WHY A COOPERATIVE?

Is the cooperative model suited for small-and medium-sized businesses?

Yes, of course! They are another model of business, and are particularly well-suited for small-and medium-sized enterprises (SMEs).

According to the International Co-operative Alliance (ICA), a cooperative 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."

Moreover, according the the ICA's cooperative identity, all cooperatives must adhere to the seven cooperative principles:

1. Voluntary and open membership

2. Democratic member control

3. Member economic participation

4. Autonomy and independence

5. Education, training, and information

6. Co-operation among cooperatives

7. Concern for community

All well suited for small businesses and for converting SMEs to cooperatives. Research has found that cooperatives are particularly strong with businesses...

1. In labour-intensive sectors (low capitalization needs), but not necessarily so (consider the Mondragón cooperatives)

2. With strong inter-firm or inter-sector networks

3. With strong community bonds

4. Where workers’ have a strong geographic and sector-wide situatedness

5. With strong bonds among staff in intra-firm social networks

6. Emerging from crisis or market failure (but not necessarily only so, can also be sound conversions of healty businesses, as in France)

7. Needing succession, where no other traditional purchasers of the business are found

8. And, cooperatives are particularly resilient in times of crisis, and tend to fail less than conventional firms

What are the types of cooperatives that exist?

Four broad types of cooperatives, found in all sectors of the Canadian and world economy:

Worker
Consumer
Producer/Marketing
Financial (credit unions, insurance, etc.)
And hybrid, multi-stakeholder forms:

Multi-stakeholder or solidarity cooperatives

NGCooperatives

Some of the stats:

  • Four of every ten adult Canadians are members of a cooperative

  • About 8,800-9,000 cooperatives exist in Canada

  • They directly employ 150,000+ people

  • About $34 billion a year in business

  • 7 co-ops are listed in the top 500 companies

  • Desjardins, 6th largest financial services institution in Canada, $190 billion in assets

  • 1 billion+ members world-wide (in affiliates of International Co-operative Alliance), $3 trillion in assets

What are the advantages of converting a business to a cooperative instead of another business form?

For owners, there are 8 advantages (see Vieta, Depedri & Carrano, 2017):

  1. By selling to employees—“those that know well the enterprise”—exiting owners may be able to attain the desired and best price for the firm.

  2. In the absence of a new business owner, employees might be the only stakeholders able to “retain the know-how,…markets” and value of the firm after the owner’s departure from the business.

  3. Selling to employees prevents the firm from falling into the hands of competitors.

  4. There is a positive “emotional dimension” to knowing that jobs will be maintained by the employees that the owner knows.

  5. A more gradual and smooth business transition might be guaranteed with a WBO with “less negative consequences that can preserve” the “history and identity” of the firm.

  6. Employees are already familiar with the business, customers, and the “functioning of the enterprise.”

  7. “Collaboration with clients, banks, and suppliers is not interrupted.”

  8. The development and sustainability of the territory is potentially maintained, preventing the “desertification of some regions” from a business’s closure or move.

    • Local economies are also preserved, local ownership, local jobs.

    • Ride out crises moments much better than conventional firms

    • Will operater in sectors with market failure and revive them.

For workers/employees, there are four major advantages (see Vieta, Depedri & Carrano, 2017):

  1. Jobs are saved.

  2. The worker cooperative business form can actually strengthen the “financial stability of the enterprise” since “worker members are motivated by the cooperative results.”

    • Workers are intimately connected to local communities and are less likely to sell off or close the business.

    • Ride out moments of crisis much better.

  3. The “double identity” of the employee as “worker and owner of the enterprise” reduces “ownership risks” because they are protected. In a worker cooperative, worker-members control capital rather than capital being controlled by investor-owners.

  4. Cooperative federations and other institutional organizations (as in Italy, France, and Spain, Quebec, etc.) provide additional business support structures and financial mechanisms that worker-owners can tap into, giving them further competitive advantage.

If someone wants to convert to a cooperative, is help available in Canada?

Most definitely!

 

Resources and experts include:

Funding sources include:

Canadian funding sources:

Canadian Cooperative Investment Fund

Tenacity Works of the CWCF

Community Bonds via RRSPs and TFSAs

Social Impact Bonds, if applicable

Regional Community Economic Development funds from Federal and Provincial governments

Workers’ savings or severance

Credit Union micro-loans and other community investment vehicles

Usual business funding – must build a sound business case

Additional funding sources and supports in Quebec

Conseil québécois de la coopération et de la mutualité (CQCM). 

Réseau de la coopération du travail du Québec (Réseau COOP), which is the Federation of worker coops in Quebec. 

Coopérative de développement régional du Québec, which is the organization that supports cooperative development in every region of Quebec.  

Centre de transfert d’entreprise du Québec (CTEQ), which can be translated as «Quebec Business Transfer Center», which supports the conversion process.

Investissement Québec and Caisse d’économie solidaire, as they offer financing solutions specific to collective takeover.

Cooperative developers are crucial for helping in the process of conversion to a coooperative. They can help with the most crucial parts of the conversion and throughout the process, which include:

Create a steering committee comprised of interested parties

  1. Create a steering committee comprised of interested parties

  2. Complete a feasibility analysis – given the type of business, is it possible to convert to a cooperative?

  3. Sign a joint commitment letter with the employees indicating the intention to convert the business to a cooperative business

  4. Develop a conversion plan together with interested parties

  5. Get expert training and advice - connect with a co-op advisor such as CQCM, CCIF, Co-operatives First, CoopZone, or the Canadian Worker Cooperative Federation (CWCF)

  6. Determine business value via a qualified valuator

  7. Develop a preliminary financing plan – how will the employees buy the business?

  8. Develop a cooperative business plan – what will the new business model look like?

  9. Develop a succession plan that transfers responsibility over time – longer succession plans allow for transfer of knowledge and expertise

  10. Develop a relevant training plan to transfer knowledge and owner expertise

  11. Incorporate as a cooperative (provincially, nationally, or both)

  12. Develop a cooperative governance plan, bylaws, and train leadership skills

  13. Provide ongoing training throughout the conversion process

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ABOUT THE PROJECT

The Conversion to Cooperatives Project (CoopConvert) aims to better understand business conversion to cooperatives (BCCs) as outlets for preserving jobs, addressing business succession needs, and starting new cooperatives across Canada. Creating knowledge, building capacity, and enhancing sustainable cross-sectoral networks, the CoopConvert Project is of interest to the cooperative movement, policy makers, retiring business owners, unions, local communities, and working people, in Canada and beyond. Go here for a detailed project description.

OUR MAIL LIST

CONTACT

T: +1.416.978.0515

E: info@coopconvert.ca

 

The CoopConvert Project is funded by the Social Science and Humanities Research Council of Canada’s (SSHRC) Partnership Development Grants, and supports the objectives of SSHRC’s Insight and Connection programs.