Choosing a co-op type is an important step in developing a co-op. Co-operative businesses use a variety of structures to deliver services. Likewise, the right type of co-op model can help you create a strategy for your business and recruit members or shareholders. So, when choosing a co-op type, it’s important to choose the right one for your situation.
Below is an overview of the different types of co-operatives, along with some examples.
Producer or marketing co-operatives are created by a group of people who produce things or share market interests. These people (often independent business owners, such as accountants, artists, farmers, and fishers) are generally from the same industry and share similar expenses and challenges.
To reduce input costs, producers form a co-op to purchase things as a group, share administrative costs, and increase the value of their products through collective marketing. Producer co-ops are a great way to achieve economies of scale, enter new markets and acquire resources. In short, working together can lower the cost of doing business. It can also help small businesses enter larger, more lucrative markets. Some examples of this co-op type includes: Ocean Spray, RedHat, and the Ashern Cattlemen’s Association.
Consumer co-operatives are the most recognizable type of co-op in western Canada. In this model, those who use the co-op’s services are the shareholders (members). In western Canada, this is a popular model for financial services (credit unions) and retail businesses, like gas stations and grocery stores. However, you can also find consumer co-ops in sectors such as telecommunications, child care, and infrastructure services. Some examples include Mountain Equipment Co-op (MEC), Servus Credit Union, and the La Ronge Daycare Co-operative.
Worker co-ops are owned and operated by their employees. This model has been used in situations when business owners retire and their workers buy the business and run it themselves. Not every employee of a worker co-op has to be an owner — the business can still hire non-member staff or contract workers.
Worker co-operatives are in all industries, usually as an alternative to a partnership business model. Popular sectors to find worker co-ops include: consulting agencies, breweries, small retail, and manufacturing. London Brewing Co-op, ALIF Partners, and Planet S Magazine are great examples.
These co-operatives provide people with alternative (and often local) places to invest their money. Many investment co-ops are created for reasons other than just wealth creation, including solar energy production and small business financing. Investment co-ops often sell shares and some allow shareholders to invest a portion of their RRSP or TFSA in the business. Some examples include the Alberta Solar Co-op, the Sangudo Opportunities Development Co-operative, and the Creston and District Community Investment Co-op.
These co-operatives are formed when there are different interest groups that would benefit from being included in the co-op. Not all provinces make it easy to start multi-stakeholder co-operatives. Saskatchewan, for example, does not have provisions for multi-stakeholder co-ops in its Co-op Act, but does allow groups to file an appeal to request additional share classes. The governance of these co-ops can be trickier, because the different groups may have different — and sometimes conflicting — views or interests. Having a good set of bylaws that clearly set out the co-op’s processes and procedures can help the group avoid (or at least minimize) conflicts. Some examples of multi-stakeholder co-ops include Stocksy United and the Weaver Street Market.
These agriculture-specific co-ops have their own legislation in the western provinces. This structure combines the characteristics of co-operatives and investor-owned firms, which gives producers more flexibility. New Generation (or “New Gen”) co-ops usually involve creating a value-added agricultural facility — and that takes a big capital investment from shareholders. These co-ops provide delivery rights to producers (ranchers, farmers, etc.) that want a stable price for their products. This involves processing their products to add value, which creates local jobs as well as wealth for shareholders. Some examples of New Gen co-ops include Westlock Terminals, The Alberta Egg Producers Co-operative, and the North American Bison Co-operative.
The purpose of a housing co-op is simple: to provide housing to members. Housing co-ops can be for-profit (where members have individual ownership of their unit) or non-profit (where members collectively own the facility). However, many provincial regulations require housing co-operatives to incorporate as a non-profit. Housing charges are determined by the collective cost of the co-operative and are shared equitably among members. This is often used as a solution for low-income housing that allows home ownership. The Co-operative Housing Federation of Canada (CHF) upholds a list of all Canadian housing co-ops including vacancies.
These co-operatives are typically non-profit and usually perform a social function. Usually formed with an open membership, community service co-ops allow anyone to participate in their governance. Common uses of the model include community halls, recreation centres, and social programming. These co-operatives often rely on volunteers to make up their boards of directors. Some examples include Crocus Co-operative, Access Communications, and the Association of Co-operative Counselling Therapists of Canada.
Here are a few questions to ask when forming a co-op to help you figure out what type will suit your business best.
As we outlined above, the type of co-op is determined by who owns/uses it. So if the people who produce the goods your co-op sells are in charge of making decisions and will get a share of the profits, a producer co-op is the best fit. If the co-op will be owned by its employees and they share the profits, it’s a worker co-op (and so on).
If you have any questions about choosing a co-op type for your business idea, contact us! We’ll help you figure it out.
Was this useful?
Need a business plan? Start here. The Biz Plan Creator is an easy-to-use and helpful tool. Designed to guide you through the process, the Biz Plan Creator offers a user-friendly platform and clear advice at every stage. Plus, it includes a secure account and customized branding of your plan. So, you can leave and come back to your plan as needed. And when you’re done, a branded PDF business plan ready for investors and financiers is your reward.