What do you need to consider first, if you’re thinking of setting up a new worker co-op? Here’s a really short introduction.
Find the right people
Since the worker co-op system is not well known – at least in the UK – it’s important to test your founding group’s expectations, particularly if you come from a background in the private, voluntary or state sector. For instance how would you feel about working in a business where everyone has equal rights and voice? Would you be happy with sharing ownership and control? What do you feel about people having equal wages and in-work benefits?
Be realistic about your capacity – and keep track
In the start-up process, it’s useful to set yourself a timeline, keep a register of decisions, and track how many hours you’re spending on it all. The members of your founding group will have different limits on how much unpaid work they can do, even if you plan to compensate yourselves through ‘sweat equity’ when the co-op can afford it.
Test the concept
Before writing a long business plan, test your basic business idea. What would be your products and/or services? Is there an effective market? In other words, while you may believe there is a need for it, will people pay for it? If so, who are they and how much? Does it stack up? At this stage it’s important to pitch your idea to potential customers, suppliers and critical friends.
Define the membership model
In a worker co-op, the primary beneficiaries are the workers. So how do your workers become members? What does membership mean in practical terms, and how exactly will the members benefit from the activity of the co-op? Worker control and worker benefit should not be at the expense of your local community, wider social causes, or environmental action. Most worker-led businesses are also responding to wider social needs and aspirations.
Work out how you will make decisions
Small co-ops often have a flat management structure, but there’s a range of democratic models and tools you can use, based on the changing needs of the business and its members. While ‘collective management’ might be right for a small organisation, you may decide to adopt elements of sociocracy or even ‘democratic hierarchy’ as you grow. Check out some of the different models worker co-ops use, in our Worker Co-op Code.
What will you do with your surplus?
You’ll also need to decide if you constitute yourself as ‘for-profit’ or ‘not-for-profit’. In other words, can the workers receive an annual bonus? Or will it all be reinvested back into the business? How much – if any – money will be set aside to support external causes?
Pick a legal structure
If you decide to legally incorporate your co-op in the UK, you can use one (or more) of several legal structures. You can incorporate as a Co-op Society – the most traditional form; a Company Limited by Guarantee or Shares – the most common; or even a Partnership. The choice of legal form will depend on your financial and trading model.
You will also need to create your governing document. This is a constitution for an unincorporated body, ‘articles of association’ for a company, ‘rules’ for a Society, or ‘agreement’ for a partnership. Then you’ll need to create ‘secondary rules’ and policies that set out in detail how your high level governing principles are going to be applied in practice.
Fundraising & finance
If you’re starting from scratch, you’ll need some level of start-up money to pay for premises, wages, supplies, or other business costs while you’re waiting for sales revenue. In some cases, your founding group may be able capitalise the business through member shares or loans from their own savings, or even be able to crowdfund. But quite likely you’ll need your business plan to convince a bank, loan provider or grant-giver to support these early costs.
Talk to as many people and co-ops as possible
Take the opportunity to talk to as many people as possible doing the same thing as you. Whether this is other co-ops in the same industry or small businesses with similar ethos, the more examples of ways of doing things you can garner the better. This will help you think through how you want to run your co-op, what things you’d do the same or differently. Contacting by phone or email is helpful, but visit in person if you can. You’ll pick up tips from others doing the same thing, for example what to expect with suppliers or typical spends on staff wages, that will feed into your profit loss projections.
Write the plan
Start by looking at the business plans of organisations you like. Whatever your sector, you’ll find inspiring blueprints from others, which you can adapt. A business plan is your ‘manifesto’ – to yourselves, your community and to potential partners and investors. The plan should set out the co-op’s goals, its composition and structure, your products, services and marketing strategy; ‘inputs’ and ‘outputs’; short and longer-term projections for your income and expenditure. You’ll also set out your staffing and recruitment model, identify your potential supply chain, and outline your initial financial needs.
This short guide is adapted from a piece we originally wrote in collaboration with our member Stir to Action, which is published in their ABCs of the New Economy. Let us know if you think it could be improved.
