All entrepreneurs face an important question at the start of their journey – what business structure provides the best fit? Traditionally, this choice would encompass sole proprietorships, partnerships, or corporations, but in British Columbia the Co-operative model (or co-ops) is steadily growing in popularity.
You may not realize it, but co-ops are a constant presence in BC life. Our province is home to some of Canada’s largest, most well-known and innovative co-ops such as Vancity Credit Union, and Stocksy. In all, there are around 700 co-op businesses operating in British Columbia, with 26 created in 2016 alone.
What is a Co-operative?
A co-operative is a business that is jointly-owned and democratically-controlled by its members. Through shared ownership and collective decision-making, members work together to meet their common economic, social, and cultural needs and aspirations. All members are shareholders in the co-op and have an equal vote in key decisions. This includes electing a board of directors, which governs the enterprise.
Co-operatives take an ethical and sustainable approach to business by considering not only the economic impacts of their activities, but also their social/cultural and environmental impacts. All cooperatives around the world are founded on the same seven principles, which guide their structure, governance, and work.
There are several types of co-operative structures that you can choose from depending on what best suits your businesses’ structure and your membership’s needs; these include worker, producer, consumer, multi-stakeholder, and other kinds of co-ops. Co-ops operate in all sectors and industries.
The Co-operative Advantage
- Co-ops put people and values first – The decisions made by co-ops balance the need for profitability with the needs of their members and wider community interests.
- Co-ops are resilient – Often, co-operatives are more stable over time and more resilient in economic downturns. When other businesses may shut down or lay off workers, coop members pull together to work out solutions.
- Co-ops support their communities – Because co-operatives are democratically owned by community members, co-ops keep money and jobs in their communities. Cooperatives also enable communities to have a degree of autonomy from outside forces. Community-based ownership helps to protect co-ops from takeovers and closures by outside decision makers.
- Co-ops are adaptable – The various co-operative structures cater themselves to businesses and enterprises across industries. Co-operatives can also evolve their structures over time through a democratic process as they scale or adapt to the changing needs of their membership.
- Co-ops distribute risk and reward – Co-operatives make it more accessible for people to form a business by sharing the initial costs and the legal and financial risks amongst multiple individuals. Co-ops tend to make less risky decisions since many people are invested in and accountable to the longevity of the business.
So, what makes a co-operative different from a conventional business model?
Democratic Member Control
A co-op is a union of persons and its control is democratic. Each member has one share and one vote, regardless of their patronage level. This business model pools the resources, knowledge, skills, and capital of its members, giving everyone a say in the direction it takes.
Allocation of Profit
Typically, income generated by the co-op remains within the community. This means profits not reinvested in the co-op are paid back to members in proportion to their patronage, not how many shares they own. A common misconception of co-ops is that they are exclusively not-for-profit enterprises, but this is not the case. They effectively straddle the line between a for-profit business and a not-for-profit model.
Concern for Community
Each co-operative works for the sustainable development of their community through policies approved by their members. This can take the form of education, training, and information opportunities for members, or socially conscious programs such as Vancity’s values-based banking, or MEC’s Outdoor Nation initiative.
Types of Co-ops
According to the BC Co-operative Association, total membership of BC co-operatives exceeds two million people. Collectively, these members control more than $48 billion in assets through ownership of their co-ops.
Three different types of co-op exist; consumer, producer, and worker. Below we detail the differences between the three models.
Consumer Co-op
A consumer co-operative exists to provide products and services to its members. It was the very first type of co-op to be created, dating back to the Industrial Revolution in the UK and the creation of the Rochdale Society of Equitable Pioneers. These businesses can work in sectors as diverse as housing, health care, child care, and traditional retail. Examples of BC based consumer co-ops include Modo, MEC and Vancity.
Worker Co-op
In a worker co-op, the creativity, productivity and commitment of the employees results directly in their final take home pay. Employees are the members and owners of the enterprise, taking a direct stake in how the company is managed. Examples of BC based worker co-ops include Left Hand Media, Victory Gardens and Food Pedalers.
Producer Co-op
A producer co-op will process and market the goods and services produced by their members. They also supply the products and services needed for their members to conduct their professional activities. Examples of BC based producer co-ops include Home Hardware, Pharmasave and Circle Craft.
Opportunities in the Field
The good news is that there are plentiful opportunities currently available in the co-op realm, as well as lots of support in getting started. A great place to start is with the BC Co-operative Society’s Cultivating Co-ops Guide. This comprehensive guidebook walks you through various evaluations, checklists and templates that will help you decide if a co-op business model is for you. Below are three examples of popular co-op models that exist in BC today.
Worker Co-op Succession
There are currently 124,000 family businesses, each with sales of $1 million or more, in Canada. Estimates suggest only one-third of these businesses will make a successful transition to the second generation of the family. Worker co-ops are increasingly providing a solution to this thorny issue, especially if small business owners are concerned about maintaining employment and other benefits in their community. If you decide to pursue an opportunity in this area, you’ll need to have the collective skills, cohesion, and capital to purchase the business.
Agricultural Producer Co-ops
Generally speaking, agricultural producers face a challenge getting a fair price for their goods. Banding together to form a co-op with other producers will collectively raise the price level for products marketed while lowering the cost of supplies purchased. This increased economy of scale allows farmers and agricultural producers to operate more efficiently at lower costs per-unit than they could individually.
Small Business Producer Co-ops
Small businesses that sell goods face challenges with economies of scale. Banding together with other like-minded businesses creates efficiencies, increases the knowledge pool, and strengthens the resiliency of each business. Recently incorporated, the Yeast Van Brewery Co-op provides a local example of this type of co-op. They have come together on co-operative marketing initiatives like brewery tours and plans are afoot to brew a Double Pale Ale collaboration between all 12 member breweries with each contributing a different hop variety.
Resources
Interested in learning more about the co-operative model? The following resources will provide the answers you need:
- BC Co-operative Association
- Vancity Co-operative Program
- Cooperate Now Bootcamp
- Cooperatives First
- Canadian Worker Co-op Federation
Here to Help
No matter what stage of business, or what problem you face, Small Business BC offers a range of seminars and one-on-one advisory sessions to suit any business.
