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How to start a co-operative: a step-by-step guide

Starting a co-op? This article provides a step by step guide on how to start a co-operative. There’s a lot to do, and a lot to learn — but we have tons of supports, resources, and tools are available. This article provides a map to many of them.

A short note before we get started

Starting a business is exciting and rewarding, but it can also be frustrating.

At Co-operatives First, our job is to de-mystify the process of starting a co-operative business. That’s why we built this site. The Co-op Creator provides a variety of guides, tips, templates, and links. We’ve also developed an online course full of helpful videos to help you learn about this process — you can take that for free here

For the DIYers out there, this is ideal. But sometimes folks need more hands-on support. If that’s you, our knowledgeable staff is a phone call or email away.

Okay, let’s get started.

Step 1: Decide if a co-op is the right choice for your business

What do you want to do?

Agree on the purpose of the business. Maybe your community doesn’t have enough daycare options. Maybe you’re a professional with your own firm who wants to share the cost of office space and administration. Perhaps you’re a producer who needs help packaging, marketing, and distributing your vegetables. Whatever the case, everyone needs to agree to and buy into the purpose of the co-op. A good place to start is by asking the question: what problem are you trying to solve and how does working as a group help solve that problem? This resource can help you focus ideas and engage potential members and markets in the process.

Who will do it?

A co-op is a business run by a group of people who share its benefits. You might already have a group that wants to work together. That’s great! You might also have an idea and need to get more people on board. To get the word out, you could organize a meeting to discuss how a co-op could work and see who wants to get involved. 

Is a co-op the best fit?

If you’re thinking about starting a co-op, consider these two questions: What is the purpose of the business and who should benefit from it? If the answer is ‘provide a service for those who benefit from it,’ then a co-op is probably a good choice. The model works best when member interests are aligned and working as a group brings value beyond what can be achieved alone.

To learn more, here’s how co-ops compare to other business models. Or try our questionnaire.

Step 2: Get organized

Decided a co-op is the way to go? Time to organize your co-op’s structure, plan of action, and finances. 

Create a steering committee

Co-ops need people to start and support them. So, if you haven’t already, find like-minded people to join you. But make sure these people have a personal interest in starting the co-op.

Also, keep in mind BC, Alberta, and Manitoba require three people to incorporate a co-op — in Saskatchewan you need six.

Develop an action plan

Sit down with your committee. Come up with a plan for starting your co-op. Decide what needs to get done, and who is going to do each task. Write it down and hold people accountable.

Do a PESTLE analysis

To assess the external factors that could impact your new business, try completing a PESTLE analysis. Also consider doing a business model canvas to better understand how the business will work.

Create a preliminary budget

How much money do you need to start the co-op? Where will it come from? Get a clear financial picture of your start-up before getting too far into it.

Create a governance structure

Who will make the decisions in your co-op? Figure out who’s in charge, and how the decision-making process will work in your business. 

Step 3: Incorporate your co-op

Now you’re ready to incorporate your co-op, which means you’ll file documents with the government that legally create your business. You probably do this with your provincial government — but if your co-op will operate in more than one province, you can incorporate with the federal government.

We’ve created work plans that you can follow to incorporate your co-op in:

Incorporating your business will include the following tasks: 

Select and reserve a name 

The next step in starting your co-op is to pick a name — here are some tips on choosing a name for your co-op. You can find more specific information about registering a name in your province’s work plan (above). Or try our guide to naming your co-op.

Complete and submit the Articles of Incorporation

Your Articles of Incorporation (also known as “Memorandum of Association” if you’re in BC) are the documents you submit to the government to start your co-op. Once you’ve filed these and they’ve been accepted, your co-op will be a legal entity. This means it has rights, and can do things like open a bank account, take out loans, etc.

You’ll find more detailed info about incorporation both in the above work plans, and here:

We know you’re busy. We can incorporate your co-op for you. Curious why you should incorporate? Check out this video.

Write your bylaws

Bylaws (known as “Rules of Association” if you’re in BC) are the rules you write for your co-op. The government requires that you include certain things in bylaws, while other rules are up to you.  Requirements change depending on whether you’re in BC, Alberta, Saskatchewan, Manitoba, or are incorporating federally.

Step 4: Build your membership

Attract and admit new members

Once you’ve started a co-op, it needs members! You’ll need to identify who your members should be, get the word out to them about joining your co-op, and create a process for them to join

Keep track of your members

To better manage members’ data, co-operatives keep membership registries. These registries are just places where you store information. For co-ops with more complex interactions with members, you might want an accounting software to track member accounts, issue dividends, and generate reports. For smaller and/or newer co-ops, you could just use an Excel spreadsheet.

Hold an Annual General Meeting

Every year, your co-op will have to hold an AGM. At this first one, you’ll elect your first board of directors. Often, the steering committee that’s been working to start the co-op becomes the first board, but you may also need to recruit members

Step 5: Formalize and expand your plans

Write a business plan

A business plan is a great tool not only to guide you as you build the business, but to attract investors, show lenders that your business idea is sound enough to deserve a loan, or get new members to join. You should do this as a group.

We’ve created this handy Business Plan Creator to lead you through the process. You can also apply to Co-operatives First to have a professional consultant create a plan for you. 

Finance your business

Figure out how you’re going to get the money to start the co-op: from loans? Members? Selling shares? Fundraising? Usually it’s a combination of these. Write a financial plan, a budget, and think about how to finance the business going forward.  

Step 6: Govern your co-op

Train your board

It’s important for all board members to understand their role and what’s expected of them. Co-operatives First can provide training to get your board started on the right foot. 

Develop policy

New boards have a lot to do to guide the co-op. Here are some just a few things a new board will do in the first year:

 If starting a co-op is your goal, Co-operatives First can be there every step of the way. Contact us to get started.

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