|
August 2006
Français
Cooperative Development Services
|
|
Building a Co-op Enterprise |
|
Cooperatives
(co-ops) are a unique form of
business that provide a number of
benefits including contributing to community sustainability and
wellbeing. Common among successful start ups of new co-ops is the
completion of a thorough due diligence process. Anyone considering
creating or expanding a co-op should follow the same full due
diligence process as would be case when assessing a traditional
business proposal.
The
process to determine whether or not to move forward with any project
should include the following steps at minimum:
As
with traditional forms of business, it is important to note that many
factors affect the viability and sustainability of a co-op, the most
influential being:
- a
strong market place (i.e. demonstrated need)
- management
capable of successfully implementing the business plan
- members
willing to finance and support the co-op.
Step by Step Process for Creating / Expanding a
Co-op
1) Identify the Opportunity
- Every new business venture begins with an idea. It
could be a new product or service, or a variation on an existing
one. Often the process to start a co-op begins with a group
realizing they share a common challenge or need, or they perceive
an opportunity of common interest.
Back
to Top
2)
Determine
the Need and Support for the Project
- Once the need / potential for a co-op is confirmed,
arrange a meeting with potential members where the project
sponsors can present the idea, its benefits and costs, and obtain
feedback from interested parties.
- It
is a good idea to survey potential members to measure the concept,
evaluate the volume of business that may exist and to determine if
people are willing to contribute financially to the project.
- If
sufficient interest to proceed exists, create a Steering Committee
to manage the feasibility study step.
Back
to Top
3)
Undertake
a Feasibility Study
- There
are many ingredients that go into creating a successful co-op. One
of the key elements is ensuring that the feasibility study step is
performed well. Its results will become the cornerstone for many
subsequent decisions.
- For
the most part, development of a new co-op usually requires
assistance from experienced outside resources, such as lawyers,
accountants, community leaders and industry experts. These
resources will help you to develop reasonable and appropriate
organizational structures and sound business and financial plans.
- Ideally
the feasibility study should be done by someone who is an industry
expert and is independent of the potential co-op membership. Note,
the cost of the feasibility study may be partially offset by
government
programs or other
sources.
- Potential
members will be required to make an up front financial
contribution to cover the costs of the feasibility study. Should
there be a reluctance to provide the up front financial
contribution, caution should be exercised as this may be an
indication of a lack of commitment to building / expanding the
co-op.
- The
results of the feasibility study will provide you with the
information you need to assess the project’s potential for
success and make a sound business decision. However, it is not a
guarantee, and the decision to proceed with the venture and how
best to go about it should rest with the potential members.
Back
to Top
4)
Select a Champion
- Once
the feasibility study has been completed, select a champion to
present it to potential members and potential stakeholders such as
funders, suppliers, and customers.
- Note
the champion often becomes the person charged with managing
subsequent development steps of the project.
- Minimum
skills / attributes your champion should possess include:
- An
understanding of how co-ops function (administratively and
financially)
- An
understanding of business development processes and practices
- An
understanding of the feasibility study process
- The
ability to interpret what the feasibility study results indicate
- The
ability to communicate effectively with potential members
- The
ability to build consensus with potential members
- Credibility
with potential members (i.e. may be a stakeholder)
- Genuine
enthusiasm for the project
Back
to Top
5) Incorporate and Raise Finances
-
Incorporate
to have a legal entity to negotiate the for the next steps of the
process
- Hold
a meeting and approve new members
- Elect
a Board of Directors
- Reaffirm
the champion and the ongoing role within the new co-op structure
- Appoint
committees
- Raise
the necessary funding to develop a business plan
Back
to Top
6)
Prepare a Business Plan
- A
business plan is a document providing a complete description of
the proposed co-op enterprise. The plan must include financial
projections, marketing opportunities and other pertinent
information about the venture. It must also address all issues
relevant to the project. Visit the
online business plan development utility.
- Once
the plan has been approved by the steering committee, present the
business plan to the potential membership. The information is
required to enable them to decide if they are willing to risk
investing equity in the new business.
- After
securing the members’ support, present the plan to the
individuals or organizations, especially potential stakeholders
such as lenders, suppliers and customers from whom the co-op is
seeking financial or other support. It is important that the
business plan explain:
- why
they should invest in the enterprise you’re proposing;
- the
seriousness of the enterprise; and
- the
team’s ability to launch and develop it successfully and to
repay any financial assistance.
Back
to Top
7)
Review
the Business Plan and its Assumptions with Potential Members
- Understanding
the business plan, its assumptions and demonstrating that the
project should be successful is key to giving members enough
information and confidence that they will be willing to supply the
necessary equity, attracting competent management and securing
lenders and other creditors necessary to operate the business
successfully.
- The
business plan should be studied by the potential members.
- Members
should demonstrate their willingness to proceed with developing
the project by providing the required capital, as set out in the
business plan, to attract the other stakeholders into the project.
- Before
embarking on a campaign to secure capital from members, you must
ensure that the appropriate approvals have been received from The
Registrar of Cooperatives for an
Offering
Statement or The
Securities Commission for an Initial Purchase Offering.
- If
the decision is made to proceed with the venture, the key areas to
address are the organizational structure management, and
implementation of the business plan.
Back
to Top
8)
Build
and Operate the Co-op
- Proceed
with the project only after the equity required by the business
plan is raised, funders, creditors, suppliers and customers are
confirmed to meet the volumes of business identified by the
business plan to at least break even.
- The
incorporators are the first directors and the only members until
new members are approved by the board. Arrange a meeting of
existing and potential members. Potential members should be
encouraged to formally join before the meeting in order to have
the right to vote. At the meeting, voting members should elect
directors, approve the bylaws, set out financial requirements of
membership and approve the implementation of the business plan. For
more information on Board of Directors' roles and responsibilities
visit the Saskatchewan's
Directors Handbook.
While there may be minor differences between
Saskatchewan and Manitoba’s cooperative legislation, the role of
a cooperative director remains essentially unchanged.
- Prepare
for business launch - Once the business plan has been approved,
identify leaders to run the equity drive. When the volumes of
business and equity targets set out in the business plan have been
met by the members and they are prepared to support and do
business with the co-op, the co-op is ready to launch the
business.
- Launching
the business will involve hiring management, acquiring or building
facilities, hiring and training staff and opening for business.
Back
to Top
9)
Periodically
Review and
Evaluate the Activities and Results Against the Business Plan
- It
is the responsibility of management to prepare this information
for the Board of Directors. The analysis should include
recommendations for amendments to the business plan. Operational
decisions within the guidelines of the business plan are best left
with management.
- The
annual general meetings of members should present audited
financial statements and the budget for the coming year. It is
useful to use the AGM to explain possible changes in direction in
the management or operations of the co-op as well as to do social
things that encourage members to attend and feel connected to the
co-op, as this connection is an important part of the ongoing
success of the co-op.
- An
on-going task within cooperatives is to continually re-examine its
governance methods and the roles and responsibilities of the board
and management.
Governance
Matters, a publication of the
Canadian Cooperative
Association, provides assistance on various governance models and
methods.
Back to Top
|
|
|