Erbin Crowell, Executive Director of the Neighboring Food Co-op Association & Adam Trott, Staff Developer for the Valley Alliance of Worker Co-ops share the basics of the co-operative model, its relevance to local economies, and the process for business development. This presentation focuses on worker co-ops in the food system, multi-stakeholder models, which include producers and consumers, and shares guidance for people exploring a co-operative business start-up or conversion.

1. Start a Worker Co-op or
Convert an Existing Business
Erbin Crowell, Neighboring Food Co-op Association
Adam Trott, Valley Alliance of Worker Co-operatives
NOFA Summer Conference, 10th Aug 2013
University of Massachusetts, Amherst

2. Workshop Description
Participants will learn the basics of the co-
operative model, its relevance to local
economies, and the process for business
development. We’ll focus on worker co-ops
in the food system, and also consider multi-
stakeholder models, which include producers
and consumers. We’ll provide guidance for
people exploring a co-operative business
start-up or conversion.

3. Outline
1. Our Context
2. What is a Co-op?
3. Why Co-ops Matter
4. Regional Impact
5. Case Studies: Start-Ups & Conversions
6. Suggested Guidelines
7. Discussion, Ideas, Questions
8. Resources

4. 1. Our Context
• Crisis of Global Economic System
• Unemployment
• Dramatic Shifts in Wealth
• Diminished Democracy
• Instability & Change
• Hunger for Alternatives

5. What If…?
There was a business model that...
…was democratic.
…was rooted in our local communities.
…was part of a values based movement.
…put common good before private gain.
…delivered tangible benefits.
…was flexible and innovative.
…was successful and resilient.

6. England in the 1800s
• Dislocation of Local Economies
• Dramatic Shifts in Wealth
• Concentration of Economic Control
• Poor Working Conditions
• Limited Access to Healthy Food
• Birth of the Co-operative Movement

7. Rochdale Equitable Pioneers
• Founded 1844
• Weavers, Unionists,
Community Activists
• Member-Owned Store
• Pure, Affordable Food
• Co-op Principles

8. Co-ops & Food Security
“What was the motivation of
the Rochdale Pioneers, who
codified the values and
principles on which the co-
operative movement has
based since 1844?
We know it today as food
security.”
Dame Pauline Green, President
International Co-operative Alliance

9. Vision: A Co-operative Economy
“Co-operative housing, worker co-operatives,
even collective agricultural co-operatives, can all
look back to the original Rochdale plan for
inspiration. In 1844 these pieces were not
separate…
The Rochdale pioneers conceived in one
association of what would now make a
multisectoral co-operative movement.”
Brett Fairbairn, The Meaning of Rochdale • www.usaskstudies.coop

10. 2. What is a Co-op?
A co-operative is an autonomous association of
persons united voluntarily to meet their common
economic, social, and cultural needs and
aspirations through a jointly-owned and
democratically-controlled enterprise.
International Co-operative Alliance • www.ica.coop

11. In Other Words…
A co-op is a business that is equitably owned and
democratically controlled by its members for
their common good, the good of the community
and to accomplish a shared goal or purpose.
Any surplus (profit) is distributed among members
in proportion to their use of the business
(purchases, labor, or supply), or is reinvested in
the enterprise.

12. Values Based Business
Co-operatives are based on the values of self-
help, self-responsibility, democracy, equality,
equity and solidarity. In the tradition of their
founders, co-operative members believe in the
ethical values of honesty, openness, social
responsibility and caring for others.
International Co-operative Alliance, 1995 • www.ica.coop

13. Co-operative Business Principles
• Voluntary & Open Membership
• Democratic Member Control
• Member Economic Participation
• Autonomy & Independence
• Education, Training & Information
• Co-operation among Co-operatives
• Concern for Community
International Co-operative Alliance, 1995 • www.ica.coop

14. Flexibility: Purpose
• Provide Employment and a livelihood.
• Purchase needed products or services as a
group.
• Produce a product or service together.
• Process and add value to raw materials
produced by members.
• Market products produced by members or by
the co-op.

15. Flexibility: Industry
• Worker Co-ops
• Food Co-ops
• Agricultural Co-ops
• Fishing Co-ops
• Artisan Co-ops
• Housing Co-ops
• Credit Unions
• Communications
• Utilities Co-ops
• Health & Insurance

16. Flexibility: Stakeholders
• Worker Co-ops: Owned and operated by the
people who contribute their labor to the business.
• Consumer Co-ops: Owned by the people who
purchase goods or services.
• Producer Co-ops: Owned by producers who
process and market their products.
• Community Co-ops: Owned and governed by
members of community.
• Multistakeholder Co-ops: Owned and
controlled by combination of stakeholders.

17. Basic Co-op Structure
MEMBERS
BOARD OF DIRECTORS
EMPLOYEES
Elect
Hire
Hire
MANAGEMENT
Worker Co-op
CONSUMERS OR
PRODUCERS
Consumer or
Producer Co-op
Product or Service
A Multistakeholder Co-op
includes a combination of
member types in ownership
and governance.
Collectives
flatten organizational
layers, emphasizing consensus
and group decision-making.

18. 3. Why Co-ops Matter
Co-ops “in their various forms, promote the
fullest possible participation in the economic
and social development of all people, including
women, youth, older persons, persons with
disabilities and indigenous peoples, are becoming
a major factor of economic and social
development and contribute to the eradication of
poverty.”
United Nations Resolution 64/136

19. A Co-operative Decade
“The real opportunity, of course, is to use 2012 to
help achieve a longer-term vision. ICA is
committed to turning the International Year of Co-
operatives into a Co-operative Decade, with the
goal of the co-operative being the fastest-growing
model of enterprise by 2020.”
Charles Gould, Secretary General
International Co-operative Alliance

20. Co-ops Today…
• Are more common than we think
• 1 billion members worldwide (1 in 3 in the US)
• More people than own stock in multinationals
• Majority of US farmers are co-op members
• Are innovative
• Healthy food, organic agriculture, Fair Trade,
relocalization, regional aggregation and distribution
• Are successful
• 30,000 co-ops in all sectors of US economy

21. Co-ops & Local Economies
• Community ownership & control
• Focus on service, meeting needs before profit
• Develop local skills & assets
• Ability to pool limited resources
• Regional economic efficiencies
• Difficult to move or buy-out
• Root wealth in community, not markets
• Member, customer loyalty
• Low business failure rate & are long-lived…

22. Co-ops &
Local
Economies
Ontario Co-op Association // ontario.coop

23. Co-ops & Local Economies
Results:
• Co-ops contribute to more stable local food
systems, infrastructure, employment, services,
and economy.
• Jobs and wealth are rooted in community
members.
• Increased expertise in managing financial
responsibilities, legislative engagement and
community resources.

24. Mondragón Co-operative Corporation
" Located in Basque region, Spain
" First co-op in 1956 (Started with 5
employees, now has 8,000)
" $22 Billion in Sales (2009)
" 103,700 Employee (2009)
" Premised on Import substitution and
social entrepreneurship
" Started co-op bank with
entrepreneurial division (1959)
" Utilized internal capital accounts for
development and retirement

25. The Region of Emilia Romagna
" National law that co-ops in Italy pay
3% of surplus into co-op development
written by co-ops themselves
" 7,500+ co-ops (2/3 are worker co-ops)
" 30-40% of GDP
" 2 out 3 are members of co-ops
" Most co-ops per capita
" 10% employed by co-ops
" Cross-sector collaboration

26. 4. Regional Co-op Networks

27. Neighboring Food Co-op Association
• 35 Co-ops & Start-Ups
• 80,000 memberships
• 1,450 employees
• $28.6 million in wages
• $200 million revenue
• $30 million in local
purchases
http://nfca.coop/members

28. Neighboring Food Co-op Association
“Our vision is of a thriving regional economy,
rooted in a healthy, just and sustainable food
system and a vibrant community of co-
operative enterprise.”

29. Food Co-ops in the Food System
PROCESSING
DISTRIBUTION:
MARKETING
DISTRIBUTION:
TRANSPORTATION
DISTRIBUTION:
SOURCING
NFCA
Member
Food Co-ops
CONSUMPTION
NFCA
Food Co-op
Member-owners
PRODUCTION
WASTE & NUTRIENT
MANAGEMENT
Based on
Components of a Food System
(Nickerson, 2008)
NFCA
Leveraging the shared
impact of food co-ops
in the food system…

30. Opportunities for Co-op Development
PROCESSING
DISTRIBUTION:
MARKETING
DISTRIBUTION:
TRANSPORTATION
DISTRIBUTION:
SOURCING
NFCA
Member
Food Co-ops
CONSUMPTION
NFCA
Food Co-op
Member-owners
PRODUCTION
WASTE & NUTRIENT
MANAGEMENT
Based on
Components of a Food System
(Nickerson, 2008)
NFCA
Where are the key
opportunities for new
co-ops &
conversions?

31. " VAWC: 10 member worker co-operatives
" Tradition of collective management
" 60+ worker members
" $7.1 million revenue (2012)
" VAWC system has increased in revenue
and membership annually for the last three
years
" Linked to/founded from social justice and/or
environmental movements
" Advertises in co-op movement media
including food co-op and worker co-op
newsletters
VAWC Region Characteristics
Worker Co-operation in western Massachusetts and southern Vermont

32. " Ten Member Co-ops direct and fund support and development
" Co-ops are founded with support from a system – not expected to
perform/grow while isolated
" 5% of Member Co-op's surplus paid to a development fund
directed by VAWC members for co-op expansion or new co-ops
" Staff, supervised and directed byBoard of Directors and VAWC
Member Co-op representatives
" Shared knowledge and resources save time, energy and funds:
Model bylaws and articles of incorporation; legal, lending,
accounting, training and process support, etc.
" Development, support and funding is based on long term goals
VAWC Co-operative Development
A Co-op driven Model

33. Case Study:
Valley Green Feast Collective
Started in 2007 by sole proprietor endeavor to support local farms
sustainable agriculture & access to their produce. Converted in
2010.
VAWC support centered on facilitating shift in ownership that included
former sole proprietor; hiring of new worker/members; Articles of
Incorporation and Bylaws
Co-operative operation turned a decline in customers into growth
Currently delivers over 500 pounds of food a
week to 70 locations
4 Worker/Members

34. Case Study:
Brattleboro Holistic Health Co-op
Team of six potential worker/members converted long time alternative
health center in downtown Brattleboro.
VAWC support centered on assembling scarce financial resources;
facilitating loan application from Co-operative Fund of New
England; meeting support and design of a member package of
benefits; Articles of Incorporation and Bylaws.
BHHC has massage, chiropractic, acupuncture and herbalist services
along with an apothecary.
6 worker/members

35. Case Study:
Simple Diaper and Linen
One potential worker/member joined current sole proprietor in
converting to worker co-operative.
VAWC support centered on long term direction and support for
conversion discussion (over 3 years); implementation of business
plan for growth; facilitating loan application from Co-operative Fund
of New England; structure and governance support.
Simple moved to a new location, purchased state of the art machinery
that has more read outs than most cars and added horse blankets
to their services.
2 worker/members going on 3

36. Case Study:
Broadfork Permaculture Co-op
Two potential worker/member joined current sole proprietor in
converting to worker co-operative.
VAWC support centered on structure and governance; formulation of
marketing and advertising programming; facilitating purchase from
sole proprietor.
Broadfork seeks to assemble permaculturists in a format of collective
co-operation over individual competition in their industry. Long term
support for business co-ownership and financial literacy are
important aspects to assert in the establishment of the co-op.
3 worker/members

37. Case Study:
Real Pickles Co-op
Founded as sole proprietorship in 2001
Naturally fermented foods (pickles, sauerkraut, etc.)
Incorporated as a worker co-op, May 9, 2013, with 5 founding
members, including current owners
$500,000 outside investment raised to fund transition
$700,000 revenue
Core goals: Preservation of mission, local ownership and control,
retention of staff over time

38.  Currently co-owned by 5 people
 Incorporated as an LLC
 Operates as a worker-owned collective
 Grossing an average of $120,000/year

39. Benefits of a !
Collective
 Work as core value
 Equity
 Multiple perspectives
 Shared responsibility
 Shared political vision
 More capacity
 More fun
 Worker-owners ensure quality

40. 6. Suggested Guidelines
• Launch a new co-op
• Convert an existing business

41. Launching a New Co-op
Activities:
• Define overall purpose or goal
• Create steering committee
• Raise pre-development funds
• Hire a coordinator, if possible
• Conduct feasibility study
• Establish the founding board
• Incorporate and adopt by-laws

42. Launching a New Co-op
Activities, continued:
• Develop a business plan
• Create membership agreements
• Recruit members and equity investment
• Access necessary debt financing
• Hire appropriate management
• Open for business

43. Co-operative Development
Challenges to conversions
" Sole proprietors lack of trust in process of conversions and
co-op model to preserve business dynasty. Is seller willing?
" Shift away from dependence on conventional system to a co-
operative culture. Need for ongoing education and training.
" Financing and capital: Is business viable? What will the
transaction look like?
" Lack of business expertise in financial literacy, governance,
meeting structure, marketing. Where is the support system?
" Expensive, irregular and often bad advice from professionals
in legal, accounting and bookkeeping, professional training and
meeting structures.

44. Basic Development Process
Timeline
• 12-18 months to incorporate (varies widely!)
• Open doors – 2 yrs, 4 yrs, 12 yrs
• Existing facility or business can be faster
Resources needed
• Committed, visionary leadership
• Co-op business, legal, and financial support
• Member equity investment
• Start-up financing
• Peer support & guidance

45. Legal Statutes
Worker Co-op Statutes
• VT: Title 11, Ch. 8: Worker Cooperative
Corporations
• MA: Title XXII, Ch. 157A. Employee Cooperative
Corporations
• CT: Ch. 599a Worker Cooperative Corporations
General Co-op Statutes
• MA: Title XXII, Ch. 157
• ME: Title 13, Chapter 85: Cooperatives

46. Concerns for Co-operators
• Understanding group dynamics
• Facilitation of process, shared vision
• Defining roles and responsibilities early
• Professional standards
• Participatory but focused environment
• Recognizing strengths and weaknesses

47. Concerns for Co-operators
• Engagement of members
• Encourage and develop broad leadership
• Ongoing training in:
• Co-operative values & principles
• Board leadership and accountability to members
• Fiscal oversight
• Project & strategic planning
• Communication, facilitation, conflict resolution

48. Suggested Guidelines
Characteristics in strong co-op conversions
" Building businesses and members with strong co-op
identities and sense of history.
" Sound, strong governance and structure
" Educated worker/members with sustained contacts
to veteran co-operators
" Use concrete market research and business
planning
" Maintaining long term support for challenges –
market competition, financial literacy, marketing and
advertising, plug in to co-operative networks
" Contact support co-operatives and other co-ops:
acting as node of knowledge for exposure for current
owners and potential co-owners with examples, recent
conversions.

49. Why Go Co-op?
Co-operative enterprises:
…put people before profit,
…are community owned,
…are accountable to members,
…are successful businesses,
…strengthen local economies,
…are resilient,
…build a better, more sustainable food system.

50. Conversions
Basic Questions:
• Is there a willing seller?
• Are there potential member owners?
• Is the business viable?
• Is there a support system?
• Designing the transaction
• Completing the transaction
• Ongoing investment in education and training
• Linkage with existing co-op networks

51. Suggested Guidelines for Success
• Strong, committed member leadership
• Set realistic goals and focus on them
• Base decisions on concrete market research
and business planning
• Invest in member education and keep
members informed and involved
• Use technical assistance from co-op networks
and reputable co-op developers
• Join regional co-op networks and seek out
peer support from other co-ops

52. Resources
Valley Alliance of Worker Co-operatives
www.valleyworker.org
US Federation of Worker Co-operatives
www.usworker.coop
Neighboring Food Co-op Association
www.nfca.coop
International Co-operative Alliance
www.ica.coop
Adam Trott • adam@valleyworker.org
Erbin Crowell • erbin@nfca.coop