Step 1: Define the idea
Co-operatives, like any business enterprise, are formed to pursue an idea, be it a profit making one, a social purpose or a mix of both. The idea may be a new product or service, a new way to make a business or product work better or it may be solving a problem. It is important to be able to identify in simple terms what the business idea is and what a co-operative can do to make the idea a reality. Ask yourself some questions:
- If your idea is a new product, why is this new product needed?
- If your idea is solving a problem, what is the problem and what are the primary causes of the problem?
- What is your motivation for developing the new product or addressing the problem?
- Why haven’t other businesses or government agencies pursued this idea?
- If the idea has been pursued in the past and failed, what is it about your business idea that would do any better?
- What is it about your business idea that would do any better than existing products or services?
- What benefits would users or members of a co-operative receive from the business idea?
Step 2: Is a co-operative the right choice?
It is important to understand why a co-operative model is appropriate or better suited to addressing the problem than other business models. In Australia, there are broadly two types of incorporated business models: companies and co-operatives. Both types of business model can be either for profit or not for profit.
Co-operatives are based on the notion that a group of people working together will achieve more than a single person alone. The co-operative business model is designed so that each member is fairly treated, has an opportunity to be part of the board and has an equal vote at meetings. Co-operatives have a commitment to benefit their communities. They are often described as the original social enterprise model.
Members of a co-operative may be geographically close, or they may be spread across vast distances. Technology platforms can facilitate discussions, meetings and voting to connect members with their co-operative, enhance engagement and democratic participation to develop new products or services.
Check out the linked resources below to learn more about co-operative business models and their benefits.
- What do you find attractive about the co-operative principles and values?
- What are the benefits of a co-operative model for your business idea?
- Do you want each member to have an equal say in how the business is run?
Step 3: Who will benefit from the co-operative
Once you have a good understanding of the business idea and have decided a co-operative is the right model, you need to think about who are likely to be the members. Identifying the members also helps you refine what things the co-operative will do and what the members need to do to participate. Co-operatives are often classified according to who their members are:
Members jointly purchase programs and services, improving value for money and access to expert advice.
The members of a worker co-operative are the employees of the co-operative. This empowers employees with a stake in the organisation’s decision-making process.
Smaller businesses can group together in producer-owned co-operatives (also known as enterprise co-operatives) to share supply chain costs to reach markets that would otherwise be dominated by large investor-owned firms.
Platform co-operatives are co-operatives that might have members who are producers, customers or workers. A platform is any technology that enables people to create a network to share data and information. A platform co-operative is owned by its members.
Multi-stakeholder co-operatives formally allow for governance by representatives of two or more “stakeholder” groups within the same organisation, including customers, producers, workers, volunteers or general community supporters.
- What is the primary purpose of your co-operative?
- Who will receive the most benefit from membership?
Step 4: Who will drive the idea?
To register your co-operative you must have at least five members. A member may be an individual or they can be other businesses or corporations. The first members play an important role in establishing and building the co-operative and providing leadership and focus to set up the operations of the co-operative.
Co-operatives are governed by a board of directors and you will need to find your initial directors from amongst the first members of the co-operative.
The first members need to be prepared to give time and effort to examining the feasibility of a co-operative and preparing the co-operative’s road map towards start-up and success.
If your members do not have the required skills, consider employing professionals such as legal consultants, accounting and financial advisors, co-operative advisors and business advisors.
- What skills and capability are needed to help establish the co-operative?
- What level of activity will members have in the co-operative?
- What will be the roles and responsibilities of the members?
Step 5: Feasibility study
When you have a number of members interested in your products and services, you will need to undertake a feasibility study. A feasibility study precedes a business plan and will help you determine the viability of your co-operative. It should be a consolidation of answers to questions you have asked along the journey, but should answer one key question: will your co-operative be financially viable?
Federal, state and local government agencies offer grants and other assistance for new businesses. It is worth investigating agencies in your area or relevant to your area to find what help may be available. This could be either links to small business agencies or perhaps a single link to the Advice and Resources tab that shows a whole range of funding or advice options – for example, Launch Vic or even the NAB grants and Small Giants.
- How many members are expected to join?
- What benefits would your members expect?
- What is the potential size of the market?
- Who will your key competitors be?
- What makes your idea attractive to members?
- What are the risks, benefits, strengths, weaknesses and threats?
- What are the costs of establishing and operating the co-operative?
- How much money will need to be raised?
- How long before you expect to break even?