While a worker-owned collective might not be everyone’s dream, these types of workplaces can be pretty dreamy. According to Corey Reidy, cooperative development director of the Philadelphia Area Cooperative Alliance (PACA), co-ops create long-term job stability, equitable wealth-building and are safer and more productive than non-cooperative businesses.
“Co-ops in the U.S. are two-thirds more likely to succeed and 14% more profitable compared to the average company,” Reidy says. “There is also a 2:1 pay average compared to the average 301:1 CEO-to-worker pay ratio in the U.S. The clarity in pay is a huge part of why people want to form co-ops.”
There’s also a profound sense of empowerment that comes with workplace democracy. It turns out that once people have a stake in a business, they’re more committed to it: the annual co-op employee turnover is just 14%, compared with industry norms of 40-60%.
“Workplace democracy is infectious: once you have it, you can’t ever go back,” Reidy asserts. “You know that if there are problems, you have the ability to change them.”
What kind of for-profit business can operate as a co-op? Any kind, from ceramics studios to child care centers, grocery stores to gyms.
Here’s how to start your own worker-owned co-op, according to the pros at PACA:
❶ Do your homework: Think through the big picture. What do you want to do? Then, just like with any business, conduct market research.
❷ Find your people: Reidy suggests identifying at least two more people who are excited to form a co-op with you. This will become the steering committee which will explore the feasibility of the co-op, create governance and decision-making guidelines and organizational structures, and craft a budget.
❸ Get in formation: Recruit more members, if needed, to form a board of directors. Incorporate the co-op, develop financial projections, fine-tune your business plan and form committees.
❹ Raise capital: Money to seed the co-op can come from multiple sources, including member equity investments, loans, crowdfunding and grants.
❺ Implement your vision: It’s time to secure a location, lock down your financing, obtain any necessary license or permits, begin construction (if relevant), hire staff, develop HR policies, meet with clients and vendors and start marketing your business to the community.
❻ Open for business: This is when your co-op is ready to start selling its products or services. Closely monitor financial performance and compare it with projections, adjusting as needed. There should be clear communication and transparency with all members about the numbers. Revisit group dynamics and decision-making policies as you see how the business operates in real life.
❼ Steady the ship: As the co-op progresses, adjust costs and pricing to achieve profitability. Examine systems, update financials and keep communication flowing between the members. Keep refining and clarifying decision-making processes.
❽ Grow the co-op: Once the co-op is stabilized, consider adding more services or products, growing the staff, opening additional locations and supporting other co-ops, while continuing to work on group dynamics.
Reidy reminds prospective co-ops that PACA is a resource that can support and help with technical assistance, from legal aspects, like bylaws and risk assessment, to financials, like loan readiness, to the business components, like writing business plans, incorporating and conflict resolution.
