Resources on Cooperative Development

Before You Start...Guidelines for Success and the Pros and Cons of Forming a Co-op

Guidelines for Success

Green Mountain Spinnery in Vermont

• 1. Keep your focus
• 2. Keep members informed and involved
• 3. Build strong member leadership and commitment
• 4. Set realistic goals and assumptions
• 5. Conduct businesslike meetings
• 6. Follow sound business practices
• 7. Base decisions on market research rather than opinions
• 8. Create a comprehensive business plan
• 9. Use advisors and committees effectively
• 10. Forge links with other cooperatives
• 11. Identify and minimize risks
• 12. Maintain honest open communications
• 13. Invest in member, board, and staff education
• 14. Hire competent management
• 15. Raise sufficient capital
• 16. Establish a realistic market entry strategy
• 17. Make sure you have enough product to sell to a large enough market to make money.

Some Pros and Cons of Forming a Cooperative

Four Reasons Why You Might Want to Start A Co-op:

• 1. Cooperatives exist to meet their member's needs. Their focus is on service to members not on bringing a return to their investors.
• 2. Cooperative members are not penalized for working together in a cooperative business under US Tax Code, therefore many cooperatives enjoy tax advantages.
• 3. Cooperatives are owned and controlled by their members. They help keep resources in the members' community and are guided by the members' values. Decisions made democratically by the membership provide a strong direction that is supported across the organization.
• 4. Profits are returned to members so members benefit from the business they do with the cooperative.

Four Reasons Why You Might Want to Think Twice Before Starting a Co-op:

• 1. Sometimes cooperatives have difficulty gaining access to the capital they need without being able to bring on investors who have a seat on the board.
• 2. Cooperatives need to invest time and money in supporting their democratic process - educating members about key issues, holding meetings, and responding to member concerns. This can be expensive and time consuming.
• 3. Sometimes there are legal limits to the scope of operations or membership for a cooperative.
• 4. Cooperatives are only as good as their members ask them to be. When members stop investing time and energy, cooperatives can reduce the benefits they provide to their members.

Also, be sure to check out our cooperative resource library for more information.