The idea

The first step to make in developing any business is to work out what your idea is and whether it will work. If you are planning to form a co-operative, your idea needs to work for all involved, such as the individual farmers, fishers or foresters.

New businesses often focus on an opportunity for creating a new product or service or making an existing product or service work better. Think about whether your idea could respond to a need or demand not satisfied by another business or by the government.

Co-operatives are formed to do the same things as other types of businesses. A co-operative is a business is controlled by its members, owned by its members, and benefits its members.

Together, those three things contrast co-operatives with non-co-operative firms. The main difference is who owns the business and how the business is controlled.

Agricultural co-operatives are formed by groups of farmers to process, distribute and market their farm products. In some cases, they provide farmers and fishers with facilities for the supply and storage of inputs for agricultural production, such as fertilisers, seeds, fuel, and ploughing or harvesting services.

Agricultural co-operatives seek to maximise the benefits to their farmer members by helping them to access markets, services and products more cost-effective on a collective basis than on an individual one.

Key steps

Step 1: Define the idea

Because of the co-operative’s member focused structure, their business goals differ from other types of companies. Like any business their performance and efficiency compares favourably when run well.

It is important to be able to identify in simple terms what the business idea is and what a co-operative can do to make the idea a reality.

Here are some questions to ask yourself as you develop your idea:

  • If your idea is solving a problem, what is the problem and what are the primary causes of the problem?
  • What is your motivation for developing the new product or addressing the problem?
  • If your idea is a new product, why is this new product needed?
  • Why haven’t other businesses or government agencies pursued this idea?
  • If the idea has been pursued in the past and failed, why did they fail? What is it about your business idea that would do any better?
  • What is it about your business idea that would do any better than existing products or services?
  • What benefits would users or members of a co-operative receive from the business idea?
Step 2: Is a co-operative the right choice?

Co-operatives represent farmers’ desire to achieve fair payment for their labour and other investments and were created to supply farmers with goods and services of the required quality at competitive prices.

They have enabled groups of farmers fishers to pool resources, minimise input costs, maximise the value of products and share profits from value-added processing, distribution and sales.

Members of a co-operative may be geographically close, or they may be spread across vast distances. Video-conferencing and social media can help facilitate discussions, meetings and voting to connect members with their co-operative, enhance engagement and democratic participation to develop new products or services.

Some key questions to ask yourself as you learn more about co-operative business models:

  • What are the benefits of a co-operative model for your business idea?
  • Do you want each member to have an equal say in how the business is run?
  • What do you find attractive about the co-operative principles and values?

Here are some resources to help you learn more about co-operative business models and their benefits:

Step 3: Who will benefit from the co-operative?

Once you have a good understanding of the business idea and have decided a co-operative is the right model, you need to think about who the members will be.

Identifying the members also helps you refine what things the co-operative will do and what the members need to do to participate.

Again, there are some key questions that you can ask to help with this stage of the planning process:

  • What is the primary purpose of your co-operative?
  • Who will benefit from membership?

Co-operatives are often classified according to who their members are. In agriculture, farming and fisheries, producer-owned and enterprise co-operatives are the most common.

Producer-owned co-operative

A producer co-operative is a business owned and democratically controlled by producers who band together to process or market their products. An example is a dairy co-operative, which enables farmer members to process their produce and access markets collectively, giving them better bargaining power and increased prices for their goods. The co-operative is the key market for the members’ products, and is owned by the members who sell or buy its products and services.

Enterprise co-operative

An enterprise co-operative (also known as a purchasing co-operative) is a business formed to purchase and supply goods and services at competitive conditions in the interest of members, who own and control it equally. An example is a wholesaler for independent retail outlets, which purchases goods in bulk and sells them to members, giving them better bargaining power and lower prices for the goods they need for their business.

Other types of co-operative:

Customer-owned co-operative

Members jointly purchase programs and services, improving value for money and access to expert advice.

Worker-owned co-operative

The members of a worker co-operative are the employees of the co-operative. This empowers employees with a stake in the organisation’s decision-making process.

Platform co-operative

Platform co-operatives are co-operatives that might have members who are producers, customers or workers. A platform is any technology that enables people to create a network to share data and information. A platform co-operative is owned by its members.

Multi-stakeholder co-operative

Multi-stakeholder co-operatives formally allow for control by representatives of two or more “stakeholder” groups within the same organisation, including customers, producers, workers, volunteers or general community supporters.

Step 4: Who will drive the idea?

To register your co-operative you must have at least five members. A member may be an individual or they can be a business or corporation. The first members play an important role in establishing and building the co-operative and providing leadership and focus to set up the operations of the business.

Co-operatives are governed by a board of directors and you will need to find your initial directors from amongst the first members of the co-operative.

The first members need to be prepared to give time and effort to examining the feasibility of a co-operative and preparing the co-operative’s road map towards launch and success.

If your members do not have the required skills, consider employing professionals such as legal consultants, accounting and financial advisors, co-operative advisors and business advisors.

Key questions
  • What skills and capability are needed to help establish the co-operative?
  • What level of activity will members have in the co-operative?
  • What will be the roles and responsibilities of the members?

Here is a key resource:

Step 5: Feasibility study

Once you have enough potential members interested in your products or services, you will need to undertake a feasibility study. A feasibility study precedes a business plan and will help you determine the viability of your co-operative. It should be a consolidation of answers to questions you have asked along the journey, but should answer one key question: will your co-operative be financially viable?

Federal, state and local government agencies offer grants and other assistance for new businesses. It is worth investigating agencies in your area or relevant to your area to find what help may be available.

Key questions
  • How many members are expected to join?
  • What benefits would your members expect?
  • What is the potential size of the market?
  • Who will your key competitors be?
  • What makes your idea attractive to members?
  • What are the risks, benefits, strengths, weaknesses and threats?
  • What are the costs of establishing and operating the co-operative?
  • How much money will need to be raised?
  • How long before you expect to break even?
Resources

Watch

Doriana Mangili, Business Manager, Sweeter Banana, on the benefits of being in a co-operative.

“Farming can be quite a lonely business, you’re generally stuck on your own farm. You don’t have colleagues, work colleagues like people do in offices. So the co-op gives everybody the opportunity to get together and talk to someone else about the common issues that you have in your business. Whether it’s water, whether it’s a pest or whether it’s the weather or whatever it is. It gives you that sense of community within the community.”

Extracted from Co-operative Conversations, Episode 4

Remember a co-operative is a business, and you have to be really clear on your purpose and delivering the results that benefit your members

Doriana Mangili, Sweeter BananasCo-operative Farming Roundtable, 11 May 2020