– Strong memberships
– Well balanced social and commercial objectives
– Great customer service
– Excellent location
– Unique product or service
Target markets
Describe the target markets for your product or service. Who are your customers? If you already know who they are, list the major clients if they agree to this information being made available to external parties. If you don’t have major clients, or there are potentially many of them, you should define the markets you will be selling to.
How have you identified your target markets? What are the characteristics of the target markets? Are your customers a certain age or gender, do they live in a particular location, have a certain type of job, ethnicity or income level? Are they members of the co-operative? What are their needs and preferences? How big is your target market? How often will they buy from you? Why and how will they buy your product or service? Are they end-users?
Consider if there are different segments to your target market. For example, would both students and professionals buy your products? Each segment may have different needs, and may be willing to pay different prices. If you understand the needs of each segment, you can adapt your marketing mix to provide what each segment wants.
Product pricing and terms
In determining the prices of your products or services, consider the costs to produce, or to deliver services, your customers’ sensitivity to the price and to price changes, and what the price reveals about the product’s value or quality. Will you offer quantity discounts, or discounts for repeat sales? Will co-operative members receive a discount or rebate?
Describe the expected payment terms for customers, e.g. direct customers pay cash while distributors and members pay within 30 days from invoice date.
Product sales, margins and distribution
If your co-operative is new, estimate the number of products or services to be sold in the first year, and consider using a table to show your estimates. If the co-operative is already established, use both past and projected performance levels. You may wish to break the table down into weeks or months. The table can form the basis of sales volume records and pricing over time, and identify changes to help you to plan future sales targets and purchases of raw materials.
Describe how your products will be distributed – whether through direct sales, online marketing, direct mail, agents, wholesalers, representatives, retailers or consignments. Describe commissions or other fees involved.
Estimate the cost of other expenses such as shipping, warranties, contracts and liabilities.
Strategic alliances
List strategic partnerships the co-operative has, or plans to form, with other co-operatives or businesses.
These may be to work together in major ventures, or on market access, supplies or other resources. Provide information about the arrangements.
List key suppliers, and describe their history and reliability, location, what and how much they can supply, credit policy and delivery details, and the cost and availability of materials.
Marketing plan
Explain your marketing objectives – what you aim to achieve and what you will do to achieve them. Ensure they can be measured and evaluated. An example might be “to obtain 20% of market share by the end of the first year”, or “to ensure 50% of our target market recognise our brand, and 10% buy our products”. Then determine what marketing activities will help you achieve your aim.
Determine your marketing strategies and activities for each month of the first year to create awareness and sales. This is your marketing mix, and relates to product, place, price, promotion, people and process.
Product strategy : consider the products’ qualities, consistency, features, adaptability, packaging and design, how the customers will perceive the products’ features, and how you will market them.
Place strategy : consider distribution channels, location of retail outlets, the geographic area your products will be available in.
Price strategy : consider the selling price to various customers and markets, including discounts for quantity and early payment.
Promotion strategy : consider what advertising, selling, sales promotion, trade shows, website, media and public relations activities you will undertake to differentiate your product and make consumers aware of your product or service.
People strategy : consider who will sell the product and delivery it. People may include staff, strategic partners and agents.
Process strategy : this is the strategy where you plan, target, cost, develop, implement, document and review the systems to attain the other aspects of the marketing plan. You’ll plan to have the right product, in the right place, at the right price, in the right quantity, at the right time for the right customers.
The finances
Often the last part in the business plan, the finance section is important as it demonstrates the likely financial viability of the co-operative, and is vital information for anyone considering investing in the co-operative.
It shows what financial resources are needed to set up and operate the co-operative, forecasts of the co-operative’s performance based on expected sales levels, and it details the timing and the amount of investment needed from external sources.
Commencement capital – new co-operatives
List the amount of capital that has been raised and will be raised from members, and funding confirmed from other sources.
List the costs to start the co-operative (below) in a table, and show the month when the costs are expected to be paid.
Subtract the set-up costs from the confirmed capital raised; the balance is the amount of borrowings you will require.
Financial objectives
List the co-operative’s financial objectives and how long you expect to take to achieve them. These may be profit targets, investment levels, returns to members and debt repayment.
Assumptions
Explain the key assumptions made in developing your financial forecasts:
If the co-operative has already been trading, describe its financial history, including equity, debt and profit levels.
Include at least four key financial ratios:
Monthly cash flow forecasts
The cash flow forecast demonstrates how and when cash comes into and goes out of the co-operative. Hopefully it also shows that income from sales will pay for bank loan repayments and other expenses. It will show you when you need an injection of cash to cover monthly bills, and when you need to conserve cash to pay for upcoming bills.
For the first year of trading, present monthly cash flow forecasts. After the first year, show yearly forecasts for at least two years.
Monthly income and expenditure forecasts
Also called profit and loss forecasts, and forecasts of financial performance, income and expenditure forecasts show the co-operative’s projected income less expenditure, resulting in a profit (or loss) over a specific period of time. For the first year of trading, provide monthly or quarterly forecasts, and annually for the following two years.
Just a few quick tips for the financially challenged – income is usually from sales, and expenditure is usually the costs to run the co-operative and interest payments. Loans (liabilities), purchased equipment and inventory (assets), capital injections from members (equity) are all items for the balance sheet.
When you receive an invoice it is an expense, even if you haven’t paid it yet; so it is shown in the month the expense was incurred. Show all items as GST exclusive (i.e. without GST).
Balance sheet forecasts
The balance sheet, also known as the statement of financial position, shows the co-operative’s net worth at a particular point in time – usually the last day of the financial year. Assets are usually objects and cash the business owns, liabilities are usually debts owed, and equity is the capital contribution and accrued profits. Assets minus liabilities equals equity.
Provide balance sheet forecasts for three years.
Financial plan
Describe your plans for the co-operative’s financial viability. What is the total investment required for start-up? What are your short and medium-term investment plans? Where will funds come from? Have they been confirmed? How much comes from each source, and what conditions do funds come under (e.g. interest rates, repayment terms)? What security is offered?
When is the co-operative expected to make a profit? What level of sales is required to make a profit? When will members see a return? How much are profits expected to grow each year? How will costs be kept down? If non-distributing, will you retain surpluses, and where do you plan to donate excess surpluses?
Do you have an exit strategy?
A note on financial management
This note on financial management is not meant for inclusion in the business plan, but nevertheless is very important. (A summary of the financial management systems used could be included in the financial plan.)
Members (and investors) need to know how the co-operative is performing and need to receive regular accurate reports. Systems must correctly identify, measure and communicate financial information.
You need to understand and abide by accounting principles.
Complete, accurate, and up-to-date financial records must be kept. These may be handwritten, or on computer spreadsheets, but we recommend that unless the co-operative is very small, you should use financial software. Such software doesn’t replace an accountant, but usually knows what to debit and credit, and has a useful help function.
Develop strong systems for handling cash. Provide numbered and dated receipts for money received. Provide numbered and dated invoices (tax invoices if the co-operative is GST registered) for purchases and to others who owe you money.
Every month, reconcile your expenses paid and income received with the bank statement. Produce a balance sheet and profit and loss statement to help you keep an eye on finances and to allow you to plan and control the co-operative. Watch your creditor and debtor levels; ensure you collect money owing and pay expenses when due.
The strategic plan
A strategic plan is usually a long-term plan for the next three to five years. It explains the goals and objectives to be reached, and the path to achieve them. It’s a bit like a GPS for a very long journey, if you zoom out and ignore the minor roads.
Focus on a small number of key priorities. Too many priorities will mean you lose focus on the major objectives.
Make the priorities easy to translate into action plans, and have clear timelines to achieve outcomes.
Information that might distract from the business plan’s flow should be included as appendices. Provide a summary of the information within the business plan, and more detail in the appendices. It’s also a good place to include information that is not part of the business plan. Start a new page for each appendix.
Appendices might include the following:
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How to start a co-operative: a step-by-step guide.
Starting a co-op? This article provides a step by step guide on how to start a co-operative. There’s a lot to do, and a lot to learn — but we have tons of supports, resources, and tools are available. This article provides a map to many of them.
Starting a business is exciting and rewarding, but it can also be frustrating.
At Co-operatives First, our job is to de-mystify the process of starting a co-operative business . That’s why we built this site. The Co-op Creator provides a variety of guides, tips, templates, and links. We’ve also developed an online course full of helpful videos to help you learn about this process — you can take that for free here .
For the DIYers out there, this is ideal. But sometimes folks need more hands-on support. If that’s you, our knowledgeable staff is a phone call or email away .
Okay, let’s get started.
What do you want to do.
Agree on the purpose of the business. Maybe your community doesn’t have enough daycare options. Maybe you’re a professional with your own firm who wants to share the cost of office space and administration. Perhaps you’re a producer who needs help packaging, marketing, and distributing your vegetables. Whatever the case, everyone needs to agree to and buy into the purpose of the co-op. A good place to start is by asking the question: what problem are you trying to solve and how does working as a group help solve that problem? This resource can help you focus ideas and engage potential members and markets in the process .
A co-op is a business run by a group of people who share its benefits. You might already have a group that wants to work together. That’s great! You might also have an idea and need to get more people on board. To get the word out, you could organize a meeting to discuss how a co-op could work and see who wants to get involved.
If you’re thinking about starting a co-op, consider these two questions: What is the purpose of the business and who should benefit from it? If the answer is ‘provide a service for those who benefit from it,’ then a co-op is probably a good choice. The model works best when member interests are aligned and working as a group brings value beyond what can be achieved alone.
To learn more, here’s how co-ops compare to other business models . Or try our questionnaire .
Decided a co-op is the way to go? Time to organize your co-op’s structure, plan of action, and finances.
Co-ops need people to start and support them. So, if you haven’t already, find like-minded people to join you. But make sure these people have a personal interest in starting the co-op.
Also, keep in mind BC, Alberta, and Manitoba require three people to incorporate a co-op — in Saskatchewan you need six.
Sit down with your committee. Come up with a plan for starting your co-op. Decide what needs to get done, and who is going to do each task. Write it down and hold people accountable.
To assess the external factors that could impact your new business, try completing a PESTLE analysis . Also consider doing a business model canvas to better understand how the business will work.
How much money do you need to start the co-op? Where will it come from? Get a clear financial picture of your start-up before getting too far into it.
Who will make the decisions in your co-op? Figure out who’s in charge, and how the decision-making process will work in your business.
Now you’re ready to incorporate your co-op, which means you’ll file documents with the government that legally create your business. You probably do this with your provincial government — but if your co-op will operate in more than one province, you can incorporate with the federal government.
We’ve created work plans that you can follow to incorporate your co-op in:
Incorporating your business will include the following tasks:
The next step in starting your co-op is to pick a name — here are some tips on choosing a name for your co-op . You can find more specific information about registering a name in your province’s work plan (above). Or try our guide to naming your co-op .
Your Articles of Incorporation (also known as “Memorandum of Association” if you’re in BC) are the documents you submit to the government to start your co-op. Once you’ve filed these and they’ve been accepted, your co-op will be a legal entity . This means it has rights, and can do things like open a bank account, take out loans, etc.
You’ll find more detailed info about incorporation both in the above work plans, and here:
We know you’re busy. We can incorporate your co-op for you. Curious why you should incorporate? Check out this video .
Bylaws (known as “Rules of Association” if you’re in BC) are the rules you write for your co-op. The government requires that you include certain things in bylaws, while other rules are up to you. Requirements change depending on whether you’re in BC , Alberta , Saskatchewan , Manitoba , or are incorporating federally .
Attract and admit new members.
Once you’ve started a co-op, it needs members! You’ll need to identify who your members should be , get the word out to them about joining your co-op, and create a process for them to join .
To better manage members’ data, co-operatives keep membership registries . These registries are just places where you store information. For co-ops with more complex interactions with members, you might want an accounting software to track member accounts, issue dividends, and generate reports. For smaller and/or newer co-ops, you could just use an Excel spreadsheet.
Every year, your co-op will have to hold an AGM . At this first one, you’ll elect your first board of directors . Often, the steering committee that’s been working to start the co-op becomes the first board, but you may also need to recruit members .
Write a business plan.
A business plan is a great tool not only to guide you as you build the business, but to attract investors, show lenders that your business idea is sound enough to deserve a loan, or get new members to join. You should do this as a group.
We’ve created this handy Business Plan Creator to lead you through the process. You can also apply to Co-operatives First to have a professional consultant create a plan for you.
Figure out how you’re going to get the money to start the co-op: from loans? Members? Selling shares? Fundraising? Usually it’s a combination of these. Write a financial plan , a budget , and think about how to finance the business going forward .
Train your board.
It’s important for all board members to understand their role and what’s expected of them. Co-operatives First can provide training to get your board started on the right foot.
New boards have a lot to do to guide the co-op. Here are some just a few things a new board will do in the first year:
If starting a co-op is your goal, Co-operatives First can be there every step of the way. Contact us to get started.
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Hosting a community meeting.
Early in the process of setting up a co-op, meetings provide a group the chance to…
Building consensus in a co-operative business can be important for its sustainability, especially in the early…
When starting a co-op, one of the first things you should do is form a steering…
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Learn about types of co-ops, advantages, problems, and taxation
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.
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:
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:
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.
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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 .
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.
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.
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.
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.
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.
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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A successful business doesn’t just happen. Like a garden, a healthy business requires planning, nurturing, and a hospitable environment. It also requires experimentation, adaptation, and research.
And, while a business plan is a great way for an entrepreneur to capture and communicate their vision – especially to potential lenders, investors, and shareholders – it generally comes later in the development process and is often created with the help of a third party .
For us, developing a business plan with outside help is healthy and provides a more holistic view of the co-op. And working with a third party, like a business consultant, can bring important insights you might otherwise miss.
Because a business plan comes later in the development phase, many of the ideas in it have usually been fleshed out or tested in some way.
So, how does a group of entrepreneurs – especially those starting a co-op – get through that first ‘ideas’ stage and prepare to start a business? By using a Business Model Canvas .
Initially proposed by entrepreneur and business theorist Alexander Osterwalder, the Business Model Canvas is best captured in the book Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers.
In it, the authors describe a canvas that entrepreneurs can use to explore ideas, and then those ideas into a reality. They tested this canvas through a crowdsourcing effort with 470 different ‘practitioner co-authors’ in 45 countries.
The book defines a business model as ‘the rationale and infrastructure of how an organization creates, delivers and captures value.’ So, it’s really about being able to think through, articulate, and map what you’re trying to do, why you want to do it, and how you will do it well. This process will help you define your value proposition .
For groups forming co-ops, this blend of creative and practical thinking is essential.
In “The Case for a Socially Oriented Business Model Canvas: The Social Enterprise Model Canvas,” Sergio Sparviero notes, “business models are simplifications of real systems that are used for explaining performance and competitive advantage or for rethinking and redesigning an organization’s strategy in order to benefit from innovations and other opportunities”.
In other words, a business model is a testing grounds and thought experiment, and a tool for educating and communicating with potential shareholders. And a good business model often plays “an important role in coordinating and facilitating social action within the organization and with external stakeholders”.
Co-op entrepreneurs are no strangers to innovating on traditional business models. If you’ve chosen the co-op model, there’s a good chance you need to innovate. This could mean scaling your independent business, bringing an important asset to your community, or creating a service no one else will provide. The business model canvas can help you innovate.
In an interview with Institute Management Development, Osterwalder talks about how entrepreneurs should design their business model, much like architects do for buildings.
“It needs to work like an architect drawing table to put your business model together and experiment,” he says.
In short, the canvas provides an opportunity to prototype a business model. It also provides a way to test theories, map out processes, and understand the business environment before putting a lot of effort into developing the business.
For co-ops, this also provides an opportunity to bring diverse perspectives into the conversation and make the model more robust.
Because co-ops are a group effort, they require a great deal of agreement and communication to get off the ground. An exercise like the Business Model Canvas can help align everyone behind the work that needs to be done. You “create a shared language” to cooperate, says Osterwalder .
The canvas exercise also helps support all three pillars of good co-op governance . It helps form a vision everyone can get behind, and helps create a map for making legitimate decisions.
With a solid understanding of your business model and strong governance practices, you can create a board and membership that supports, understands, and promotes your co-op. To get started, try our Business Model Canvas tool or contact us for support . Or take the Introduction to Co-ops course to learn everything you need to know about co-ops and the canvas!
“Heather and the team at Co-operatives First are top-notch. Not only their knowledge but their understanding of the project. They have truly helped us along every step of the way. Their timely response and knowledge of the steps are extraordinary. They are forthcoming with information. This is one of the most knowledgeable and friendliest teams I have ever had the pleasure of working with.”
“Co-operatives First made the process of establishing our Artisan Co-operative a very clear and easy process. The expanse of available tools and resources provided by Co-operatives First answers many questions and lightens the workload. Greatly appreciate having the connections made with Trista and Kyle, they keep the co-operative moving forward.”
“Our experience working with the Co-operatives First team was absolutely fabulous. The staff was accommodating, knowledgeable and patient. It was truly a breath of fresh air to have such a wealth of skill and resources available to a non-profit. They were invaluable to our successful launch!”
“Working with Co-operatives First was fantastic! We are still new to the cooperative world, and we relied heavily on their advice and expertise when drafting our rules/bylaws, and our memorandum of association. The team has experience with many different cooperative models, so they provided advice on what has and hasn’t worked for other cooperatives. We wouldn’t have been able to incorporate without their help!”
“We have had a very positive experience with everyone at Co-operatives First. They have helped us in multiple ways. Right from the first step in knowing how to incorporate, how to set our business and offering ideas for us to help steer us in the right direction plus allowing us to really make our own decisions. If our decisions go off track, they have gently guided us back to where we needed to be. The Co-operatives first guys are always eager to answer questions, and give ideas to us that got us off the ground.”
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There are a few things you should know about democratically run “cooperative” businesses. First, they're not all that unusual. They're also respectably profitable. And working in one doesn't require you to be a Marxist or wear patchouli.
Last December, the United Nations declared 2012 to be “ The International Year of Cooperatives ,” encouraging countries around the world to promote the establishment of these types of businesses. And with good reason.
From Spain's seventh-largest business, Mondragon Corporation , a federation of worker cooperatives that employs over 90,000 people, to Wisconsin's Isthmus Engineering , with its 29 co-owners, cooperative businesses are thriving. Arguably the most well known, Mondragon is now 54 years old and has outperformed private sector companies on employee compensation and, during several bleak recession years, unemployment rates.
Still, when people hear the word “cooperative,” most have difficulty envisioning anything beyond a crunchy granola health food store. That's perhaps not surprising, considering the closest thing to employee-ownership most corporate workers experience is an Employee Stock Ownership Plan, where they can purchase (or are granted) stock in their company. These programs are designed to incentivize workers to be more productive, as they now benefit directly from the business's success. They are built around the assumption that monetary reward is the best motivation for workers.
Cooperative businesses take this idea of employee ownership and engagement one step further: employees actually own and operate the business . Besides the profit motive, cooperative models assume that workers value a more humanized workplace, where the input of ground-level employees can improve the business. Most cooperative businesses are founded on the democratic principle of “one worker, one vote,” and no two are alike.
Isthmus Engineering employs around 45 people, who are eligible to become worker-owners of the company after two years of service. According to controls engineer Ole Olson, worker-owners “get to decide how our company runs, what we build, what we don’t build.” The waiting period gives employees time to experience the business model, get acclimated to the environment, and understand the corporate culture.
Nearby Union Cab operates a bit differently, creating new owners almost immediately, as long-time member Fred Schepartz explained to The Workers' Paradise :
“All employees who pass probation are members of Union Cab Cooperative. Period. [...] There is no caste system. Structurally, there are no members that are more equal than others. Yes, we have managers, but they have to answer to the board of directors, which is elected from the membership, by the membership. Essentially, management works for the employees though they are given the authority to do their jobs. [E]verybody who works at Union Cab who has passed probation is a full-fledged member. Drivers, dispatchers, phone answerers, mechanics, IT staff, accounting staff. Everybody.”
Meanwhile, New York City's Cooperative Home Care Associates , which provides services like light housekeeping and personal care to a number of elderly and disabled individuals, focuses on transforming what are traditionally low income, entry-level, part time jobs into full time positions with training, full benefits, higher wages, and guaranteed hours. The company offers a number of special services tailored to the needs of these workers, including no-interest loans up to $250, free tax preparation, and savings programs toward the $1,000 required to become a worker-owner. Meanwhile, operating decisions are made by a 14-member Board of Directors, eight being elected from among all worker-owners. The Worker Council, composed of 12 home care workers, serves as a liason between the Board of Directors and the employees, explaining decisions and advocating for needs. Each worker-owner votes to approve or deny the annual allocation of net profit determined by the Board.
There are many more stories of profitable cooperatives, from bakeries to retailers. There are also a number of organizing bodies, including the US Federation of Worker Cooperatives , National Cooperative Business Organization , and the International Co-operative Alliance .
Even Pittsburgh's United Steel Workers Union is getting in on the (cooperative) action. The union is partnering with Mondragon to explore the possibility of steel worker cooperatives. With over 40,000 manufacturing facilities closed throughout the United States during the economic recession, exploring new business models probably isn't a bad idea.
Retired steelworker Rick Kimbrough told SolidarityEconomy.net that he's all for the initiative. “Ever since they shut down our mill, I've always thought, 'Why shouldn't we own them?' If we did, they wouldn't be running away.”
Starting a cooperative presents a unique opportunity for a group of people to meet a shared economic or social need. As democratically governed businesses, cooperatives can be a great way to structure a business that is guided by member values.
As with any new venture, starting a cooperative requires good ideas, expertise, time, energy, and money. It can take six months to two years, sometimes longer, for a new cooperative to go from an initial concept to launch.
The following are basic guidelines for getting started, but each new cooperative is unique. The manner in which the momentum, people, and money come together will vary. However, each of the steps described below is a logical point at which organizers can evaluate a cooperative’s progress and decide whether or not the effort should move forward.
Here are a few questions to ask yourself before getting started.
Made it through the basics? Good for you! Now it’s time to figure out if a new cooperative business is the right choice for you. You’ll find more details on how to get started in the steps below.
For even more info, please visit our Startup Resources Page .
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A core group of individuals explores an opportunity or common need for a particular product or service. They identify the benefits that a cooperative approach might offer and reach out to a broader group or community to gauge interest in the idea. This group organizes informational meetings for potential members to further define a common need. It also recruits others who have the skills and expertise required to lead the cooperative development process.
If there is enough initial interest in the cooperative idea, it is time to establish a steering committee. The steering committee should be made up of trustworthy individuals who have good business sense, will champion the project, and are capable of putting the interests of the group before their own. Many potential cooperative members will base their support of the cooperative on the credibility of the steering committee members. The steering committee:
Conduct a feasibility study.
The steering committee coordinates a feasibility study to assess the viability of the proposed cooperative venture. This study examines whether there is a market for the new cooperative’s products or services, and whether the co-op can generate enough revenue to cover the risks and costs of operating the business. It should be completed by someone who is knowledgeable about the particular business sector and does not have a vested interest in the study’s outcome. This study is a key step in the development of the cooperative. The group may need to pay for the study by conducting the first phase of a membership drive, or by applying for funding from federal, state, or non-profit agencies.
A feasibility study includes:
Cooperative Development Grant . Wisconsin Economic Development Corp.
Cooperative Feasibility Study Guide . USDA Service Report 58, 2016.
Feasibility Study Outline . Iowa State University Extension, 2010.
The results of the feasibility study help the steering committee decide whether to continue the cooperative development process. This is a critical decision point during the development process.
File articles and adopt bylaws.
If the feasibility study indicates the concept is viable and the steering committee decides to move forward, the group may decide to legally incorporate as a cooperative. In Wisconsin, the group can choose to incorporate under Chapter 185 or Chapter 193 of the state statutes by filing Articles of Incorporation with the Wisconsin Department of Financial Institutions. The Articles provide the basic organizational information required by state statutes.
The steering committee often acts as the interim board of directors. It may draft the Articles and the initial set of bylaws, which describe how the cooperative is governed. Articles and bylaws should be reviewed by a lawyer familiar with cooperatives. Bylaws must be adopted or amended by the cooperative’s members at the first membership meeting.
Sample Articles of Incorporation . USDA Cooperative Information Report 7, How to Start a Cooperative, 2015.
Guidelines for Cooperative Bylaws. University of Wisconsin Center for Cooperatives, 2019.
For more, see our Legal & Taxation Resources page.
Once the cooperative is established, the interim board of directors should open a bank account for cooperative financial transactions. In many cases, a group will incorporate earlier in the process so that the cooperative can receive funds and pay initial expenses.
Prepare a business plan.
A business plan is an in-depth analysis of and plan for the cooperative business. It is also an important communication tool for answering questions that potential members will have about the proposed cooperative. Banks and other funding sources will want to assess the business plan as part of their financing decisions. The business plan includes:
• Description of the goods or services offered; • Market analysis; • Marketing plan; • Operational plan; • Description of the management and ownership structures; • Sources and uses of start-up funds; • Projected financial data for the first five years of operations.
A membership meeting is held within six months of incorporation to elect the first board of directors and to present and approve the bylaws. The board of directors begins coordinating the business plan implementation and works to secure start-up capital.
The Circle of Responsibilities for Co-op Boards . USDA Cooperative Information Report 61, 2014.
Benefiting from the Board: A Case Study . UW Center for Cooperatives, 2008.
For more resources see our Governance Resources page.
Begin membership drive.
The membership drive will indicate whether there is sufficient member support for the new cooperative. Materials for prospective members should clearly explain the cooperative’s mission, the financial requirements for membership, and the risks and benefits of membership. Some groups launch the membership drive earlier in the development process.
Cooperative Equity and Ownership: An Introduction . UW Center for Cooperatives, 2013.
A cooperative may use both debt and equity to meet its initial capital needs. Cooperatives may also use member loans or preferred stock to raise start-up capital. Lending institutions will evaluate the risks associated with making a loan to the start-up cooperative business by analyzing the financial projections in the business plan and ensuring the co-op has capable staff lined up. Lenders will also look at the amount of member equity invested in the cooperative, since this indicates the level of risk and commitment that members are willing to assume. Members will typically be expected to supply 30-50% of the start-up equity capital. The cooperative will need to borrow the balance from a financial institution. Banks, credit unions, and loan funds that are specifically oriented to cooperatives and understand their unique structure can be important resources.
The board hires a general manager, who plays a key role in securing the operations site, developing vendor networks, and hiring additional staff. Some groups hire staff earlier to assist with the development process.
There are often specific licensing or regulatory requirements that must be met before the business can begin operations. Legal, insurance, and risk management issues must also be addressed before launching.
Ongoing member education and board training are vital to establishing a sustainable foundation for successful cooperative operations. Education topics might include the cooperative model, cooperative finance and governance, industry trends, and working together effectively.
You don’t have to do it alone! There are lots of great resources available, as well as co-op development centers all over the country that can help you get started.
Steps for Starting a Cooperative . USDA Powerpoint, 2016.
Cooperative Development Centers by State
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.
Last Updated: January 18, 2023 References
This article was written by Jennifer Mueller, JD . Jennifer Mueller is an in-house legal expert at wikiHow. Jennifer reviews, fact-checks, and evaluates wikiHow's legal content to ensure thoroughness and accuracy. She received her JD from Indiana University Maurer School of Law in 2006. There are 8 references cited in this article, which can be found at the bottom of the page. This article has been viewed 26,942 times.
Cooperative businesses are voluntary organizations composed of people united towards a common goal. These members participate and share in the traditional business functions such as training and providing services. In exchange for their participation, they all receive a share of the business's profits. Cooperative businesses have become increasingly popular in the United States. Setting up a cooperative business is essentially similar to setting up any other kind of business, although a cooperative typically requires more planning at the outset for it to be successful. [1] X Trustworthy Source U.S. Small Business Administration U.S. government agency focused on supporting small businesses Go to source [2] X Research source
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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:
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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What is a co-op, what is a co-op.
Who owns a business determines the type of entity it is. When an individual owns and operates a company, it’s often a sole proprietorship. When two or more people own a company, it’s often a partnership. A company can incorporate, forming a corporation that is owned by fewer than 100 people (an S-corp) or hundreds or even thousands of people (a C-corp).
When the people who use the products and services a company has to offer own and operate the company, it’s known as a cooperative. Aside from the ownership structure, there are a few other distinct features that set cooperatives apart from other types of business.
How does a cooperative work, co-op ownership and control, 7 cooperative principles, what types of co-ops are there, what is the purpose of a co-op, why co-ops matter today, the benefits of cooperatives.
The International Co-Operative Alliance defines a cooperative, or co-op, as “an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically controlled enterprise.” In other words, cooperatives are created by people who have a specific need and who are willing to work together to operate and organize a company that will meet that need.
To an outsider, a cooperative might look very similar to any other type of corporation. For example, if you were to visit a grocery store cooperative, it is very likely that it will look like any other grocery store. There will be aisles full of food and checkout registers where people can make their purchases.
But if you were to look more closely, or take a peek behind the scenes, you’d be likely to notice that the food co-op operates slightly differently from a typical grocery store. For one thing, it’s likely that the people who are members of the cooperative, or part-owners of the co-op, are also working at the co-op, stocking the shelves and ringing customers up at the register.
For another thing, some cooperatives limit who can shop there or use their services. In some cases, only members of a cooperative can shop at it. Some cooperatives are open to all, but provide special incentives to members, such as a discount on products or services.
Why are people who are members of a food co-op willing to volunteer or donate their time to work at the co-op? In part because of the community focus of a cooperative and the values behind co-ops. Among those values are:
People who join cooperatives or who are among the founding members of a co-op often have the same shared values, meaning they are willing to work together towards a common goal. One of those goals is to create a better world by working together and by shifting the focus of the business to place people over profit to build a more inclusive economy.
The people who benefit from the products or services of a cooperative business own the cooperative business. In the case of a grocery co-op, the people who shop at the store are owner-members. In the case of co-op housing, the people who live in a particular building are members of the cooperative that owns the building.
Just as the stockholders or shareholders of a business have a say in the ownership and operations of a company, the member-owners of a co-op have a say in how the cooperative operates. The crucial difference is that in the case of other types of corporations, the size of their ownership stake affects how much of a say or how much control an owner has over the company. A shareholder who owns 50% of a corporation will have more votes or more control over the operation of the company compared to a shareholder who owns 2% of a corporation.
That’s not the case with a co-op. As equity and equality are among the founding principles of a cooperative, each member-owner of a co-op gets one vote. The opinion of one co-op member does not have more weight than the opinion of another co-op member.
Cooperatives often elect a board of directors. The responsibilities of the co-op board include ensuring that the cooperative is working towards achieving its mission, setting up operational policies for the co-op and hiring any outside managers or other employees.
Members of a co-op’s board are members of the cooperative itself. They are typically elected to the board by a member vote. Some board members also serve as officers, such as president, vice president, secretary and treasurer. Board officers have additional responsibilities and duties, which members can find in the cooperative’s by-laws.
The International Co-Operative Alliance adopted seven cooperative principles in 1995. These guiding values are based on a set of principles known as the Rochdale Principles, which were first created in 1844 . The cooperative principles create guidelines for co-ops to follow and allow co-ops to put their values into action.
Cooperatives can be large or small, can exist in a range of industries or sectors and can take multiple forms, based on who the member-owners of the co-op are. A few examples of cooperative types include:
A cooperative business can operate in nearly any industry or sector, but you are more likely to see co-ops in the following areas :
Agricultural co-ops have been in existence for centuries. In early agricultural cooperatives, members pooled their resources to help farmers secure land and supplies. Today, more independent farms are beginning to work together to achieve long-term success. Some examples of agriculture cooperatives include Sunkist Growers Inc. and Tillamook County Creamery Association .
Insurance co-ops function in two ways. The first is through cooperative insurance that fully covers all co-op members. The second is through insurance companies that apply the co-op business model. With the cooperative business model in place, organizations such as the National Association of Mutual Insurance Companies and the International Cooperative Alliance can focus on policyholders to provide full coverage at a reasonable cost.
Financial services co-ops such as a credit union help to strengthen the economy by granting account members ownership over the financial institution. Account members receive the revenue they earn as owners through higher dividends, fewer fees and low-interest rates. National and international organizations such as Credit Union National Association and World Council of Credit Unions work to promote the mission of cooperative financial institutions.
In a grocery co-op , the customers are the owners and can purchase shares to participate in decision-making and receiving profits. However, everyone is welcome to shop at a grocery co-op without being a member. Grocery cooperatives help their communities by giving money back to the local community through their employees, members and neighbors. Examples of grocery cooperatives include National Co-op Grocers and the Neighboring Food Co-op Association .
Education co-ops exist at the early education levels all the way up to undergraduate programs. A preschool education cooperative allows parent members to determine policies and serve on committees to reduce costs. Many universities, such as Cornell University , also offer a co-op education program where students gain professional experience for course credit.
Healthcare cooperatives do not pursue profit to help patients save money on their medical bills and insurance. As more patients join a cooperative healthcare plan, the cost spreads out among more members, and the amount each patient has to pay goes down. Healthcare co-ops exist worldwide, and many cooperative alliances such as Cooperatives for a Better World work to support and defend the co-op business model.
In many major cities, housing co-ops are apartment complexes, single-family homes, mobile home parks or student housing that empowers people with homeownership and responsibility. Each resident is a stakeholder with a particular focus on the needs and interests of the group. Many U.S and international associations advocate and promote housing cooperatives such as Co-operative Housing International .
Utility and energy co-ops help local communities by managing public services such as electricity, water and telecommunications. Each member is a shareholder and can express an opinion about the governance and delivery of services. Examples of utility co-ops include organizations such as A&N Electric Cooperative and Basin Electric Power Cooperative .
Why do co-ops exist? The purpose of a cooperative is to realize the economic, cultural and social needs of the organization’s members and its surrounding community. Cooperatives often have a strong commitment to their community and a focus on strengthening the community they exist in or serve. When a co-operative does well financially or economically, the community served by the co-op benefits, not just a small group of shareholders.
Co-ops offer multiple benefits to their members and the community around them. From a business point-of-view, cooperatives offer their members the benefit of limited liability. If the co-op should have financial difficulties or accused of wrong-doing, the individual member-owners are not personally responsible for the problems faced by the cooperative.
The structure of a co-op means that it can transfer shares from one owner to another. If a member moves out of the area, dies or no longer wants to be part of a cooperative, they can sell their stake or membership in the co-op to someone else. The cooperative itself will survive even once all of the original members have moved on.
From a social justice and democratic point-of-view, cooperatives matter today because they help to rebalance power and dilute the concentration of wealth. In the U.S., the wealthiest 1% of households have more wealth than 90% of households . The cooperative model creates shared prosperity, allowing more people to participate in the economy. Instead of a few people owning the bulk of every business, ownership resides with the people.
As the cooperative model uses the concept of “one member, one vote,” it also helps to level the playing field. People don’t get to have more of a say or more power simply because they happen to own a more significant portion of a company.
The cooperative model is also proving to be beneficial for the growth of small businesses in the U.S. As baby-boomer business owners approach retirement age, many are selling the companies they own to their employees , effectively turning the businesses into worker co-ops. Turning privately-held businesses into worker co-ops not only benefits the employees of those companies, who become the owners of the businesses that employ them, but it also benefits the businesses themselves. On average, companies see a 5% increase in productivity the year they become a worker co-op. That productivity level continues in future years.
The benefits of cooperatives are visible across multiple areas. NCBA CLUSA , the Cooperative Development Foundation and the Urban Institute worked together to identify seven areas where the benefits of the cooperative structure have the most impact. The organizations dubbed those seven areas the “ ABCs of Cooperative Impact .”
Among the measurable benefits and areas of impact are:
Around the world, there are about 3 million cooperatives , and about 12% of the human population are members of a co-op. About 10% of the world’s population, or around 280 million people, are employees at co-ops. In the United States, there are around 65,000 cooperative establishments , and one out of every three people is a member of a cooperative.
The number of co-ops in the U.S. varies by sector and type. For example, there are between 300 and 400 worker-cooperatives in this country. Worker co-ops employ around 7,000 people and produce in the neighborhood of $400 million in annual revenue. In the financial services sector, there were more than 5,500 federally insured credit unions in the U.S. at the start of 2018. More than 112 million people were members of a credit union during the first quarter of 2018, and nearly 5 million people joined a credit union during that time. Another popular type of cooperative in America is the grocery store co-op, and there are between 300 and 350 retail cooperatives in the U.S .
Grocery cooperatives considerably impact their local economy, as many offer products from local farmers and producers. Locally-produced products make up about 21% of sales at grocery co-ops , compared to less than 2% of sales at supermarkets and grocery stores. Grocery co-ops are also more likely to give back to their community, particularly in the form of food donations. In 2016, co-ops donated more than 1.5 million pounds of food.
NCBA CLUSA aims to advance, protect and develop cooperative enterprise. We’re happy to answer any questions you have about cooperatives and about the work we do to advocate for co-ops worldwide. Contact us today to learn more. You can also join us as an individual, cooperative or associate member to help promote the work we do and the cause of cooperatives across the United States and around the world.
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What is moscow prioritization.
MoSCoW prioritization, also known as the MoSCoW method or MoSCoW analysis, is a popular prioritization technique for managing requirements.
The acronym MoSCoW represents four categories of initiatives: must-have, should-have, could-have, and won’t-have, or will not have right now. Some companies also use the “W” in MoSCoW to mean “wish.”
Software development expert Dai Clegg created the MoSCoW method while working at Oracle. He designed the framework to help his team prioritize tasks during development work on product releases.
You can find a detailed account of using MoSCoW prioritization in the Dynamic System Development Method (DSDM) handbook . But because MoSCoW can prioritize tasks within any time-boxed project, teams have adapted the method for a broad range of uses.
Before running a MoSCoW analysis, a few things need to happen. First, key stakeholders and the product team need to get aligned on objectives and prioritization factors. Then, all participants must agree on which initiatives to prioritize.
At this point, your team should also discuss how they will settle any disagreements in prioritization. If you can establish how to resolve disputes before they come up, you can help prevent those disagreements from holding up progress.
Finally, you’ll also want to reach a consensus on what percentage of resources you’d like to allocate to each category.
With the groundwork complete, you may begin determining which category is most appropriate for each initiative. But, first, let’s further break down each category in the MoSCoW method.
Moscow prioritization categories.
As the name suggests, this category consists of initiatives that are “musts” for your team. They represent non-negotiable needs for the project, product, or release in question. For example, if you’re releasing a healthcare application, a must-have initiative may be security functionalities that help maintain compliance.
The “must-have” category requires the team to complete a mandatory task. If you’re unsure about whether something belongs in this category, ask yourself the following.
If the product won’t work without an initiative, or the release becomes useless without it, the initiative is most likely a “must-have.”
Should-have initiatives are just a step below must-haves. They are essential to the product, project, or release, but they are not vital. If left out, the product or project still functions. However, the initiatives may add significant value.
“Should-have” initiatives are different from “must-have” initiatives in that they can get scheduled for a future release without impacting the current one. For example, performance improvements, minor bug fixes, or new functionality may be “should-have” initiatives. Without them, the product still works.
Another way of describing “could-have” initiatives is nice-to-haves. “Could-have” initiatives are not necessary to the core function of the product. However, compared with “should-have” initiatives, they have a much smaller impact on the outcome if left out.
So, initiatives placed in the “could-have” category are often the first to be deprioritized if a project in the “should-have” or “must-have” category ends up larger than expected.
One benefit of the MoSCoW method is that it places several initiatives in the “will-not-have” category. The category can manage expectations about what the team will not include in a specific release (or another timeframe you’re prioritizing).
Placing initiatives in the “will-not-have” category is one way to help prevent scope creep . If initiatives are in this category, the team knows they are not a priority for this specific time frame.
Some initiatives in the “will-not-have” group will be prioritized in the future, while others are not likely to happen. Some teams decide to differentiate between those by creating a subcategory within this group.
Although Dai Clegg developed the approach to help prioritize tasks around his team’s limited time, the MoSCoW method also works when a development team faces limitations other than time. For example:
What if a development team’s limiting factor is not a deadline but a tight budget imposed by the company? Working with the product managers, the team can use MoSCoW first to decide on the initiatives that represent must-haves and the should-haves. Then, using the development department’s budget as the guide, the team can figure out which items they can complete.
A cross-functional product team might also find itself constrained by the experience and expertise of its developers. If the product roadmap calls for functionality the team does not have the skills to build, this limiting factor will play into scoring those items in their MoSCoW analysis.
Cross-functional teams can also find themselves constrained by other company priorities. The team wants to make progress on a new product release, but the executive staff has created tight deadlines for further releases in the same timeframe. In this case, the team can use MoSCoW to determine which aspects of their desired release represent must-haves and temporarily backlog everything else.
Although many product and development teams have prioritized MoSCoW, the approach has potential pitfalls. Here are a few examples.
One common criticism against MoSCoW is that it does not include an objective methodology for ranking initiatives against each other. Your team will need to bring this methodology to your analysis. The MoSCoW approach works only to ensure that your team applies a consistent scoring system for all initiatives.
Pro tip: One proven method is weighted scoring, where your team measures each initiative on your backlog against a standard set of cost and benefit criteria. You can use the weighted scoring approach in ProductPlan’s roadmap app .
To know which of your team’s initiatives represent must-haves for your product and which are merely should-haves, you will need as much context as possible.
For example, you might need someone from your sales team to let you know how important (or unimportant) prospective buyers view a proposed new feature.
One pitfall of the MoSCoW method is that you could make poor decisions about where to slot each initiative unless your team receives input from all relevant stakeholders.
Because MoSCoW does not include an objective scoring method, your team members can fall victim to their own opinions about certain initiatives.
One risk of using MoSCoW prioritization is that a team can mistakenly think MoSCoW itself represents an objective way of measuring the items on their list. They discuss an initiative, agree that it is a “should have,” and move on to the next.
But your team will also need an objective and consistent framework for ranking all initiatives. That is the only way to minimize your team’s biases in favor of items or against them.
MoSCoW prioritization is effective for teams that want to include representatives from the whole organization in their process. You can capture a broader perspective by involving participants from various functional departments.
Another reason you may want to use MoSCoW prioritization is it allows your team to determine how much effort goes into each category. Therefore, you can ensure you’re delivering a good variety of initiatives in each release.
If you’re considering giving MoSCoW prioritization a try, here are a few steps to keep in mind. Incorporating these into your process will help your team gain more value from the MoSCoW method.
Remember, MoSCoW helps your team group items into the appropriate buckets—from must-have items down to your longer-term wish list. But MoSCoW itself doesn’t help you determine which item belongs in which category.
You will need a separate ranking methodology. You can choose from many, such as:
For help finding the best scoring methodology for your team, check out ProductPlan’s article: 7 strategies to choose the best features for your product .
To make sure you’re placing each initiative into the right bucket—must-have, should-have, could-have, or won’t-have—your team needs context.
At the beginning of your MoSCoW method, your team should consider which stakeholders can provide valuable context and insights. Sales? Customer success? The executive staff? Product managers in another area of your business? Include them in your initiative scoring process if you think they can help you see opportunities or threats your team might miss.
MoSCoW gives your team a tangible way to show your organization prioritizing initiatives for your products or projects.
The method can help you build company-wide consensus for your work, or at least help you show stakeholders why you made the decisions you did.
Communicating your team’s prioritization strategy also helps you set expectations across the business. When they see your methodology for choosing one initiative over another, stakeholders in other departments will understand that your team has thought through and weighed all decisions you’ve made.
If any stakeholders have an issue with one of your decisions, they will understand that they can’t simply complain—they’ll need to present you with evidence to alter your course of action.
Related Terms
2×2 prioritization matrix / Eisenhower matrix / DACI decision-making framework / ICE scoring model / RICE scoring model
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Business Planning for Co-oPerativesAll co-operatives, regardless of thei. size or type need a business plan. A business plan helps clarify the activities for the co-operative and identifies the logistics, resources and fina. ces needed for it to be successful.All co-operatives should be able to prepare forecast financial statements that ...
What Is a Cooperative? And How Do You Start One?
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.
Step 5: Prepare a Business Plan. Feasibility study acts as the foundation of this plan. The Business Plan provides a plan of action and specifics on how the cooperative business will operate. Go over plan in detail, adjust, and finalize. Step 6: Employ Legal Council for Legal Papers.
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.
Operational plan. A new co-operative should explain how the co-operative will be run: the daily routines, people and functions that will make the co-operative run smoothly and successfully. Keep in mind the democratic nature of your co-operative and its social purpose; make it the focus of your actions.
Here are some just a few things a new board will do in the first year: Create a strategic plan. Write a Human Resources policy. Write a Conflict of Interest policy. Recruit members. Evaluate itself. If starting a co-op is your goal, Co-operatives First can be there every step of the way. Contact us to get started.
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.
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 ...
An exercise like the Business Model Canvas can help align everyone behind the work that needs to be done. You "create a shared language" to cooperate, says Osterwalder. The canvas exercise also helps support all three pillars of good co-op governance. It helps form a vision everyone can get behind, and helps create a map for making ...
From Spain's seventh-largest business, Mondragon Corporation, a federation of worker cooperatives that employs over 90,000 people, to Wisconsin's Isthmus Engineering, with its 29 co-owners, cooperative businesses are thriving. Arguably the most well known, Mondragon is now 54 years old and has outperformed private sector companies on employee ...
Steps to Startup. Starting a cooperative presents a unique opportunity for a group of people to meet a shared economic or social need. As democratically governed businesses, cooperatives can be a great way to structure a business that is guided by member values. As with any new venture, starting a cooperative requires good ideas, expertise ...
9 Advantages of the Cooperative Business Model
Your co-op's business plan should be treated as a living document. As circumstances change, change your objectives to maintain their realism, challenge, and motivational impact. Regularly. refer back to the plan and revise it as you gather new information, knowledge and experience. The document is not written in stone and as your co-op ...
Choose Your Business Structure: Cooperative
P.O. Box 166140. Chicago, IL 60616 USA. (773) 404-2667. [email protected]. 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 ...
Select a unique name. If you intend to incorporate your cooperative, you must come up with a unique business name. Check with the secretary of state's office in the state where you plan to open your cooperative. [16] The secretary of state typically will have a business name database.
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 ...
Organic Valley is an example of a farmer and independent business co-op. Purchasing co-ops: Purchasing co-ops are several small businesses that have joined together to improve their purchase power and to get better discounts and offers on products and services. ... As more patients join a cooperative healthcare plan, the cost spreads out among ...
The Moscow Food Co-op is a cooperatively-owned grocery store in Moscow, Idaho that is open to everyone. We started with some fresh local produce, a few bulk bins, and a ton of big ideas. Now, 50 years later, we've grown to over 7,700 owners strong: a community of food-loving individuals who put local and natural products first.
Visit the Moscow Food Co-op in Moscow Idaho and discover more of area's local businesses and the services and amenities in the local Moscow area.
Monday - Friday from 6:45 a.m. - 4 p.m. *campus location is closed for most university and federal holidays. Please call for specific hour updates. In January 2018, The Moscow Food Co-op took its first step in growth by opening the Co-op on Campus, where students, staff, faculty, and more can buy organic coffee, fresh-made baked goods, packaged ...
MoSCoW prioritization, also known as the MoSCoW method or MoSCoW analysis, is a popular prioritization technique for managing requirements. The acronym MoSCoW represents four categories of initiatives: must-have, should-have, could-have, and won't-have, or will not have right now. Some companies also use the "W" in MoSCoW to mean "wish.".