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Creating a Preliminary Budget — A Guide

Creating a co-operative, like any business, requires a lot of time, effort, and (usually) money. Depending on the business you’re creating, you may need to raise a lot of cash — and keeping track of that cash is key. That’s where a preliminary budget comes in.

As a corporation or a co-operative, you have more options for raising money than simply trying to find it yourself. Not only does the co-operative structure bring multiple people together to invest in a business, it provides several options for how people can invest in the business.

Once you’ve formed a steering committee, draft a preliminary budget. A simple draft budget will help guide discussions about how to raise the capital you need. Use this template with suggested budget items to start planning.


Estimated Cost


Incorporation Costs


Usual cost is approximately $400

The cost of incorporating the co-op. There are small government filing fees for this. If you choose to hire a lawyer to help with the paperwork, it can drive up the cost considerably. 



Basic business plan is usually around 5 – 10K

It’s important to have a coordinated plan for your co-op. While you can create a business
plan yourself, a third-party consultant can give it the legitimacy funders might want to see.

Meeting Expenses


Usual cost is approximately $300

Creating a co-op often requires bringing a larger group together to get feedback and input on the business. Providing food and a space for these meetings comes with a cost.

Legal Fees



Depending on the co-op’s industry of operation, you might need to hire a lawyer to draw up agreements, contracts, policies, or licences.

Building costs
(3 months)

Depends on
market, size, and terms

Depending on the business of your co-op, it may need to purchase, build, or lease space. This can be particularly costly if there aren’t a lot of options and the co-op is responsible for retrofitting or maintaining the space.

Staff (3 months)

Depends on
number of staff and expected wages

The co-op may need to hire staff to deliver its operations. This can be costly but may be
necessary to the business. Consider raising at least 3 months’ wages before opening to give the co-op some time to generate sufficient cash flow from operations. Be sure to also consider contracted positions like a bookkeeper.


Depends on
industry and business needs

The co-op will likely have to purchase some equipment. This may only consist of a laptop,
but it might involve outfitting a full-service grocery store. Purchasing used equipment and being aware of applicable grants and tax deductions can help keep costs down.

Fees and

Depends on
industry and location

The co-op will likely have to pay certain fees and obtain licenses to operate. This might
include a municipal business licence, Microsoft Office, or QuickBooks.

Marketing and



Big or small, all co-ops should invest in communications. Whether this is some paid
advertising on Facebook or a full brand and communications plan, getting your co-op’s message out there and creating awareness is important for start-up success. Ongoing marketing is usually 10% of revenue. The development of a simple visual identity can cost anywhere from $500 to $5,000.

Education and

Depends on
number of staff and nature of training

The co-op’s staff and board may require some training before the co-op begins operations.
This might include training on governance, food safety, workplace safety, equipment training, etc. Be sure to check for free educational resources to keep costs down.



An expert business planning consultant will help identify accurate start-up cost estimates, but having a ballpark figure can help initiate some early financial planning.

Once the group has a sense of the costs of building the co-operative business written in the preliminary budget, think about where this money could come from. Generally, co-operatives draw on four sources for start-up funds.

  1. Membership investment: Co-operatives raise money from their members through membership shares or member loans. This investment gives members ownership rights in the co-op and members will likely expect a return on their investment, especially if it’s a larger amount. A lower cost of entry may encourage more members to join, which may be desirable for some co-ops.
  2. Investment shares: Co-operatives can issue non-voting investment shares to their members or the general public. These shares don’t give the holder voting rights but come with the promise of a larger, more regular pay back. There may be additional reporting requirements that come with issuing these shares.
  3. Free money (grants/sponsorship/fundraising): This is the best kind of money! Depending on the business the co-op is starting, there may be grants available to help cover some of the start-up costs. Also, community-focused projects may be able to get community support through fundraisers or donations. Select (non-profit) co-ops may be eligible for charitable status, which allows the co-op to issue tax-deductible receipts and can make people more likely to give donations. Platforms like Kickstarter also offer innovative methods of raising start-up capital.
  4. Debt: The most familiar form of finding money is debt. Whether a mortgage on a property, an inventory loan from a supplier, a line of credit, or a short-term loan from an equity firm, co-ops can take on various forms of debt. Be sure to read the terms and conditions of a loan carefully; some lenders will require members or a board of directors to secure a loan, making them liable for its repayment if the co-op defaults. Having property or equipment the co-op can use to secure loans will reduce this risk.

Consider creating a chart that can help plan out and identify sources of funds. This part of the preliminary budget will give the steering committee some goals to work towards and weigh the different sources and their impact on the co-op. Here are a few tips:




(Number of memberships) x (value of membership) = Member equity


(Number of investment shares) x (value of shares) = investor equity


Grant 1: $

  • Source:
  • Conditions:

Grant 2: $

  • Source:
  • Conditions:


Loan 1: $

  • Lender:
  • Interest rate:
  • Term:
  • Monthly payment:

Loan 2: $

  • Lender:
  • Interest rate:
  • Term:
  • Monthly payment:

Total cash
from financing


Total monthly


Debt : Equity

This ratio gives a snapshot of a co-op’s debt relative to its equity (ie. member and investor investments). Ideally, the co-op will have less debt than equity, which indicates it is less risky.

Enjoy this tool on creating a preliminary budget? Then you might also like our tips for using co-op start-up capital.


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