Cooperative Management Series
Starting A Cooperative
Phil Kenkel
Fitzwater Endowed Cooperatives
Chair
So you’ve decided that the cooperative
business form is right for you. A
cooperative enterprise is one who
belongs to the people who use its
services; the control rests with all the
members and the gains are distributed to
the members in proportion to the use
they make of its services. But how do
you go about deciding what type of
cooperative is right for you? The first
step is to hold a meeting of all of the
producers who might be interested in a
cooperative. Some questions that should
be asked at this meeting are:
 What type of cooperative do we
need?
 What business functions does our
cooperative need to perform?
 What are the benefits of doing
business with the cooperative?
 What are the producer’s
problems and needs?
 How would a cooperative help
solve these problems and needs?
 Is there sufficient interest among
those producers present to
continue with the organizing of a
cooperative?
What type of cooperative do we need?
There are various types of cooperatives
from which a committee can choose
when designing a cooperative. The first
type is a marketing cooperative that
processes and markets the products the
members produce. This type of
cooperative has become more common
in the last decade with the rising
popularity of new generation
cooperatives.
Another type of cooperative is a
purchasing cooperative. These co-ops
work with others to buy supplies jointly.
These supplies could include, but are not
limited to: fertilizer, feed, oil, gas, seed,
insecticides, and others. An example of
this is the purchasing cooperative
formed between Kentucky Fried
Chicken, Dairy Queen, Taco Bell, and
Burger King. These four fast food giants
buy services in bulk. Ace hardware also
is a member of a purchasing cooperative
to reduce the costs of merchandise.
A type you may be more familiar with is
a service cooperative. These co-ops
provide special services such as electric,
telephone, credit, irrigation, breeding,
custom spraying/fertilizing and others.
Most people who live in rural areas are
serviced by their rural electric
cooperative, and are members of this
cooperative through the purchase of their
electricity.
A less numerous type of cooperative is a
bargaining cooperative. These coops
serve as a middle man to negotiate the
terms of sale for certain commodities. A
pure bargaining cooperative does not
physically handle or take title to the
commodity.
What business functions does our
cooperative need to perform?
These various types of cooperatives can
haul, ship, assemble, sell, sort, grade,
collect, pack, remit, store or buy the
products of its members. By doing
business with the cooperative these
members receive the benefits of the
cooperative form of business. Some of
these benefits include
 Being a part of a group
 Having market power
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Reducing costs
Getting a better price
Ease of financing
Having confidence in the future
of your business.
What are the producer’s problems
and needs?
The answer to this question will have a
profound impact on the type of
cooperative formed. Some idea of this
must already be in place or the
cooperative form of business would not
be right for you. Is it a problem with
transportation costs? Do they need a
more competitive market in which to sell
their product? These questions should be
raised in the beginning to assure that the
cooperative meets the needs of the
patron/ owners.
How would a cooperative help solve
these problems and needs?
This question is closely tied into the
question just asked. Can a cooperative
best meet the needs of those it would
serve? Again, this is a question that
should be posed early in the planning
process.
If there is sufficient interest and all of
the above questions have been
adequately answered, then a survey
committee should be organized to look
further into the possibilities offered by
cooperatives.
The Next Level: The Survey
Committee
The survey committee has the difficult
task of evaluating the different sides of
the issue and making a decision whether
or not to further pursue the endeavor.
Some questions this committee must ask
are:
 Is there a need for a cooperative?
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Will it succeed?
What is the potential for
membership and volume of
business?
What management skills are
needed?
What facilities are needed?
What are the projected operating
costs?
What are the estimated capital
needs?
Other considerations that should be
explored by the survey committee are:
 Incorporation
 Scope of Business
 Membership
 Location
 Hours of Business
 Board Representation
 Pricing of supplies and services
produced by members
 Marketing agreements
 Non-member business
 Organization Costs.
Upon the completion of these questions
the survey committee should report back
to the producers with an evaluation and a
recommendation on their findings. The
producers then vote whether or not to
continue to pursue this opportunity or to
stop. Several meetings may be necessary
to that all interested producers can hear
and study the findings. If they chose to
continue the next step it to form and
organization committee.
The responsibilities of the Organization
committee are to sign up members,
obtain capital, draft legal documents,
and file the articles of incorporation.