I attended a board meeting recently and was surprised to hear the word “cooperative” used two different ways. Maybe you have also experienced this confusion. An individual is said to be cooperative when working smoothly and without complaints with others. The board of directors was not referring to this informal definition. The underlying principle is the same for business.

My company was investigating the weaknesses and strengths of a purchasing cooperative business model. This is a legal term and an application (1023) must be submitted to the government for approval.

“A co-operative (also known as co-op, cooperative or coop) is an autonomous association of people united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly owned and democratically controlled business. Since 2002 Cooperatives and Credit Unions could be distinguished by use of a .coop domain.” Wikipedia

The google dictionary offers both nouns and adjective definitions.

  • “involving mutual assistance in working toward a common goal. “every member has clearly defined tasks in a cooperative enterprise”
  •  “A farm, business, or other organization which is owned and run jointly by its members, who share the profits or benefits.”
People at the business table worked for different companies who were already not-for-profit entities and they were using the term to refer to the company’s values and services. They explained that the legal entity required too many criteria for their existing businesses.
“The term cooperative also signifies the ownership of an apartment building by a nonprofit corporation that holds title to it and the property upon which it is situated. Stock in the corporation is allotted among the apartment units on the basis of their relative value or size”  Legal Dictionary. The Free Dictionary
You don’t have an apartment building? Maybe one of the other descriptions will work.

The Legal Dictionary has a broader view on the subject to offer: “An association or corporation established for the purpose of providing services on a nonprofit basis to its shareholders or members who own and control it.”

Cooperatives differ considerably in their nature and function. I was investigating purchasing and marketing cooperatives; but there are also consumer cooperatives,. Farmer’s cooperatives used to rule the agricultural business because most farmers were family business. Today Big business operates the agricultural sector. Coops aid small business owners because by shopping and marketing together, they can match big business numbers.
“In the context of agriculture, a farmers’ cooperative refers to an organization of farmers residing in the same locale that joined
together for their mutual benefit with cultivation and harvest of their products, the purchase of farm equipment and supplies at the lowest possible cost, and the sale of their products at the maximum possible price.
Cooperative members are  financially dependent on each other.  They can buy buildings by using a blanket mortgage. Together they also make individual liens on the property so in case the owners default the long term loan, the members can be paid back for their investment.
Functional definitions include the following business model:
  • non-profit community organizations
  • businesses owned and managed by the people who use their services-a consumer cooperative
  • organizations managed by the people who work there -worker cooperatives
  • organizations managed by the people to whom they provide accommodation- housing cooperatives
  • hybrids such as worker cooperatives that are also consumer cooperatives or credit unions
  • multi-stakeholder cooperatives such as those that bring together civil society and local actors to deliver community needs
  • second-and third-tier cooperatives whose members are other cooperatives
What do Customers Think of Cooperatives?
It all depends on the success of the venture, just as with other business. People are happiest when they are receiving their dividends, buying for less and marketing for more than others. Cooperatives come in all sizes.”Sunkist” is a large cooperative.Cooperatives include dairy milk producers, cotton gins, and thousands of other enterprises.There are also cooperatives in which consumers form retail outlets like grocery stores and share the profits based on the amount of patronage of each member. It is best to find a cooperative of people of like minded business strategies. Local businesses create strongest bonds which helps during problem solving. Most cooperatives depend on their customers who are most often themselves. Stores are then under their control. Cooperatives usually see their members as their customers and do their best to serve them.
Why do some states have many and other states none?
Many states support Cooperative Federalism whereby communities, regions and states band together to govern their people. This type of cooperative enables applications for larger grants, less administrative staff, larger purchasing capabilities, more quality assurance and research opportunities. Other states have ignored the cooperative not for profit question. Consult a lawyer in your state for further information.
” Past estimates of the number of co-ops have ranged as high as 40,000.1 This report (of the Cooperative Businesses in the United States: A 2005 Snapshot)  counts 21,367 co-ops in six individual sectors. Coops focus on local customers, local products, and local patrons. Local people understand community needs.
“Co-ops typically are formed when the marketplace fails to provide needed goods or services at affordable prices or of acceptable quality. Among other things, cooperatives provide:
ƒ Business services, such as personnel and benefits management, and group purchasing of goods and services
ƒ Childcare
ƒ Credit and personal financial services
ƒ Equipment, hardware and farm supplies
ƒ Electricity, telephone, Internet, satellite and cable TV services
ƒ Food and grocery services
ƒ Funeral and memorial service planning
ƒ Health care
ƒ Housing
ƒ Insurance
ƒ Legal and professional services
ƒ Marketing of agricultural and other products
Cooperatives follow seven internationally recognized principles as the basis for doing business:
ƒ Voluntary and open membership
ƒ Democratic member control
ƒ Member economic participation
ƒ Autonomy and independence
ƒ Education, training and information-sharing
ƒ Cooperation among cooperatives
ƒ Concern for community
How does the Cooperative Model Meet Your Needs as a Small Business Owner?

Family owned businesses experience difficulties when competing with larger companies. One of the issues is purchasing power. Ordering large quantities usually mean lower prices for individual items. A cooperative enables small business to command smaller costs for supplies.  There are other advantages for joining a coop as well. When small entities pool link their buying power to acquire inventory and services like insurance, they lower operating costs, better respond to competition, and improve overall performance.  Smart entrepreneurs can out think big box stores if given the leverage of a coop.

Cooperatives offer services  such as improved marketing channels, public relations, lobbying efforts, educational and training programs, networking opportunities, sharing of ‘best business practices’ and technology support. 

I will let you know what Artistic Perspectives decides to do in our wonderful community of Blackfoot, Idaho.  In the mean time, give us the benefit of your thinking. There are arts and crafts cooperatives that mostly share marketing expenses and services. Our goal during investigation of this model was to find the best way to strengthen collaboration in our town. The coop is a strong methodology but some of the government requirements for becoming a cooperative, may  actually harm the model.


The picture comes from the Idaho Cooperative Center.