Why would someone want to be involved as a member rather than just as a customer or an employee? How will you make sure that it is in members' interests that the business keeps trading?

Some examples of member benefit include:

  • A dividend on purchases made, or a share of the business profits
  • Access to more affordable or better quality goods or services
  • Access to goods, services or assets that might otherwise not be available, or a wider choice
  • Better terms and conditions than are offered by other businesses
  • Mutual support or solidarity
  • A sense of belonging and empowerment, by being involved in a democratic business
  • Opportunities for self improvement
  • Satisfaction or pride in the social benefits delivered by the co-operative
  • Achieving a common goal - changing the world!

    Define your member benefit

    Using this Define your member benefit template:

    Work through the following:

    • Who are the co-op's members and what transactions take place?
    • What are members’ mutual needs?
    • What is the benefit people receive if they are a member?
    • How will you ensure that continuing as a member is a better offer than leaving the co-operative or closing it down?

    What is your social impact?

    Social impact will have more or less significance depending on the type of co-operative you are setting up.

    • If your co-operative is to operate in a business-to-business environment then social impact will be less central to your business model than in, say, a co-operative that provides care to elderly people.
    • If social impact does not at first glance seem central to your business model, there will be other factors which will affect your social impact, such as your potential employees, suppliers and the area in which your business premises will be based.

    Regardless of the centrality of social impact to your co-operative, it is still important to consider it in your business plan. After all, ‘concern for the community’ is one of the seven co-operative principles on which your co-operative will be based and considering your impact will help your understand your business better.

    When defining your social impact, you will need to be clear on the following:

    • What it is
    • How it will be achieved
    • How you are going to measure it
    • You need to make sure you have mechanisms in place to measure these impacts and, potentially, report on these impacts. This might be information that’s of interest to your co-operative, and even your members and/or the wider public.

    Describing the 'community' in which your co-operative or community business will operate

    • Describe or define that community.
    • Describe how the need being addressed will impact this community.  Does it affect individuals, families, schools, the local economy etc.?
    • Estimate the size of the community in terms of population, geographical area etc. Within that community, what is the scale of the problem? 
    • If you draw on research to do this, cite your sources.
    • If you are setting up a business-to-business co-operative, or one where your social impact is not immediately clear, you might also think about the following potential ‘communities’:
      • Your supply chain Who will supply your goods and services? Who they are and how you relate to them will affect your social impact.
      • Your employees Issues such as satisfaction, remuneration and demographic profile will also affect your social impact.
      • Your business premises What is the area like in which you will be located? Or if you work remotely, any meeting space you will use. Your choice of location and how you interact with the wider area will affect your social impact.

    Describing the social output your business will deliver

    • What is the social output that your co-operative will deliver to the 'community' you defined above?
    • What positive impact will this community have?

    Measuring the social output

    What exactly are the outputs that will have the positive social impact that you intend?

    In order to substantiate your claim that your co-operative has positive social impacts, you will need to provide evidence of how these are achieved. Therefore you will need to:

    • Set targets for social outputs
    • Measure and record activity against these targets
    • Report the results (and possibly have those reports audited)

    This process need not be detailed or complex.

    How will you measure social impact?

    Some social outputs are easy to measure, such as qualifications gained or number of meals-on-wheels delivered. These are called hard outputs.

    If you are dealing in soft outputs, such as increased self-confidence or employee satisfaction, you will need to consider how you will measure and record them.

    In the world of social impact measurement, the following terms have particular meanings, which you will need to understand:

    • Social output: This is your social product, as described above, for instance, number of meals on wheels delivered, fundraising for a local or business-related charity, or prompt payment of small suppliers.
    • Social outcome: This is the effect that your social output has on the community.
    • Social impact: This is the difference that your social output makes.

    Examples of social output

    Social output

    Social outcome

    Social impact

    Number of meals on wheel delivered Number of meals-on-wheels clients getting adequate nutrition over a given period For example, if you did not deliver meals-on-wheels it may be that some clients would be catered for by carers, so it would seem that your service does not have such a great impact after all.  However, it now becomes clear that what your main social impact is respite to carers.
    Fundraising for a local charity  Amount of money raised for nominated charity The work that charity is able to do which would not have been possible without your donation
    Prompt payment of small suppliers Percentage of small supplier invoices paid within the term of the invoice Reducing cashflow problems for your small suppliers 

    Measuring other kinds of 'impact'

    Please note that there are other kinds of impact that do not count as social impact. For example, positive environmental impact (or reduced environmental damage). Your business will need additional systems if you want to monitor your environmental impact.  Use the same approach: set targets, measure progress, record, report and (optionally) audit. 

    For advice on measuring your environmental impact, visit the environment section within growing your co-operative which includes some useful tools and resources.

    What is your social impact?

    Using this Social impact template

    Answer the following:

    Social output: Describe the social output of your co-operative business or organisations; What targets will you set, or how will go about setting targets for social output? How will you go about measuring and recording progress against these targets?  You will need to consider how you will deal with the 'soft' outputs, as outlined above.

    Social outcome: What affect do you expect the social outputs described above to have on the individuals to which the social output is delivered?

    Social impact: What affect will these social outcomes have on the community as a whole?

    The information and tools in this section have been developed by our colleagues at the Co-operative Assistance Network.

    Updated: 26/03/2019