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Home > Business > Business Startup

How to Get a Business Cooperative Started

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A business cooperative is an enticing alternative to the standard capitalism model, offering a democratic management style, lower risk of debt, and other social and economic benefits. Cooperatives also give small-business owners more control over their organization and come with certain tax advantages.

In this article, we’ll define a cooperative business, offer examples of worker cooperatives, and discuss how to get a business cooperative started.

• What is a business cooperative?

Business cooperative examples

• Steps to starting a business cooperative

The takeaway

Business cooperative faq.

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What is a cooperative business?

A business cooperative (co-op), is an organization or enterprise owned by its members. While a traditional business serves the interests of investors, founders, or board members, a co-op services the interest of its customers or workers. Most co-ops are established to fulfill an economic need, such as providing products, services, or bargaining power that is otherwise unavailable to a certain group of people.

Business cooperatives come in many forms, such as housing co-ops, food co-ops, credit unions, and agricultural co-ops. However, many large corporations are also cooperatives, including Ace Hardware, REI, and Land O’Lakes dairy.

Here are some other well-known cooperatives in the US.

• Navy Federal Credit Union: The largest credit union in the US, serving military servicemen and government employees
• Alliant Credit Union: A credit union based in Chicago, Illinois, originally founded by employees of United Airlines
• Dairy Farmers of America: A marketing cooperative owned and operated by dairy farmers across the US
• Associated Wholesale Grocers: The nation’s largest food co-op, which supplies independent grocery stores across the country
• People’s Food Co-op: A Portland, Oregon-based food co-op with a focus on sustainability
• Berkeley Student Cooperative: A housing co-op for students of UC Berkeley

How to start a business cooperative

Since co-op founders usually organize cooperatives based on a specific need or problem, the first step in starting one is to identify that need. Once this is done, the group should take the following actions to officially establish the co-op:

1. Establish a steering committee.

A steering committee is a group of people that represents the members of the organization. This committee should create a timeline for coordinating the logistics of the co-op. They should also establish the co-op’s values and mission, as well as gauge the overall level of interest in the co-op.

2. Conduct a feasibility study.

Once the steering committee is established, the group should conduct a study to consider all possible challenges and obstacles the co-op might face. This study should look closely at opportunities for financing, operating costs, and other factors that influence the market.

3. Create articles of incorporation.

Every cooperative must have articles of incorporation and bylaws that govern the organization. These bylaws should be made by a legal counsel and can be changed and enhanced over time.

4. Draft a business plan.

Like a traditional business, a co-op should have a detailed business plan that guides the company as it grows. The plan should include a market analysis, a marketing plan, product research, and a description of the co-ops goals and objectives.

5. Get financing.

Most co-ops need cash flow for day-to-day operations. This cash often comes from member investments, but some co-ops use a business loan to finance their organization in the early stages.

6. Begin operations

At this point, the co-op can hire a manager and employees, secure a facility, and open its doors. It’s important for members to remain committed to and aligned with the goals of the organization to ensure long-term success.

A worker cooperative offers a number of benefits to small-business owners, including a democratic management style, less debt risk, and member dividends. To set up a business cooperative, a setting committee must conduct a feasibility study, establish articles of incorporation, create a business plan, and secure financing.

Would you like to learn more about starting a business cooperative? Check out Business.org for How to Start a Small Business: Must-Have Checklist to Spark Success .

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Some cooperatives are not designed to make a profit and instead operate at cost. If a cooperative does make a profit, the members who purchase goods or services generate that money. Those profits are typically returned to the members as a refund or put back into the organization.

Safety stock is a term used to describe the excess inventory business owners choose to keep in hand in the event of an increase in demand or supplier delay.

Here are the steps to starting a worker cooperative:

• Establish a steering committee.
• Conduct a feasibility study.
• Create articles of incorporation.
• Draft a business plan.
• Get financing.
• Begin operations.

A cooperative (co-op) is a type of business organization that exists to benefit its members rather than outside investors. The co-op is owned and run by the members, and any profits are divided among those members. Most cooperatives are organized to reduce costs, fulfill an unmet need, improve the quality of a product or service, or improve bargaining power.

What are some cooperative business examples?

There are many types of cooperative business organizations, including mutual insurance groups, credit unions, electrical power co-ops, housing co-ops, and retail co-ops, such as Ace Hardware or REI.

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• Business Templates
• Sample Plans

FREE 10+ Co-operative Business Plan Samples [ Ecological, Food, Arts ]

Cooperatives need a working business plan in order to maintain their operation and to bring in more profitable client progress . A cooperative business plan is a systematic approach to a favorable profit and loss turnout that sets the goals and objectives of the institution as well as the practical steps to realize them. Below are free Co-operative Business Plan Samples that you can download to get you started with your own cooperative business plan. Keep reading.

Co Operative Business

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Without a reliable and concrete plan, the cooperative will not progress and will not meet its goals as a simple small business investment that serves average-income workers of a particular community. The business plan should serve as a guide to the undertakings of the cooperative and will redirect the business administration according to what’s stated in the plan. Hence, the cooperative should be written in a clear and informative manner. Below are the salient parts of a cooperative business plan.

The executive summary includes everything that a reader or a prospective client should know about the business. It comprises an overview of the coop’s humble beginnings and goals. This part also contains, most importantly, the mission, vision, purpose, and values that the cooperative wants to uphold. 

The operational plan that keeps the manpower of the coop moving follows certain standards and methods of evaluation to be followed properly. This section provides the identification of materials and human resources to carry out the tasks of specific designations. 

This section of the plan analyzes the existence of the coop’s natural environment external to its organization. External factors such as the weather of the locality at which it operates and the kind of residences living nearby are key factors of its failure and success because it is from this environment that potential customers and clients are made. Other external factors that affect the operation of the coop are the legal, political, and social environment. 

This part discusses how to reach out to prospective customers and how to promote the product and services of the cooperative. Whether the coop’s nature of business is anchored more on retail business or wholesale , promotional works can be implemented to increase profit. 

The production plan and structure of the cooperative depends on what kind of profit-making institution it is. If it is anchored on manufacturing and fabrication, several factors should be considered such as the location and limitation of land area to conduct operations. A considerable amount of budget for capital will be allocated to the equipment required to mobilize operations of this kind of cooperative. 

An individual or organization who buys the products and avails the services of the cooperative for a sum of money. They are either members or nonmembers of the cooperative and members usually have privileges to discounts.

These are monetary returns of the cooperative’s investors and the amount of return depends on the invested items or products or preferred stocks. In the US, dividends from many state-owned cooperatives are limited to an annual rate of 8%.

Capital stocks that have a specific dividend rate. It is preferred over other stock dividends and refunds to members of the cooperative. It is a type of equity capital that is different from other dividends paid by the board members and other stakeholders. These stocks are also the kind that other members can buy from stockholders at a defined amount of money by the regulations and by-laws of the cooperative.

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4.2 Create your business plan

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Are you ready to write your co-op's business plan? We provide advice on the best approach, links to a template plan, and a brief overview of each section you might need to include.

It's worth understanding that all business plans are different – like all  businesses  are different. 

You can use a template as a guide, but don't feel wedded to it. Make it work for your needs. 

Writing your business plan

Feasibility studies determine whether to go ahead with the business or with another idea. Business plans are designed after the decision to go ahead has already been made and provide a roadmap for this work.  

Make sure you have  completed a feasibility study before you start on your business plan. 

How do I start?

• Getting past a blank piece of paper is the most difficult and important part of the whole process.  It does not matter how poor your first draft is, just start writing! You can refine it later
• Get advice and keep asking questions. You do not have to take on every piece of advice. But if someone you know asks a question, it's worth thinking about how to answer it. They may think of something you haven't considered
• Every time you find something worth putting in the business plan, add it in

How much detail?

• Business plans should be meaningful documents and only include relevant information. Seventy page business plans may look impressive but nobody will actually read it, so it becomes no use at all
• For each part of the business plan, create a resource folder which contains all the information that backs up your plan. This might be market research, quotes, work flow diagrams, etc. You can refer to these when you need them, but they don't need to be in the main document

Financial projections

Financial projections are a key part of your business plan. They help your reader understand how you have calculated the investment your business needs, how you're sourcing this finance and your projected income and expenditure

What do I need to include?

Projections for three years are usually sufficient for a start up business plan. You will need:

• Financial projections – you can use these templates
• Assumptions – what evidence do you have that your projections are accurate?
• Scenarios and contingency plans – what will you do if things are worse (or better) then you expected?

What investment do you need?

As part of the business planning process you should have carried out a feasibility study . The investment requirement analysis that you did as part of your feasibility study will inform what investment is needed. 

If you haven't done this yet, you will need go back and do this before you can complete your financial projections.  Go back to feasibility study .

Ready to write your business plan?

Download a template and jump straight in – try this one from gov.uk .

Financial projection templates

Download and complete this financial projections template, which acts as the second 'half' of your business plan.

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Co-op 101: how to start a co-op.

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Are you wondering how to start a cooperative or if a co-op is right for your business? There are a lot of steps to starting a cooperative and factors to consider throughout the process. We’re here to help you get started. In this guide to starting a cooperative, we’ll provide an overview of how to organize a co-op and what you can expect. If you determine the co-op model is the right fit, you’ll be ready to commit to a rewarding and empowering business venture.

What Is a Cooperative?

A co-op, or cooperative , is a user-controlled, user-owned enterprise. It is a type of corporation . People voluntarily form a cooperative together to meet common needs and benefit from the products or services of the cooperative they create. For example, a grocery co-op is owned by the people who shop there.

Cooperatives are open to anyone who is willing to accept the terms of membership. They are fully controlled by their members, and members equally contribute to the capital. The profits of the co-op are distributed among the members or re-invested in the company.

Members have an equal say in the business of the cooperative. Unlike other types of corporations, where shareholders have more say if they own a higher percentage of the company, all co-op members follow the principle of “one member, one vote” which carries equal weight. Equality is one of the core values and founding principles of a co-op. A co-op will usually have a board of directors to run the co-op, set up policies and make sure the co-op stays on track. The members of the board are members of the cooperative and are usually elected by vote. The board of directors makes decisions based on the votes of regular members.

A cooperative can be created in any industry and can be any size. Cooperatives are commonly found in agriculture, grocery, healthcare, housing, financial services and utilities. One in three Americans is a member of a cooperative.

Should Your Business Be a Co-Op?

If you’re interested in starting a new business or changing the structure of your current business, there’s a lot to consider if you’re thinking about setting up a co-op. As with any business, you want to make sure the cooperative model suits your vision best before investing your time and money. Here are some reasons a cooperative might be right for you:

• Stability: According to the W.E. Upjohn Institute for Employment Research, employee-owned businesses are less likely to reduce employment during a recession . This helps companies like cooperatives make it through economic challenges. Employee-owners help increase profits as well. A Rutgers University study found that businesses that switch to employee ownership see profits increase as much as 14 percent .
• Democratic control: If you want your business to be run by its members rather than controlled by investors, a co-op might be right for you. With a co-op, no one has a greater say than the other person.
• Lower startup costs: A cooperative may be an appealing option for those who require lower startup costs. With a cooperative business, every member contributes to the capital and provides support.
• Benefits to the community: Co-ops are an excellent option for businesses that want to serve their community. For example, co-ops may obtain products or services that would usually be unavailable in the community or would otherwise be unaffordable. Co-ops also contribute to the economy of the local community. Overall, the focus of a cooperative is to benefit its members, instead of delivering profit to investors.
• Worker engagement: Employees are more likely to be engaged with a company they own and benefit from. They are also more likely to be committed to the quality of service and products they provide because they will want to see their company succeed.
• Tax advantages: Like other businesses, cooperatives face tax rules, but they can also reduce their tax burden in ways other corporations can’t. For example, a co-op can issue patronage dividends which can be deducted from the cooperative’s taxable income.

Despite the advantages, the cooperative model may not be the right fit for all businesses. Here are reasons why you may wish to reconsider starting a cooperative:

• Financing: Generally, cooperatives don’t attract large investors who want greater control of the company with more shares. It can also be tough for cooperatives to get loans from banks. However, that doesn’t mean financial assistance is unavailable for cooperatives. There are various funding opportunities to help co-ops get started, such as the Rural Cooperative Development Grant (RCDG) program  which supplies funding for development through cooperative development organizations around the country. A cooperative may also attract funding if a funder wants to promote the development of the community.
• Longer decision-making process: Cooperatives require time to make decisions because all members are part of the decision-making process. If you anticipate the need to make decisions fast, a cooperative may not be the best option for your business.
• Reliance on members’ involvement: Co-ops depend on their members’ interest levels and involvement. If members lose interest in the co-op and stop investing energy in the business, it can be hard to continue to provide benefits for members.
• Profits are disbursed among members: A cooperative spreads its wealth among its members. Therefore, the founding members of a cooperative business do not benefit more than others only because they started the cooperative. This may make a co-op an unattractive option for some business owners.

Steps to Forming a Cooperative

Like any business, starting a cooperative requires dedication and business know-how. If you are new to the business world, there are professionals out there to assist you throughout the process. Also, a cooperative is about its members, so you won’t be alone if you find people who want to join your mission and be part of your success.

Follow this step-by-step co-op startup guide to get an idea of what it takes to organize a co-op, and where to start.

1. Develop the Idea

A cooperative is a business that needs to make a profit to continue operating. You first need to know what you are going to sell or what services you plan to provide. Consider who will buy your product and if they will be willing to purchase your product or services at the prices you offer.

One way to develop a co-op idea is to identify something your community needs and how your business can fill that need. Are there certain products or services unavailable? Are some products of poor quality or overpriced? Research your community to determine if your idea will work. Plan to spend 3 to 6 months exploring your business idea.

2. Gather Members

You need to gather individuals who are genuinely interested in your business idea and who may want to become members of your cooperative. Hold a meeting with potential members and develop your mission and core values. Clearly define your business idea and describe how it’ll benefit the lives of the co-op members. Also during the meeting, choose the name of the co-op and its head office location.

3. Conduct a Feasibility Study

A feasibility study will help you determine if your idea is doable and will work well in your community. After you consider the results of the study, you can decide whether or not to continue with your co-op idea. If you decide to move forward, you can use the information from the study as the basis of your business plan. Here are components to include in your feasibility study:

• Preliminary analysis: First, consider if your product will serve the needs of your community. Also, ask if you can successfully compete with other businesses offering the same products or services. Lastly, identify any obstacles that may stand in your way of success. For example, can you acquire the capital needed for your business, or is it unaffordable? The preliminary analysis will illuminate the potential of your idea.
• Market survey: Conduct a market survey or hire an outside company to conduct the survey. Conducting a market survey is a crucial part of your feasibility study. You’ll review factors such as demographics and purchasing power in your community, and you’ll use the information to analyze competitors and potential customers.

You and other members might consider hiring a consultant to assist you with the feasibility analysis. It may be well worth the money to ensure you complete a thorough and accurate study because it can save you a lot of money and effort in the long run.

4. Incorporate and Create Bylaws

If you conclude that your idea is financially feasible, you can take the next steps with confidence. You’ll next want to elect a board of directors, incorporate your business and adopt bylaws.

You must incorporate your business if you want to be recognized as a corporation legally. A cooperative is a type of corporation. A corporation is simply the term used to describe a legal entity owned by a group of shareholders . There are many advantages to incorporating, such as:

• Protecting your assets against liabilities
• Allowing you to transfer ownership easily
• Receiving tax advantages

Not all cooperatives are incorporated. However, if you decide to incorporate, you’ll need to take the following steps:

• File articles of incorporation with your state: Articles of incorporation are documents your file with your state to legally record the formation of your cooperative. Articles of incorporation include information such as your co-op’s name and address, as well as the names and addresses of the board of directors. The exact document requirements vary by state.
• Write bylaws: Bylaws are the rules of your co-op. The board of directors establishes bylaws during the process of setting up a new company. Creating bylaws will be the step you take after your co-op is legally formed. You do not generally need to file bylaws with your state unless you are applying for non-profit status. Your bylaws should include information such as the name and address of the business, board member duties, and meeting and record-keeping procedures. Be sure to consult your state’s statutes to help you create bylaws. You might ask a lawyer to ensure your bylaws comply with the laws in your state.

5. Create a Business Plan

After you incorporate and create bylaws, it’s time to develop a detailed business plan. You can think of your business plan as a map that will show members and the board of directors which direction to take to reach common goals. Use the information you gathered from your feasibility study to help you write your business plan.

Overall, your business plan should include everything you and members need to know to run and grow the co-op. There is no right or wrong way to create a business plan as long as it meets your needs. Traditional business plans include the following:

• An executive summary which includes your mission statement and basic company information
• A description of the problems your co-op solves and the people it serves
• A market analysis describing trends in your industry, the outlook, what competitors are doing and how you’ll do it better
• Information about organization and management, such as who runs the co-op and how it’s structured
• A description of the products you sell or services you provide and how it benefits members
• How much funding you need and what you will use it for

6. Obtain Capital

The board of directors will be responsible for acquiring the capital needed to launch the co-op. You might raise money from members, local residents and lenders. You may also be eligible for government startup grants. Make sure you include how much financing you need and how you plan to obtain it in your business plan.

Once you have an adequate amount of capital, you’ll be ready to launch. Hire staff and teach them their duties and responsibilities as cooperative members. Open business doors and provide products and services to meet the needs of your members, and don’t forget to market your co-op. Lastly, remember to celebrate your journey and accomplishments.

Keys to Successful Cooperative Development

Various key elements will determine the success of your cooperative and its development. According to a cooperative development guide put together by the Cooperative Development Institute , the following elements are signs your co-op is off to a good start:

• Founding members are committed and motivated: Your co-op’s members will determine the success of the business. Without your members, the co-op can’t exist. The development of your co-op is more likely to be successful if the members are committed, motivated by your vision, involved in the process from the beginning and will benefit the most from the co-op.
• The project has strong leaders: Every project needs strong leadership to guide members and keep motivation high. If your project has leaders who are strongly interested in the success of the cooperative and are willing to contribute their skills, vision, and experience, you’ll be heading in the right direction.
• The vision is clear: You have to have a clear vision, so members know what’s expected of them, how to resolve issues, and most importantly, how to achieve goals.
• The business is well-planned: Planning is essential to the success of any business. Make sure you properly planned all the details of your cooperative and how it will operate. This should include market research.
• It’s financially feasible: You will need adequate capital to succeed. Founding members should be financially committed to the co-op. If you have the financial resources you need from the start, you’ll be able to grow.

Other tips for co-op success include:

• Stay focused
• Keep members up to date and involved
• Set realistic goals
• Use market research, rather than opinions, to guide decisions
• Identify and reduce risks
• Maintain open communication
• Invest in staff training and education
• Raise adequate funding

Join NCBA CLUSA Today

We hope we helped you learn the basics of starting a co-op. Starting any business is a complicated process that demands careful planning and consideration. It also requires the help of other individuals who are as dedicated to your mission as you are. At NCBA CLUSA, we are passionate about promoting the cooperative business model and Building an Inclusive Economy.

If you have more questions, we’re here to help. Browse our site to learn more about cooperatives and how we advocate for co-ops around the world or reach out to us so we can assist you. If you’re ready to join our mission to advance, promote and defend cooperative businesses, become a member today .

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Advantages of the Cooperative Business Model

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Cooperative Business Planning

This resource includes several templates for cooperative business plans from actual housing cooperatives in North America. Other references provided are a blueprint for the development process, of which the business plan is a part, and a cooperative business plan presentation given at the 2009 NASCO Institute.

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How to Adopt a Cooperative Business Model

• | September 9, 2020

Cooperative businesses can contribute to a more just, resilient economy. Here’s how companies are adopting cooperative business models.

Capitalism built around investor-owned companies is struggling to meet society’s needs. Nathan Schneider (University of Colorado Boulder) argues that cooperatives could do better.

Starting or running a business? A cooperative model might help you do it better.

While our economy keeps getting more efficient and generating more value, most people are getting a smaller and smaller portion of it. The investor-owned companies that dominate our economy are geared to maximizing shareholder value, more than pleasing customers, creating jobs, or benefitting society.

Cooperatives are a different way of doing business. They have been around since the 19th century, but many people aren’t familiar with them. They’re likely all around you, blending in with for-profit enterprises but serving a very different purpose.

In this article, I’ll describe what makes a cooperative and how you can build the principles into your enterprise. I’ll describe advantages and disadvantages and how cooperatives are being retooled for the modern era. These ideas are adapted from my 2018 book, Everything for Everyone: The Radical Tradition that Is Shaping the Next Economy .

What makes an enterprise cooperative

Cooperatives are based on the idea that those who use an enterprise — the members — should also own and govern it. Cooperative members decide to produce, how to do it, and what to do with the profits. The goal is to make businesses truly accountable to those they claim to serve.

A co-op’s members might be individuals, or businesses, or other co-ops. Cooperatives of any substantial size hire staff to manage the day-to-day, but for big decisions or board elections, the rule is one member, one vote.

As co-owners, members receive dividends from the enterprise’s profits, proportional to how much they have spent. Members can also choose to reinvest dividends to develop the cooperative.

The International Cooperative Alliance, an international non-profit, identifies seven principles of cooperatives. In addition to member control, these principles also stress voluntary and open membership – no discrimination – and concern for community. Cooperatives must aid not only their members but the broader society.

7 Principles of a Cooperative Enterprise, from the International Cooperative Alliance (design by Abby Litchfield)

Cooperatives aren’t all or nothing.

Businesses can also take partial inspiration from the co-op model. For example, Employee Stock Ownership Plans (ESOPs) give employees an ownership stake in the company. Trusts are another strategy; they can hold some or all of a company’s stock on behalf of certain beneficiaries, such as its workers, or in service of a social purpose. 

Many emerging business models draw on the co-op idea; while they aren’t formal co-ops per se, they can still gain some of the benefits. In my recent work on the idea of an “ Exit to Community ” for startups, we’ve been exploring a wide range of models for shared ownership.

Cooperatives in practice

Globally, commonwealths are a major market force. The largest cooperatives generate about $2.2 trillion in turnover and employ about 10 percent of the world’s employed population. For example:

In Canada, the vast credit-union federation Desjardins is a cooperative bank.

New Zealand has the world’s largest cooperative economy as a percentage of GDP, thanks mostly to hulking dairy co-ops .

Smart—originally, Société Mutuelle pour Artistes —organizes 80,000 workers in 9 European countries to provide employment support services.

When Argentina’s economy collapsed in 2001, workers took over factories that owners tried to close and started running them for themselves.

The case for a cooperative business model

Cooperatives have advantages over investor-owned or purely for-profit companies. For example:

Cooperatives are innovative, often identifying a missing market . They’re a ground-up approach; traditionally, they have evolved when people have to figure out how to do what no one will do for them.

Cooperatives can have lower costs. Volunteerism and sweat equity reduce start-up costs , and co-ownership can mean lower transaction and contracting costs. When people trust each other as co-owners, they can cut fair deals more easily.

Cooperatives have greater trust and loyalty from customers. Customers see cooperatives as providing higher quality products and more worker and community benefits.

Cooperatives are more resilient. They have a lower chance of failure , especially after the startup phase, and greater resilience in downturns (likely due to shared sacrifice and greater risk aversion). 

Today, as digital firms dominate the economy, the democracy of cooperatives has even more appeal. It can provide safeguards around data privacy and labour conditions , both under threat.

Limitations of cooperatives

Cooperatives have disadvantages as well. Raising capital is a challenge in an economy designed for investor ownership. Lenders and investors expect businesses to be owned by a small group of founders, not a community of members; we need policies that can change that.

Cooperatives can become stuck in their ways. Investor-owned businesses attract investor-owners by promising to exceed expectations; co-ops tend to attract members by meeting known, day-to-day needs. We need to ensure that the co-ops have built-in incentives not just to meet member needs but to help prepare members for uncertain futures.

A new generation revives cooperatives

Over the years, many large, established cooperatives – like credit unions and mutual insurance giants — have lost the kind of member involvement that they had at their founding. They have low member turnout in board elections, for example. They’ve also often become conservative and hesitant to adopt new ideas. Some organizations, like We Own It , are organizing co-op members to re-activate their democracy.

Newer cooperatives often have different goals than their predecessors. They want go beyond serving their members to do good in the broader world. They can adopt complex, multi-stakeholder ownership structures to address complex challenges; many new co-ops, for instance, have separate member classes for workers, users, founders, or outside investors. Co-ops increasingly view themselves as social entrepreneurs and secure B Corp certifications, based on metrics of social impact.

Modern cooperatives

Two cases show the more modern cooperative approach.

Brianna Wettlaufer, an executive at image provider iStock, was frustrated that the imperatives coming from the company’s investor-owners required her to keep payments to independent artists. She left iStock and founded Stocksy United . It’s an artist-owned cooperative, where 50%-75% of all licenses go directly into contributors’ pockets. Stocksy presents its value proposition: “The sense of community and ownership felt by our members drives a greater level of passion into their work, resulting in inspired imagery of the highest quality.”

Namaste Solar is a worker co-op solar utility company based in Colorado. By combining and connecting different co-op models, the founders of Namaste have achieved both a successful local business and national-scale impact on their market. Namaste organizers created Amicus Solar, a purchasing co-op that allows other small solar utilities across North America to buy equipment together, dramatically lowering costs. Namaste has also spun off the Clean Energy Federal Credit Union to assist with financing.

Be part of cooperative change

Cooperatives provide an imaginative, exciting, possible future. In my Media Enterprise Design Lab at the University of Colorado, we explore some of the ways that cooperatives are evolving. Check out our work – and share your ideas for an economy that better addresses society’s needs.

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How to Form a Farmer's Cooperative Business Plan

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How to Set up a Co-op Store

How to write a farm business plan, how to become a cigar distributor.

• The Structure of a Cooperative Organization
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Increased bargaining power and the opportunity to reach more markets makes a cooperative a lucrative idea for small farms. When it comes to preparing the business plan, co-op plans differ from those of other organizations in that the focus is about providing for the needs of the members rather than making a profit as a whole. The plan should include several key components that show your group has studied the market and is in agreement on the types of services the cooperative will provide.

Executive Summary

The executive summary appears at the beginning of your plan where it briefly explains the background and experience of each farmer involved in the co-op. Describe the legal nature of your cooperative and explain how decisions are made, such as requiring a vote by all of the members for major decisions. List the goals of the group in forming the organization, including reaching out to retail markets or accessing corporations that buy large quantities of farm goods.

Explain the services your cooperative plans to offer, such as providing training to help farmers better understand potential markets. Some co-ops provide immediate payment for delivery of products so the members can put the money right back into their farms. Or you may provide transportation to get products to market or high-quality storage spaces that members would not have access to otherwise. Since your co-op likely consists of farms that grow or raise similar types of products, explain how you need the selling power of the group as a whole to find better-paying markets that want larger quantities than individual farmers could produce.

Describe the branding your cooperative plans to use to develop a name and reputation in the marketplace. Explain the types of companies you plan to approach. For instance, a co-op made up of hay farmers may want to approach overseas markets that need large volumes of hay for their livestock. Explain how the co-op plans to differ from individual farms, such as by accessing wholesalers and restaurants that would be difficult to reach by single farmers. Provide details on the marketing, promotions and advertising activities needed to make your buyers aware of the products you provide as a cooperative.

Typically, the founding members lead a cooperative with legal, technical and financial consultants brought in when necessary. Explain who will monitor the business and marketing plan the cooperative creates to make sure all of the farmers are on target and participating in the manner originally planned.

The financial section explains how much cash each member will contribute to fund the cooperative. Outline the types of stock or certificates to be given to each farmer who becomes a member. Explain how the money invested will pay for facilities and marketing efforts as part of the co-op’s mission to provide services to the members that help them increase their profits.

• Oregon State University Small Farms: Siskiyou Sustainable Cooperative, A Model for Cooperative Farming and Marketing
• University of Kentucky: Grower Cooperatives

Nancy Wagner is a marketing strategist and speaker who started writing in 1998. She writes business plans for startups and established companies and teaches marketing and promotional tactics at local workshops. Wagner's business and marketing articles have appeared in "Home Business Journal," "Nation’s Business," "Emerging Business" and "The Mortgage Press," among others. She holds a B.S. from Eastern Illinois University.

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MSU Extension Product Center

Starting a cooperative and developing a business plan: phase 2.

Questions about this information? Contact us . June 04, 2015

Updated from an original article written by Mark Thomas, Michigan State University Extension.

Having enough interest in starting a cooperative is just the first step, developing a viable business plan, when implemented, that meets the identified needs is the second.

In my first article on starting a cooperative I noted that the purpose of starting a cooperative was recognition of the need to solve problems or meet needs of the marketplace with goods or services. A steering committee should be formed to determine if there is data to support the feasibility of the cooperative. This committee should present its findings to potential members and let them make the decision to move forward with the development of a cooperative. The development of a business plan is then critical, as it will map out the necessary steps for a successful enterprise.

The feasibility study will lay the foundation for the business plan. It contains market information about the potential members’ usage and how a cooperative would differentiate itself from existing competition (if any). Additionally, financial viability and management expertise will be spelled out, as well as facilities needed and potential locations. Having this study prepared in an expert manner will insure the business plan is on solid footing s moving forward.

The business plan is a road map to launching a cooperative and will allow the Board of Directors to know where they want to be and how to get there. Having a professional who is familiar with cooperatives to assist with the preparation of the business plan is a good idea and can avoid and voids problems in the future. It should include the preparation of three years’ projections (pro-forma) of cash flow, operating statements and beginning and year-end balance sheets. These will be used to paint the picture of the capital needs and potential sources of funds to meet the asset needed. Additionally financial planning should include funding the operating until profitable.

The steering committee should study the legal aspects of cooperatives and have an understanding of the duties necessary. At this point employment of legal counsel to develop the articles of incorporation, specific to the State should be undertaken. They can also assist with bylaw development and they should be in sync with the purpose and scope of how the cooperative will operate.

The steering committee should now be ready to hold a fourth member exploratory meeting. It is essential to have a large turnout of the identified potential members. Direct contact, newspaper articles, web postings and any other method of “spreading the word” about the meeting should not be overlooked. The meeting is conducted to present the business plan to potential members. The business plan will tell the story of the potential cooperative. Why the steering committee supports the development and how it will benefit the community of interest at large should be spelled out. Financial details regarding membership investment requirements should leave no doubt in the minds of the potential members that their assets will be at risk.

With full disclosure of the information regarding the risks and possible returns of the cooperative, the potential members conduct a vote to continue or not. If the vote is in the affirmative, the cooperative can hold its first meeting at which two items of business need to be conducted:

• Approve the bylaws
• Elect a Board of Directors

Michigan State University Extension educators working with the MSU Product Center’s Michigan Cooperative Development Center can provide assistance with helping guide groups of potential cooperatives through this process. 

This article was published by Michigan State University Extension . For more information, visit https://extension.msu.edu . To have a digest of information delivered straight to your email inbox, visit https://extension.msu.edu/newsletters . To contact an expert in your area, visit https://extension.msu.edu/experts , or call 888-MSUE4MI (888-678-3464).

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How a Cooperative Business Works in the 21st Century

Learn about types of co-ops, advantages, problems, and taxation

• What is a Cooperative Business?

Types of Cooperative Businesses

Pros and cons of co-ops, how to start a cooperative business, cooperative businesses and taxes, for more information in your state.

 Mike Harrington/Getty Images

When you think of the word “co-operative,” you might think of a local food co-op, but there are many more types of cooperative businesses operating in the U.S. today. As some business owners and consumers look beyond traditional, capitalist ways of doing business, co-ops may provide one alternative. 

What is a Cooperative Business? 

A cooperative (co-op) is a business or organization owned by and operated for the benefit of its members. Profits or earnings are distributed among its members.The co-op can be a for-profit business or a non-profit organization.The co-op runs similarly to a corporation, because members purchase shares and elect a board of directors and officers. It differs from a corporation because typically each member gets one vote.   Members of a co-op can be individuals, families, businesses, farmers/ranchers, or manufacturers.   

The International Co-operative Alliance and National Cooperative Business Association  define a cooperative as a group of people with a specific need who work together to create a company to meet that need.

The cooperative movement dates back to the mid-19th century, but the concept goes back even further, to craft guilds, farmer organizations, and mutual insurance companies. The 21st-century cooperative movement has taken off with the growing emphasis on equality and concern about people and planet, in addition to profits (these three are sometimes called “the triple bottom line”).  

These are some of the many types of co-ops, formal and informal, in operation today: 

• Mutual insurance companies (most with the word “mutual” in their names) are owned by policyholders, rather than stockholders. 
• Credit unions are not-for-profit organizations that serve their members. 
• Rural electric power co-ops are private, not-for-profit organizations incorporated in 48 states to provide at-cost electric service to customers. 
• Consumer-goods co-ops , like REI Co-op (yes, that’s part of its name). The company, an outdoor outfitter, says that “more than 70 percent of our annual profits are invested back into the outdoor community.” 
• Producer co-ops , like Sunkist, owned by and operated for their member-growers. 
• Cooperative buying clubs, in which a group of households gets together to buy foodstuffs in bulk and divide the orders among the members. 
• Retail co-ops like Ace Hardware, which was formed in 1924. The company is still owned “solely and exclusively by the local Ace retail entrepreneurs.” 
• Community-owned businesses , such as the Nebraska Cooperative Development Center, which has helped communities in small rural towns start cooperative grocery stores. 
• Housing cooperatives are formed when people join to own or control housing and/or related community facilities. These co-ops are different from condo associations, in which each unit is privately owned and there is a common area owned jointly. 
• Youth co-ops are businesses incorporated and run by young people to give them experience with one type of real-life work model. They can be set up in a school or community center or another organization that supports youth. 
• Worker cooperatives are formed and owned by employee groups that generate profits for the company and its workers.

As demonstrated by the descriptions of several types of cooperative businesses above, organizing a group with a common business purpose in this way can pay off. Positives and negatives can include:

Lower costs by buying in bulk

Common protection from loss (mutual insurance companies)

More price power for sellers when joining together (like Sunkist)

Equal say in the business for members

Shared values. Many co-ops (like REI) value more than just making a profit

Tax advantages for co-ops organized as non-profit businesses

Less opportunity for outside investors because they can’t gain control

Lack of interest by members over time

A co-op can be as simple or complex as you want. You can decide to start a co-op like a food buying club just by getting together with other families to order and distribute food. As you grow beyond this small group, you should form a cooperative business in your state.   

Business Type. You’ll need to decide on a business type (corporation, partnership, or LLC) and register your business with a state .  

Some states have regulations specifically for cooperatives ( New Mexico,  for example.) In some states, you must be formed under co-op status to use the word “cooperative” in your name. 

You’ll need to do all the other tasks involved in forming a corporation , partnership,  or LLC, including electing a board of directors to oversee the operations. 

If you want to be non-profit (exempt from income tax), you first form the business, then apply for tax-exempt status. See IRS Publication 557,  “Tax-Exempt Status for Your Organization,” for details. 

The overall philosophy of cooperatives is that they are intended to operate at cost, so there’s no “profit,” and the patrons (those doing business with the co-op) receive net earnings on an equitable basis.   

The IRS allows several different federal income tax options for cooperative businesses. One variation is exempt from tax and another is subject to tax. 

The federal tax agency considers cooperatives exempt from federal income taxes if they meet certain qualifications. To qualify for and maintain exemption (Internal Revenue Code 501(c)(12)), the cooperative must:  

• Be organized and operated as a cooperative
• Conduct business as set by the tax code and IRS regulations

It must receive 85% or more of its income each year from its members and use the income solely to meet the cooperatives’ losses and expenses. 

Taxes for cooperative businesses are complicated and getting non-profit status from the IRS is not for amateurs. Get help from a tax attorney if you want to form a cooperative business. 

A Subchapter T cooperative is subject to tax. This co-op type may conduct any kind of business. Members or patrons (those doing business with the co-op) can be individuals or organizations. The co-op returns margins (net earnings) each year to users as patronage refunds, based on the amount of business each user does with the co-op. The tax is paid by the cooperative on a temporary basis; it receives a deduction when the money is passed on to the patrons.  

The National Agricultural Law Center has a state-by-state list of Business Organization Forms and Filing Instructions that could be helpful. Also, the National Cooperative Business Association has a spreadsheet (Excel download) showing the cooperative business regulations in each state.  

Small Business Administration. " Choose a Business Structure ." Accessed March 24, 2020.

Cornell Legal Information Institute. " Cooperative ." Accessed March 24, 2020.

Cooperative Directory Service. " Coop Directory Service ." Accessed March 24, 2020.

U.S. Department of Agriculture. " Income Tax Treatment of Cooperatives ." Page 2. Accessed March 24, 2020.

IRS. " General Survey of IRS 501(c)(12 Cooperatives and Examination of Current Issues ." Page 177. Accessed March 24, 2020.

Business Cooperatives

A business cooperative, also known as a "co-op," is an organization owned and operated by a group of individuals who come together to achieve common economic goals.  

These goals may include purchasing supplies or services, marketing their products, or providing employment opportunities. Here is a breakdown of co-ops to decide if this is a good option for you and your business. 

Benefits of Starting a Co-op 

• Shared Ownership and Decision-Making: Co-ops are owned and governed by their members, which means that each member has an equal say in the decision-making process. This democratic structure ensures that all members have a voice in shaping the direction and policies of the co-op. 
• Economic Benefits: Co-ops aim to provide economic benefits to their members, such as lower costs for inputs or access to markets that might be difficult to reach individually. By pooling resources and leveraging collective bargaining power, co-op members can often achieve economies of scale and negotiate better deals. 
• Risk Sharing: In a co-op, the risks and rewards are shared among the members. This can help reduce individual financial risk and create a supportive network where members help each other overcome challenges. 
• Long-Term Sustainability: Co-ops tend to have a long-term focus, prioritizing the needs and goals of the members and the community over short-term profits. This can lead to more sustainable business practices and a greater sense of social responsibility. 

Steps to Start a Co-op 

• Identify the Need: Determine if there is a demand for a co-op in your industry or community. Research and gather a group of interested individuals who share the same goals. 
• Feasibility Study: Conduct a feasibility study to assess the viability of the co-op. This study should analyze the market, financial projections, legal requirements, and potential challenges. 
• Develop a Business Plan: Create a detailed business plan outlining the co-op's goals, structure, operations, marketing strategies, and financial projections. This plan will serve as a roadmap for the co-op's development. 
• Legal Structure: Choose a legal structure that suits your needs, such as a cooperative corporation, a limited liability company (LLC), or a cooperative association. Consult with an attorney specializing in cooperative law to ensure compliance with local regulations. 
• Membership and Governance: Determine the membership criteria and admission process for the co-op. Establish governance procedures, including how decisions will be made, voting rights, and board member elections. 
• Draft Cooperative Documents: Prepare the necessary legal documents, such as articles of incorporation, bylaws, membership agreements, and operating agreements. These documents outline the rights, responsibilities, and obligations of the co-op and its members. 
• Funding and Financing: Identify potential financing sources for your co-op. This could include member investments, loans from financial institutions, grants, or crowdfunding. Prepare a financial plan that outlines the capital requirements and how the co-op intends to secure funding. 
• Register and Comply with Regulations: Register your co-op with the appropriate government agencies and comply with legal and regulatory requirements. This may involve obtaining business licenses, tax identification numbers, and adhering to labor laws. 
• Operationalize the Co-op: Once all legal and administrative requirements are fulfilled, begin operating the co-op according to the business plan and cooperative documents. Develop marketing strategies, recruit members, and start providing products or services. 

Fiscal Responsibilities 

Co-op members typically contribute financially through initial investments, purchasing shares, or paying membership fees. Members may also be required to contribute capital based on their usage or patronage of the co-op's services. Additionally, members may share in any profits or surpluses generated by the co-op, which can be allocated based on the cooperative's bylaws or predetermined formula. 

Financing Sources for Co-ops

• Member Investments: Co-op members can provide initial capital through equity investments or by purchasing shares in the cooperative. 
• Loans and Credit: Co-ops can obtain financing from traditional lenders, such as banks or credit unions, by presenting a solid business plan and demonstrating their creditworthiness. 
• Grants and Funding Programs: Explore grants, subsidies, or funding programs specifically designed for co-ops. These may be available through government agencies, foundations, or other organizations supporting cooperative development. 
• Crowdfunding: Raise capital through crowdfunding platforms that allow individuals to contribute money in exchange for rewards or equity in the co-op. 

It's important to note that the specific steps, documents, and requirements may vary depending on your state and the type of co-op you intend to start. Consulting with legal, financial, and cooperative development professionals is highly recommended to ensure compliance with local laws and best practices for a co-op to be successful. 

The information provided on  www.onepercentforamerica.org  is intended for general informational purposes only. It should not be considered as professional advice or a substitute for seeking professional guidance.

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Nonprofit Recording Co-op Business Plan

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Gamehenge Tapers Co-op

Executive summary executive summary is a brief introduction to your business plan. it describes your business, the problem that it solves, your target market, and financial highlights.">.

Gamehenge Tapers Co-op is a not-for-profit organization that was created to serve the Portland tapers community.  The tapers community is a hobby based community that trades live recordings for personal use, never for commercial gain.  The Co-op will provide this community with the equipment needed to further the taping of shows which in effect supports the trading community as well (people who trade these live shows for personal consumption only).  The Co-op sells the recording equipment at wholesale prices + a low overhead percentage.  By offering the members heavily discounted rates, it encourages them to become more active tapers.  Because the organization is a not-for-profit co-op, members are willing to volunteer their time to help the organization allowing it to become successful.  The organization exists to support the trading community.

Membership dues and a small charge for overhead will allow the organization to cover costs associated with doing business and allow it to slowly grow. Gamehenge Tapers Co-op will be increasing their membership roster by at least 20% per year.

1.1 Objectives

The objectives for the first three years of operation include:

• To create a co-op whose #1 goal is to serve its members.
• To increase the membership base by 20% each year.
• To provide the Portland traders community with cost + overhead deals on CD-R media, microphones, CD-RWs and DAT recorders.
• To develop a sustainable co-op.

1.2 Mission

Gamehenge Tapers Co-op’ s mission is to serve the Portland tapers community.  We exist to attract and maintain customers.  When we adhere to this maxim, everything else will fall in to place.  Our services will exceed the expectations of our customers.

Organization Summary organization overview ) is an overview of the most important points about your company—your history, management team, location, mission statement and legal structure.">

Gamehenge Tapers Co-op is a co-operative organization designed to serve the Portland tapers community.  The tapers community is a hobby based group that records and trades live concerts.  All of the bands that allow live recordings are “live” or “jam” bands who incorporate improvisation into their live performances so each performance is unique.  The group members trade these live performances for personal consumption, enjoying the unique attributes of each individual show.  Commercial use of these shows is strictly prohibited. 

The organization sells a wide range of equipment for tapers.  The equipment is purchased through normal wholesale distribution channels and sold directly to organizational members.  Membership is required for entry to the co-op.  A $40 entry fee and proof of traders status (a list of your show list is usually sufficient) is all that is needed to become a member.  Products must be purchased through the web site and then picked up from the office at certain times throughout the week.  Questions regarding products can be answered via email or phone (typically voicemail with a return phone call).

2.1 Legal Entity

Gamehenge Tapers Co-op is a 501C not-for-profit co-operative organization.

2.2 Start-up Summary

Gamehenge Tapers Co-op’s start up costs include:

• Desk, chair and file cabinet.
• Computer with printer, CD-RW, and internet connection.
• Legal fees for formation of not-for-profit status including filing fees.
• Website development.

Gamehenge Tapers Co-op offers the tapers community the following products:

• CD-RW (Compact Disc ReWriteable) drives for computers, external units with USB, SCSI or Firewire connections.
• High quality stereo microphones for audience taping.
• DAT(digital audio tape) portable recorders.
• CD-R (Compact Disc Recordable) media.

Market Analysis Summary how to do a market analysis for your business plan.">

Gamehenge Tapers Co-op is a not for profit organization designed to serve the individual members of the co-op.  These members come from the Portland tapers community, a group of people who attend specific live performances and tape them for their personal consumption as well as for personal trading purposes. This is a very active community and intimate community.

Gamehenge Tapers Co-op will grow its membership through word of mouth promotions at the events.  Because it is an intimate community where most people know each other, it will be relatively easy to build up membership.  In addition to word of mouth advertising, Gamehenge Tapers Co-op will also have a web site that provides prospective members about the organization and its goals.

4.1 Market Segmentation

Gamehenge Tapers Co-op will be addressing the tapers community in the Portland area.  The taping community is made up of individuals that legally tape live concerts.  There are a handful of bands that allow taping of their live performances.  Generally, record labels discourage or ban taping of live performances because they believe that it infringes on profits from record sales.  On the contrary however, it tends to promote the band as there is an entire community that trades these shows, attends the concerts, and buys the records after they hear live performances of the band.

From a legal standpoint, the live performances are copyrighted, but the band nonetheless allows the taping.  The vast majority of bands to do not allow taping, it is only a few select bands that allow tapings. These bands are representative by the fact that they are very good live performers, they have a loyal following of people that tour with them and consequently these bands tend to play entirely different set lists each night recognizing the fact that there are people seeing several to many different shows in a row.

The bands that allow recording of live concerts are the remnants of the Grateful Dead (Phil Lesh & Friends, The Other Ones) remnants of Phish (Trey Anastatio and the Giant Country Horns), String Cheese Incident, moe., Blues Traveler, Dave Matthews Band, Medeski Martin & Wood, Tony Furtado, Bela Fleck and the Flecktones, Widespread Panic, Galactic, Government Mule, Greyboy Allstars, Karl Denson and the Tiny Universe, etc.

These bands have a loyal following, a very close knit community. This element lends itself to word of mouth promotion.

4.2 Target Market Segment Strategy

The strategy behind the market segmentation is solely based on word of mouth and web site visibility.  Because the taping community is so close knit, if you end up going to a couple of shows to tape, you will run into a large portion of tapers.  Everyone knows each other, and everyone trades show from their collection. Growing the membership list through word of mouth will be no problem.

Additionally, Gamehenge Tapers Co-op will operate a web site to  which will be used to attract new members.  The site however, will have far more content including ordering which is password protected for members only.

4.3 Service Providers Analysis

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4.3.1 Alternatives and Usage Patterns

The competition is regular retail outlets.  These take the form of mail order places, retail outlets, and e-commerce sites.  These competitors might offer a better selection, however, they will rarely compete on price because they are for profit organizations and Gamehenge Tapers Co-op is a not-for-profit.

The buying patterns of tapers are typically price sensitive.  Because the tapers are constantly using their equipment and tons of media, they are generally looking for the best price.

Strategy and Implementation Summary

Gamehenge Tapers Co-op will be aggressively using word of mouth advertising to generate new members.  The cost of this is minimal as the members are already at the concerts taping for their own collection already.

Gamehenge Tapers Co-op will have a web site that will be used to attract new members, however, the members gained from the site will pale in comparison to word of mouth promotion.

5.1 Competitive Edge

Gamehenge Tapers Co-op competitive edge is its co-operative business structure.  The organization is not-for-profit so all revenue gets funneled back into the organization.  The organization is set up to solely benefit the members.  The members benefit by being able to purchase equipment at drastically reduced prices compared to retail.

5.2 Fundraising Strategy

The sales strategy will be simply to increase membership.  Increasing membership increases buying power, reducing wholesale and overhead costs, benefiting members.

5.2.1 Funding Forecast

The first month will be used to set up the office and web site.  The office will be in a small space with low rental costs.  The web site will be designed to provide general information to the public and detailed product information regarding the products offered.  Members will only be able to purchase products via the web site and picked up from the office at certain times.

Month two will see an increase in sales and membership. The following months will see both membership as well as sales activity.

5.3 Milestones

Gamehenge Tapers Co-op will have several milestones early on:

• Business plan completion.  This will be done as a roadmap for the organization.  While we do not need a business plan to raise capital, it will be an indispensable tool for the ongoing performance and improvement of the company.
• Office set up.
• The 100th member signed up.

Management Summary management summary will include information about who's on your team and why they're the right people for the job, as well as your future hiring plans.">

Gamehenge Tapers Co-op was founded and led by Al Truistic.  Al graduated from the University of Vermont with a degree in business.  After college, Al spent the next five months on the road following the band Phish.  This was his first introduction to the taping scene.  After coming back home to Portland, Al got his MBA from the University of Portland.  

Al then entered the business world with a job at VersionTracker, an internet start up that provided software updates for Mac OS.  His love for taping never disappeared and continued to tape at all of the live bands that passed through Portland.  After numerous discussions with a lot of the Portland taping community, Al concluded that there was demand for a tapers co-op so he began investing his free time to pursue this goal.  

6.1 Personnel Plan

Al will be working part time for Gamehenge Tapers Co-op.  He will perform purchasing, order fulfillment and general management of the organization.  His wife Sarah will help out with membership and the financials.  These two positions are unpaid, volunteer positions. 

Web maintenance will be done by one of the members at a below market rates.

It is Al’s and Sarah’s plan that once they get things up off the ground and the co-op becomes much more active they will recruit more members to volunteer their time to take care of the necessary details.

Financial Plan investor-ready personnel plan .">

The following sections will outline the important financial assumptions, key financial indicators, Break-even Analysis, profit and loss, cash flow, and balance sheet.

7.1 Important Assumptions

The following table highlights some of the important financial assumptions for Gamehenge Tapers Co-op.

7.2 Break-even Analysis

The Break-even Analysis shows what we need in monthly revenue to break even.

7.3 Projected Surplus or Deficit

THe following table will indicate projected surplus or deficit.

7.4 Projected Cash Flow

The following chart and table will indicate projected cash flow.

7.5 Projected Balance Sheet

The following table will indicate the projected balance sheet.

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Phillippines Finance

Cooperative Business Examples in the Philippines Inspiring Case Studies

Cooperative businesses are an integral part of the economic landscape in the Philippines. These enterprises, owned and operated by their members, contribute to poverty reduction, job creation, and sustainable development in the country. The cooperative model offers a unique alternative to traditional business structures, emphasizing cooperation, solidarity, and mutual support.

There are numerous successful cooperatives in the Philippines that serve as inspiring case studies for aspiring entrepreneurs and advocates of social and economic development. These cooperatives span various industries, including agriculture, finance, retail, and services. By highlighting their achievements and innovations, these case studies demonstrate the potential of cooperative businesses to drive positive change in society.

One notable example is the Philippine Federation of Credit Cooperatives (PFCCO), which has made significant strides in the field of financial services. PFCCO is a network of credit cooperatives that provide access to affordable credit and other financial products for their members. Through sound management and effective member engagement, PFCCO has empowered individuals and communities to achieve financial stability and improve their quality of life.

Another inspiring case study is the First Community Cooperative (FICCO), a successful agricultural cooperative. FICCO has implemented innovative farming practices and introduced technology to increase productivity and enhance the competitiveness of its members. By working collectively, FICCO has not only improved the livelihoods of its members but also contributed to the growth of the agricultural sector in the Philippines.

These examples demonstrate the transformative power of cooperative businesses in the Philippines. By fostering inclusivity, promoting sustainable practices, and empowering individuals and communities, cooperatives are driving positive social and economic change in the country. Their success stories inspire others to embrace the cooperative model and contribute to a more equitable and prosperous society.

Table of Contents

Why cooperative businesses are important in the Philippines

In the Philippines, cooperative businesses play a crucial role in the economic and social development of the country. With a long history and strong presence, cooperative businesses contribute to poverty reduction, job creation, and sustainable development.

Poverty reduction:

Cooperative businesses provide opportunities for individuals and communities to lift themselves out of poverty. By pooling resources and working together, members of cooperatives can access credit, markets, and training, which are often difficult to attain individually. Through cooperative businesses, people have a platform to improve their economic conditions and achieve self-sufficiency.

Job creation:

Cooperative businesses are labor-intensive and have a strong emphasis on job creation. They provide employment opportunities, especially in rural areas where formal job opportunities may be limited. By establishing cooperative enterprises, individuals can engage in income-generating activities and become economically productive members of society.

Sustainable development:

Cooperatives promote sustainable development by encouraging members to adopt environmentally friendly practices. Many cooperative businesses in the Philippines are involved in agriculture and organic farming, promoting sustainable agriculture and reducing the dependence on chemical inputs. Cooperatives also prioritize social responsibility and community development, supporting initiatives such as education programs, healthcare services, and infrastructure development in underserved areas.

Empowering marginalized groups:

Cooperative businesses are instrumental in empowering marginalized groups, such as farmers, fisherfolk, and indigenous communities. By forming cooperatives, these marginalized groups gain collective bargaining power, allowing them to negotiate better prices for their products, access markets, and improve their livelihoods. Cooperatives create a space for these groups to have a voice, participate in decision-making processes, and have equal representation.

Financial inclusion:

Cooperative businesses provide financial services to individuals who are often excluded from the formal banking system. Through cooperative banks and credit unions, individuals can access affordable credit, savings accounts, and insurance products. This helps promote financial inclusion and empowers individuals to build assets, start entrepreneurial ventures, and secure their future.

Overall, cooperative businesses are vital in the Philippines as they contribute to poverty reduction, job creation, sustainable development, empowerment of marginalized groups, and financial inclusion. They embody the principles of solidarity, self-help, and mutual support, fostering inclusive growth and social progress in the country.

The benefits of cooperative businesses

Cooperative businesses, also known as co-ops, offer several advantages to their members and the communities they serve. These benefits include:

• Equal ownership and control: In a cooperative, each member has an equal say in the decision-making process. This ensures that all members have a voice in shaping the direction of the business and ensures a democratic control structure.
• Shared resources and risk: By pooling resources and sharing risks, cooperative businesses provide their members with the opportunity to access services and products that would otherwise be unaffordable or unavailable to them as individuals.
• Profit sharing: Unlike traditional businesses, co-ops distribute profits among their members based on their level of participation in the cooperative. This allows for a more equitable distribution of wealth and helps to reduce income inequality.
• Lower costs: Co-ops often benefit from economies of scale, which can result in lower costs for members. By purchasing goods or services in bulk, co-ops can negotiate better prices and pass those savings onto their members.
• Member services and support: Cooperative businesses are often focused on meeting the needs of their members and the community. They provide tailored services, such as access to credit, training, and education, specific to the needs of their members. This support helps to improve the livelihoods of members and promotes economic development.

In addition, cooperative businesses tend to have a positive impact on their communities. They contribute to local economic development by creating employment opportunities and supporting local suppliers. Co-ops also tend to have a long-term perspective, prioritizing environmental sustainability and social responsibility.

Overview of the cooperative business sector in the Philippines

The cooperative business sector in the Philippines plays a significant role in the country’s economy, providing opportunities for inclusive growth and development, particularly in rural areas. Cooperatives are member-owned and member-controlled business enterprises that operate based on cooperative principles and values.

The cooperative movement in the Philippines began in the early 1900s, and it has since grown to become a thriving sector with various types of cooperatives operating in different industries. These cooperatives range from agricultural cooperatives that focus on farming and livestock production to credit cooperatives that provide financial services to their members.

Cooperatives in the Philippines are regulated by the Cooperative Development Authority (CDA), which is responsible for promoting and monitoring the development of cooperatives in the country. The CDA ensures that cooperatives comply with the cooperative principles and guidelines, and it provides support and assistance to cooperatives through capacity building programs and access to financing.

One of the key strengths of the cooperative business sector in the Philippines is its ability to address the needs and aspirations of its members, particularly those belonging to marginalized and disadvantaged sectors. Cooperatives provide opportunities for livelihood and income generation, access to credit and financial services, and social and community development initiatives.

Moreover, cooperatives in the Philippines promote economic democracy and empowerment by giving their members a voice in decision-making processes and allowing them to participate in the distribution of profits. This participatory and inclusive approach has contributed to the sustainable growth and resilience of the cooperative sector in the country.

Currently, there are over 29,000 registered cooperatives in the Philippines, with millions of members across the country. These cooperatives operate in various sectors, including agriculture, finance, consumer, housing, and transportation. They contribute to job creation, poverty reduction, and the overall socio-economic development of the Philippines.

Overall, the cooperative business sector in the Philippines is an important pillar of the economy, providing opportunities for economic empowerment, social development, and inclusive growth. Its impact extends beyond the financial realm, as cooperatives also promote values such as solidarity, cooperation, and community building.

Successful Cooperative Business Examples

Cooperative businesses have been flourishing in the Philippines, making a significant impact on the economy and the local communities they serve. Here are some inspiring examples:

Banana Growers and Exporters Cooperative (BGEC)

The BGEC is a cooperative that focuses on banana production and export. They have established a strong partnership with local farmers, providing them with the necessary training and resources to improve their crop yield. By working together, the cooperative has successfully penetrated international markets and has become one of the leading exporters of bananas in the Philippines.

Green Energy Cooperative (GEC)

The GEC is a cooperative that focuses on renewable energy production. They have developed and implemented various projects that harness solar and wind energy. The cooperative not only provides clean and sustainable energy to its members but also contributes to reducing the carbon footprint of the Philippines. Their success has inspired other cooperatives to invest in renewable energy projects.

Women’s Handicraft Cooperative (WHC)

The WHC is a cooperative that empowers women by providing them with livelihood opportunities through handicraft production. They train women in various traditional handicraft techniques and help them market their products locally and internationally. The cooperative has successfully created a sustainable income source for its members and has become a symbol of women empowerment in the local community.

Food Processing Cooperative (FPC)

The FPC is a cooperative that specializes in food processing. They work with local farmers and food producers to create value-added products like jams, sauces, and dried fruits. The cooperative provides technical assistance, modern equipment, and a market platform for its members. Through collective effort, the FPC has expanded its product range and distribution network, boosting the income of its members and supporting the growth of the local food industry.

Fishermen’s Cooperative (FC)

The FC is a cooperative that represents the interests of small-scale fishermen. By pooling their resources and working together, the cooperative members have improved their bargaining power with buyers and suppliers. They also engage in collective marketing and purchasing to reduce costs and increase profitability. The cooperative has been successful in securing fair prices for its members’ catch and in accessing credit and government support for the fishing sector.

These examples demonstrate the power of cooperation and collaboration in building successful businesses that bring positive change to local communities in the Philippines. Through shared resources, knowledge, and a commitment to mutual success, cooperatives continue to thrive and contribute to the economic development of the country.

Agricultural Cooperative: Farmers Helping Farmers

One of the most common types of cooperative businesses in the Philippines is the agricultural cooperative. These cooperatives are formed by farmers who come together to pool their resources and collectively engage in agricultural activities.

Objectives and Benefits:

• Improving agricultural productivity
• Providing better access to markets
• Reducing production costs
• Enhancing bargaining power
• Promoting sustainable farming practices

Organizational Structure:

The agricultural cooperative is typically governed by a board of directors elected by its members. The board is responsible for making decisions on behalf of the cooperative and ensuring that the cooperative operates in accordance with its bylaws.

Activities and Services:

The agricultural cooperative carries out a range of activities and provides services to its members, including:

• Collective purchasing of agricultural inputs such as seeds, fertilizers, and equipment
• Sharing of agricultural machinery and equipment
• Providing technical assistance and training to improve farming practices
• Collective marketing and selling of agricultural products
• Access to credit and financial services

Success Story: Aguinaldo Rice Growers Cooperative

An example of a successful agricultural cooperative in the Philippines is the Aguinaldo Rice Growers Cooperative. This cooperative was formed by rice farmers in the municipality of Aguinaldo in Ifugao province.

The Aguinaldo Rice Growers Cooperative has been instrumental in improving the agricultural productivity of its members through various initiatives. The cooperative provides its members with access to high-quality seeds, fertilizers, and agricultural equipment at lower prices through collective purchasing.

In addition, the cooperative has established a rice mill, which enables its members to process their rice harvest and sell it at better prices. This has significantly increased their income and improved their livelihoods.

The cooperative also provides its members with technical assistance and training on modern and sustainable farming practices. This has not only improved the quality of their agricultural produce but also reduced their production costs.

Through collective marketing, the cooperative has been able to negotiate better prices for its members’ rice and increase their access to markets. This has helped the farmers in Aguinaldo to overcome the challenges of market fragmentation and reach a wider customer base.

The success of the Aguinaldo Rice Growers Cooperative has inspired many other agricultural communities in the Philippines to form their own cooperatives. These cooperatives have become a powerful tool for farmers to support each other, improve their livelihoods, and contribute to the sustainable development of their communities.

Conclusion:

Agricultural cooperatives in the Philippines play a crucial role in empowering farmers and ensuring their economic sustainability. By coming together and working collectively, farmers are able to overcome the challenges they face as individuals and achieve better outcomes for themselves and their communities.

Consumer Cooperative: Empowering Local Communities

A consumer cooperative is a type of cooperative organization that is owned and managed by its customers or members. Its primary focus is on meeting the needs and aspirations of its members rather than maximizing profit. Consumer cooperatives are built on the principle of democratic control, where each member has an equal say in decision-making processes.

In the Philippines, consumer cooperatives have been instrumental in empowering local communities and promoting economic development. These cooperatives often operate in rural areas, where access to goods and services is limited.

Consumer cooperatives provide a wide range of benefits to their members and the communities they serve. Here are some key ways in which consumer cooperatives empower local communities:

• Accessibility: Consumer cooperatives bring essential goods and services closer to rural communities. They establish stores or outlets that offer various products at affordable prices, making them accessible to local residents.
• Quality Control: Consumer cooperatives prioritize the quality of the products they offer. They work directly with local producers and farmers, ensuring that their products meet high standards. This promotes local entrepreneurship and helps uplift the economic status of small-scale producers.
• Community Development: Consumer cooperatives contribute to community development by reinvesting their profits back into the community. They support local initiatives, such as education programs, infrastructure projects, and livelihood development activities.
• Financial Inclusion: Consumer cooperatives provide financial services to their members, especially those who are underserved by traditional banking institutions. They offer savings and credit facilities, helping members build financial resilience and improve their livelihoods.
• Social Empowerment: Consumer cooperatives promote social empowerment by involving the community in decision-making processes. They organize regular general assemblies where members can voice their concerns and ideas. This fosters a sense of ownership and belonging among the members, leading to greater social cohesion.

Consumer cooperatives in the Philippines have proven to be effective in uplifting local communities and addressing social and economic challenges. By prioritizing the needs of their members and fostering a sense of community, these cooperatives have become agents of positive change. They serve as inspiring examples of how cooperative models can empower local communities and contribute to sustainable development.

Financial Cooperative: Promoting Financial Inclusion

A financial cooperative is a type of cooperative that is dedicated to providing financial services to its members. It operates based on the principles of cooperative ownership, democratic control, and member participation. Financial cooperatives are known for their focus on inclusivity and serving the needs of their members, especially those who are underserved or excluded from traditional banking services.

Promoting Financial Inclusion

Financial cooperatives in the Philippines play a crucial role in promoting financial inclusion, particularly among low-income individuals and those living in rural areas. Through their community-based approach, financial cooperatives provide access to financial services and products that are tailored to the specific needs and preferences of their members.

Financial cooperatives offer a wide range of services, including savings accounts, loans, insurance, and investment options. These services help individuals and families build financial stability, grow their savings, and access credit for livelihood or entrepreneurial activities.

One of the key features of financial cooperatives is the emphasis on mutual assistance and solidarity. Members pool their resources together, which allows the cooperative to provide loans and other financial services at affordable interest rates. This reduces the dependency on exploitative lenders and payday loans, which often trap borrowers in a cycle of debt.

Case Study: Philippine Federation of Credit Cooperatives

An excellent example of a financial cooperative in the Philippines is the Philippine Federation of Credit Cooperatives (PFCCO). Established in 1979, PFCCO is the largest credit cooperative federation in the country, with over 1,500 member-cooperatives.

PFCCO aims to uplift the socio-economic conditions of its members by providing access to affordable credit and financial services. It operates on the principles of self-help, mutual help, and economic participation. Through its extensive network of member-cooperatives, PFCCO serves individuals and communities in both urban and rural areas.

The cooperative offers various financial products and services, including savings and time deposits, salary loans, agricultural loans, and microfinance services. PFCCO also provides capacity-building programs to enhance the financial literacy and entrepreneurial skills of its members.

To ensure the sustainability and growth of its member-cooperatives, PFCCO provides technical assistance, training, and access to information and resources. It also advocates for policies and programs that support the development of the cooperative sector and promote financial inclusion in the Philippines.

Financial cooperatives in the Philippines are vital institutions in promoting financial inclusion and improving the socio-economic well-being of underserved individuals and communities. Through their inclusive approach, these cooperatives provide access to financial services that empower individuals to become financially independent and productive members of society.

By fostering a sense of ownership and collective responsibility, financial cooperatives ensure that the benefits of financial services are shared among their members, fostering economic resilience and sustainable growth. The success of financial cooperatives like PFCCO demonstrates the transformative power of cooperative principles in creating positive change in society.

Impact and Success Stories

Cooperative businesses in the Philippines have had a significant impact on the local economy and the lives of their members. These businesses have demonstrated their success through various initiatives and achievements.

One example of a successful cooperative business in the Philippines is the 1st Valley Bank Cooperative (1VBC). This cooperative was established in 2013 and has since grown to become one of the largest cooperative banks in the country. 1VBC provides financial services to its members, which include farmers, fisherfolk, and small business owners. By offering affordable loans and other financial products, 1VBC has empowered its members to expand their businesses and improve their living conditions.

Another inspiring success story is that of the Agdao Multi-Purpose Cooperative (AMPC). This cooperative, which was founded in 1976, focuses on supporting marginalized sectors of society, such as farmers and women. AMPC has been instrumental in providing access to credit, training, and marketing opportunities for its members. Through its efforts, AMPC has helped improve the livelihoods of its members and their families.

Furthermore, the success of the Banahaw Heals Herbal Corporation (BHHC) demonstrates the potential of cooperative businesses in the health and wellness sector. BHHC is a cooperative of medicinal and aromatic plant gatherers, processors, and traders. The cooperative has successfully cultivated and processed various plants, such as lagundi, sambong, and yerba buena, into herbal products. BHHC’s products have gained recognition both locally and internationally, contributing to the sustainable development of the community and the conservation of local biodiversity.

These success stories highlight the positive impact that cooperative businesses have on the Philippine economy and society. By promoting inclusivity, empowering marginalized sectors, and fostering sustainable practices, cooperative businesses play a vital role in improving the lives of their members and the communities they serve.

Improved Livelihoods and Economic Development

Cooperative businesses in the Philippines have played a vital role in improving the livelihoods of their members and contributing to economic development in the country. Here are some inspiring case studies that highlight the impact of cooperative businesses:

Cooperative Bank of Agusan del Sur

The Cooperative Bank of Agusan del Sur is a cooperative bank that provides financial services to its members and helps improve access to capital for small farmers and other marginalized sectors. By providing loans and other financial services at lower interest rates compared to traditional banks, the cooperative has helped its members start or expand their businesses, increase agricultural productivity, and ultimately improve their livelihoods.

Villar SIPAG (Social Institute for Poverty Alleviation and Governance)

Villar SIPAG is a cooperative organization founded by Senator Cynthia Villar. It aims to uplift the lives of Filipino families through various initiatives focused on sustainable livelihood and economic development. The cooperative provides training and opportunities for members to engage in entrepreneurship, agriculture, and other income-generating activities. By equipping community members with skills and resources, Villar SIPAG empowers them to improve their livelihoods and contribute to local economic growth.

Cavite Coffee Farmers Cooperative (CCFC)

CCFC is a cooperative of coffee farmers in Cavite province. Through collective action and cooperation, the cooperative has been able to improve the quality of coffee production in the region and access better markets. CCFC provides its members with training on coffee cultivation techniques, access to fair trade markets, and assistance in processing and marketing their products. By strengthening the coffee industry and improving the income of its members, CCFC contributes to the economic development of the local community.

Federation of People’s Sustainable Development Cooperative (FPSDC)

FPSDC is a cooperative that focuses on sustainable development initiatives, including renewable energy projects and eco-tourism. Through its various ventures, such as the FPSDC Solar Power Plants and the FPSDC EcoVillage, the cooperative has created employment opportunities, generated income, and contributed to the overall economic development of the areas where they operate. FPSDC demonstrates the potential of cooperative businesses to not only improve livelihoods but also contribute to green and sustainable economic growth.

These case studies demonstrate the transformative power of cooperative businesses in the Philippines. By fostering cooperation, providing access to resources, and promoting entrepreneurship, cooperative businesses have the potential to uplift communities, improve livelihoods, and contribute to sustainable economic development.

Empowerment of Marginalized Communities

Cooperative businesses in the Philippines have played a significant role in empowering marginalized communities. These cooperatives have provided opportunities for individuals from low-income backgrounds, indigenous peoples, and other minority groups to improve their socio-economic conditions through collective action and shared resources.

One inspiring example is the Kasagana-Ka Development Center, Inc. (KDCI), a cooperative that focuses on empowering rural women. KDCI provides microfinance services, entrepreneurial training, and livelihood programs to its members, who are mostly women from impoverished communities. Through these initiatives, KDCI has enabled its members to start their own businesses, increase their income, and gain financial independence.

Another notable cooperative is the Davao United Durian Growers Cooperative (DUDGC), which supports farmers in Davao who cultivate durian, a popular fruit in the Philippines. DUDGC provides technical assistance, access to markets, and collective bargaining power to its members. By working together, durian farmers have been able to increase their income, improve the quality of their products, and establish a strong presence in the national and international markets.

The Philippine Rural Reconstruction Movement (PRRM) is another cooperative that has prioritized the empowerment of marginalized communities. PRRM focuses on community development and sustainable livelihood programs in rural areas, particularly among indigenous communities. The cooperative works closely with these communities to address their needs and concerns, providing support for education, health, agriculture, and environmental conservation.

Overall, these examples demonstrate how cooperative businesses have successfully empowered marginalized communities in the Philippines. By fostering collaboration, providing resources and support, and advocating for their rights and welfare, cooperatives have played a crucial role in uplifting these communities and promoting inclusive economic development.

What are some examples of successful cooperative businesses in the Philippines?

Some examples of successful cooperative businesses in the Philippines include the First Community Cooperative (FICCO), which provides financial services to its members; the Cooperative Bank of Cotabato, which offers banking services to small-scale entrepreneurs; and the Bukidnon Cooperative Marketing Association, which promotes the products of local farmers.

How do cooperative businesses in the Philippines contribute to the local economy?

Cooperative businesses in the Philippines contribute to the local economy by providing employment opportunities, supporting local farmers and artisans, and promoting sustainable practices. They also help build stronger communities by empowering members and promoting shared ownership and decision-making.

What challenges do cooperative businesses in the Philippines face?

Cooperative businesses in the Philippines face challenges such as limited access to capital, lack of marketing support, and regulatory barriers. They also struggle with governance issues, ensuring member participation and commitment, and adapting to a changing business environment.

How are cooperative businesses different from traditional businesses?

Cooperative businesses are different from traditional businesses in that they are owned and governed by their members who actively participate in decision-making. They prioritize the well-being of their members rather than maximizing profits and often operate with a focus on social and community development.

Can anyone join a cooperative business in the Philippines?

Yes, anyone can join a cooperative business in the Philippines as long as they meet the membership requirements set by the cooperative. These requirements may include residency in a particular area, payment of membership fees, and adherence to the cooperative’s values and principles.

What is a Cooperative? (Ano ang Kooperatiba)

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