Hello! This is my first draft of Co-op 101 for the Athens, GA-based Athens Free School. This covers the what, why and how of cooperative businesses including typology, funding and founding. I'll continue to offer these in Athens so if you're in the area send me a note!

1. Co-op 101:Co-op 101:
What,Why, and HowWhat,Why, and How
Athens Free SchoolAthens Free School
June 26, 2016June 26, 2016
Matthew Epperson
mreppers@gmail.com

2. They are not …They are not …

3. What is a co-op?What is a co-op?
The official definition:
An autonomous association of persons
united voluntarily to meet their common
economic, social and cultural needs and
aspirations through a jointly-owned and
democratically-controlled enterprise.

4. What’s in a name?What’s in a name?
An association means mission-led; co-ops
have mission statements and social
purposes just like non-profits
An enterprise means profit (or surplus)-
generating activities keep the co-op in the
black; there must be an engine for
income and a unique selling proposition
(USP)
It’s a best of both worlds!

5. Ujamaa, the 4Ujamaa, the 4thth
principle of Kwanzaaprinciple of Kwanzaa
“a commitment to the practice of
shared social wealth and the work
necessary to achieve it.” (41)
 -SOURCE: "The African American Holiday of Kwanzaa: A Celebration of
Family Community & Culture"
by Maulana Karenga, University of Sankore Press, Los Angeles,
California, 1988, ISBN 0-943412-09-9

6. They look like this …They look like this …
And like this

7. They’re Old …They’re Old …
And they’re new

8. They have (at least) five typesThey have (at least) five types
Consumer Producer

9. Worker-owned
Purchasing/
Shared Services

10. Federation (Network)Federation (Network)
The National Rural Electric Cooperative
Association (As of 2014):
More than 900 electric cooperatives and
public power districts
More than 42 million consumers in 47
states
Approximately 12 percent of total
electricity sales in the United States

11. Hybrid/SolidarityHybrid/Solidarity

12. Why start a co-op?
Many co-ops start because of a need…

13. From economic collapse to worker
owned factories, in Basque Spain
Father Don Jose Maria
Arizmendiarrieta, visionary of the
Mondragon Cooperatives
“Savings or suitcases”

14. …… better premiums, e.g. fair tradebetter premiums, e.g. fair trade

15. …… pool resourcespool resources

16. …… for trustfor trust

17. …… A need no one else can (or will) meetA need no one else can (or will) meet

18. …… do business with anchoring principlesdo business with anchoring principles

19. Cooperative Principles (1995)Cooperative Principles (1995)

20. Cooperative PrinciplesCooperative Principles

21. Cooperative PrinciplesCooperative Principles

22. Cooperative PrinciplesCooperative Principles

23. Co-ops receive UN recognitionCo-ops receive UN recognition
…… and kickoff the Co-and kickoff the Co-
operative Decadeoperative Decade
2013-20202013-2020

24. The Steps …The Steps …
 1. Identify the problem or opportunity and gauge broader
interest
 2. Identify the problem to be addressed with a good or
service provided by the co-op
 3. Form a steering committee
 4. Conduct a feasibility study
 5. Establish the co-op
 6. Prepare a business plan
 7. Begin an equity drive
 8. Elect a board, secure start-up capital
 9. Secure site, vendors, staff and begin operations!

25. Identify the problem orIdentify the problem or
opportunity and gauge broaderopportunity and gauge broader
interestinterest
Core group
◦ Committed and trustworthy individuals
ID a problem and a co-op solution
Reach out to the community
Form info meetings
◦ Recruit skill and expertise
◦ Existing co-ops are there to help

26. The Antigonish MovementThe Antigonish Movement
Was built by “study groups,” focused on
meeting community needs by educating
themselves.

27. Study group!Study group!
Get together into teams of 3-4 people
and discuss one problem our community
(local, national or international) faces
which might be solved by a cooperative
business.

28. Whether converting or startingWhether converting or starting
from scratch …from scratch …
Answer the question: Does the co-op
business model best fit the mission of the
organization?
1) Do we want to share control with
members through a board of directors?
2) Do we want to share profits with
members in proportion to their use?
3) Do we want to finance our
organization through our members?

29. There are other models…There are other models…
501c3 non-profits
For profit enterprise
Social enterprise (e.g. B corporations)

30. ID’ing a ProblemID’ing a Problem
How do you identify a problem which a
co-op can fix?
◦ Talk to the community – what’s lacking?
 Fresh food?
 Education?
 Transportation?
 Jobs?
 All of the above?
◦ Should a new co-op be made? Could a
current organization become a co-op?

31. Form a steering committeeForm a steering committee
and further explore the co-opand further explore the co-op
business optionbusiness option
Survey potential members
◦ Interest level
◦ Potential business volume
Draft mission, purpose, goals
Core group is…
 Able to put the co-op before personal gain
 Good business sense
 Will champion the project
 Are credible to a community audience

32. Conduct a feasibility study andConduct a feasibility study and
evaluate the results.evaluate the results.
FS includes:
◦ A market analysis
◦ management, equipment and facility needs
◦ revenue projections
◦ sources of financing
Outside expertise may be needed
◦ 3rd
party is best
Seed money may be necessary
◦ Member equity
◦ Federal, state, non-profit agencies
FS results are shared (can increase support)
Do we continue???

33. Establish the cooperative byEstablish the cooperative by
adopting Articles and Bylaws.adopting Articles and Bylaws.
Steering Comm. draws up Articles
(either incorporation or Organization)
◦ Establishes broad basics: stock or non-stock,
price of stock, how many shares can be sold
(hard to change)
◦ Get review from a lawyer
Initial bylaws also drawn up by SC
◦ Thereafter adopted and amended by
members
Open a bank account!

34. There is help out there …There is help out there …
Co-oplaw.org is a clearing house for co-op legal information to help
with things like articles of incorporation, merger or association; bylaws,
policies, taxation as a subchapter T corporation, and more.
University of
Wisconsin
Center for
Cooperatives

35. Establish the cooperative byEstablish the cooperative by
adopting Articles and Bylaws.adopting Articles and Bylaws.
Georgia co-operative incorporation law allows for:
◦ Agriculture co-ops
◦ Health insurance
◦ Electricity (EMCs)
◦ Telephone service
◦ Credit unions
Lacking a general co-operative law which would
allow:
◦ Consumer co-ops
◦ Worker co-ops

36. The alternativeThe alternative
Incorporate (or organize) as C or S
corporations, partnerships (subchapter
K), non-profits, or limited liability
companies BUT operate as a co-
operative.
◦ Gain co-op strengths
◦ Uses existing legal structures available in
Georgia

37. Prepare a business planPrepare a business plan
An operational plan
Rule of thumb: 30-50% of start-up equity from
members
BP includes:
◦ A market analysis
◦ A description of the product or service that the
cooperative will be selling and how it meets a need in the
marketplace.
◦ Marketing and sales strategies.
◦ Operations.
◦ Management and ownership.
◦ Sources and uses of start-up funds.
◦ Projected financial data for the first three, five and/or ten
years of operations.

38. Begin a membership equityBegin a membership equity
drive.drive.
More information meetings with potential
members and customers
◦ Words like “fee” are avoided
◦ A “pitch” is developed, and consistent
 Can be 30 seconds of “You should be a member, and
here’s why…”
◦ Cater to the audience
 Some are more tuned into WIIFM (What’s In It For
ME?), others more WIIFU (Us); some are excited about
the product or service, others about keeping decisions
and dollars local
◦ Integrate mission and vision into professional
materials

39. Co-op EquityCo-op Equity
 Co-ops can issue common stock (aka class A shares; these are
voting shares, can be very inexpensive, e.g $5) …
 as well as preferred stock (aka class B, C, etc. shares; non-voting,
more similar to investment capital, e.g. $5,000 - $50,000, usually
pays dividends e.g. 6%, can also offer a premium)
 Equity capital is also called “risk capital” because it is the more
risky investment (vs. debt capital that is paid first upon
dissolution). Equity investors can request their investment be
returned but it is subject to board of director approval and the
financial health of the co-op – this is a risk!

41. Elect a board of directors andElect a board of directors and
secure start-up capital.secure start-up capital.
First board is elected by members
◦ If bylaws not already adopted, adopt now
Board coordinates BP, and securing start-up
capital
Lenders look at risk (more member-
sponsored equity shows more commitment,
less risk to lender)
◦ May work best to find co-op-sympathetic lenders
ID management & staff?
◦ Knowledgeable staff pose less risk

42. Twin Trap of PowerlessnessTwin Trap of Powerlessness
So much structure and bureaucratic
procedure that members cannot
actually use the power they formally
have.
VS.
So little structure that there is no
available means to make a
difference.

43. Different Scale LendersDifferent Scale Lenders
Catholic Campaign for Human
Development
◦ ~ $5,000
Northcountry Cooperative Development
Fund
◦ Up to ~$400,000
National Co-op Bank
◦ ~$1M or greater
Matching grants to
grassroots fundraising
available in the
southeast.

44. Secure site, vendors and staffSecure site, vendors and staff
so that operations can begin.so that operations can begin.
Top management roles (with board):
◦ Secure operations site
◦ Developing vendor networks
◦ Hire staff
◦ Licensing and regulatory requirements
◦ Legal, insurance and risk management
Board will become more hands-off over
time
◦

45. What if we are losing money?What if we are losing money?
 Losses, like gains, must be allocated. Generally the
reserve fund takes losses, but individual equity accounts
could take a hit as well if there is a steep operating loss
for a year.
 The reserve is the cushion that is there to help.
 Losses are expected for the first 1-3 years of operation
as in other businesses.
 If initial financials show no sign of improvement over
time, the business plan should be amended.

46. What’s next?