Cooperatives - More than getting by with a little help from your friends (and family) Self Determination Conference Wisconsin Dells November 9, 2010 Margaret M. Bau Cooperative Development Specialist USDA Rural Development 1
When you think cooperative What comes to mind? 2
What is a Co-op? A cooperative is a business owned and democratically controlled by the people who use its services. Member - owner Member - control Member - benefits 3
Co-op Symbol Twin Pines Pine tree is the ancient symbol of life Green chlorophyll Energy from the sun building block of life Two pines together Independent trees Intertwined roots and branches Circle of life Everyone gives Everyone receives 4
Various types of co-ops Defined by who owns the organization Consumer Co-ops Producer Co-ops Shared Services Co-ops Worker Co-ops 5
Why are co-ops formed? Traditionally a defensive strategy Unmet social, economic need Market power imbalances Now proactive True community ownership Co-op businesses are stronger and last longer Money stays local 6
America s Dairyland 1841 1 st co-op Anne Pickett pooled milk near Lake Mills, cheese to Milwaukee 1911 Wisconsin pioneered co-op law Active today 850 + in state 100 in Dane County Source: Greg Lawless, University of Wisconsin Center for Coopera;ves 7
Seven Co-op Principles Voluntary & open membership Democratic member control Member economic participation Autonomy & independence Education, training, information Cooperation among co-ops Concern for community 8
#1 Voluntary and open membership Membership open to all able and willing to accept the responsibilities of membership Include a pre-membership period Is the co-op a good fit for me and am I a good fit for the co-op? Provide meaningful information about membership Be sensitive to gender, social, racial, political, or religious discrimination 9
#2 Democratic member control One member-one vote Elected representation Members elect from among themselves a board of directors Transparent, fair decision-making Good communication 10
#3 Member economic participation Members contribute to and democratically control the capital of their business With net margins (profits) - balance needs of co-op (reserves) with cash to members (patronage refunds) Build up collectively owned (indivisible) reserves Investments are non-voting 11
#4 Autonomy and independence When entering into contracts or financial arrangements do so on terms that ensure Democratic control by members Autonomy for the co-op 12
#5 Education, Training, and Information Ongoing training in co-op basics, plus Participatory democracy Understanding financials Educate the public about co-ops 13
#6 Cooperation among cooperatives Co-ops serve their members and strengthen the co-op movement by working together at Local, regional, national, international levels Share information and good practices Bylaws, policies, peer meetings 14
#7 Concern for community Co-ops are rooted in the community Model for sustainability Triple bottom line Financial viability Member interests Environment and community 15
Values Cooperative Values Self-help Self-responsibility Democracy Equality Equity Solidarity Ethical Values Honesty Openness Social responsibility Caring for others Inspired by the Rochdale Pioneers, updated in 1995 by the International Cooperative Alliance 16
Which is a Co-op? 17
Key Steps to Start a Co-op 18
It All Starts With Idea! Could a group effort address the issue? 19
Explore the Idea What is the business concept? Is a co-op the best structure to meet our shared need? Discuss the idea in a Margaret Mead group 20
Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it s the only thing that ever has.! - Margaret Mead 21
Gather Information Co-op structure What is a co-op? Co-op vs LLC? Other co-ops in industry and region Co-op principles and values Ownership culture, participatory democracy Discuss your mission and values Indentify resources Project coordinator, co-op and biz consultants Define the business concept 22
Key Questions Sound business idea? Advantage to work as a group rather than alone? Co-op model the best structure? Idea worth doing? Time, resources, and energy Business, not a hobby 23
Exploratory Meeting At your discretion, depending on the project Present the concept If interest exists, form a steering committee Ask for earnest money Cover organizing expenses Best indicator of commitment 24
Decision Point If Proposal is realistic Co-op is a possible solution People show interest Then Proceed to analyzing business viability If not STOP 25
Analyze Business Viability Feasibility study Examination of the industry Business plan for your venture Organizes your thoughts Rationale to members for equity drive and lenders for borrowing money 26
Funding a Co-op Membership fees Initial Annual fees Transaction fees Per unit retains (i.e. 5% surcharge on each item sold) Hourly withholding Equity drive Common stock to members Preferred stock to members and investors; very limited voting rights Subsidized loans, grants Commercial rate loan 27
Decision Point If Market potential is sufficient Member participation is sufficient Capitalization chances look reasonable Then Proceed to incorporate If not STOP 28
Legal and Policy Documents Draft and adopt bylaws Select incorporators usually steering committee will serve as the interim board Incorporate with your state Develop policies and controls Accounting checks and balances Personnel policy handbook Membership agreements Board policies (conflict of interest) Wisconsin Statutes Chapter 185 29
Organizational Meeting Present business plan and answer questions Adopt bylaws Elect Board of Directors Collect member fees 30
Business Start-Up Immediate tasks after incorporation Tax ID number board & business insurance any licenses workers compensation Hire manager Manager hires other employees Acquire facilities, equipment 31
Begin Operations This is just the beginning 32
Organizing a Cooperative Start Up 3 Months 2 Years 33
Hint, hint Cooperative Resources Go Co-op National Cooperative Grocers Association http://www.go.coop/ University of Wisconsin Center for Cooperatives www.uwcc.wisc.edu Cooperatives in Wisconsin: The Power of Cooperative Action California Center for Cooperative Development www.cccd.coop USDA Cooperative Services Publications library www.rurdev.usda.gov/rbs/pub/newpub.htm What Is a Cooperative? Why Cooperatives Are Organized? National Cooperative Business Association www.ncba.coop 34
I Dream a Co-op What would you love to do? How would you branch out to others? 35
For More Information Margaret Bau Co-op Development Specialist USDA Rural Development (715) 345-7600 ext. 171 Margaret.Bau@wi.usda.gov 36