Went to the Cambridge Co-operative Development Agency (CCDA) today and had a good long chat with Adrian Ashton there.
I am investigating the possibility of persuading someone to start their new software-related business as a co-operative, rather than a more normally structured sort of company limited by guarantee. But that’s just an excuse, as I want to know about it myself anyway. Maybe I will start an open source charity consultancy, and then I’ll need to know.
A few cool/interesting things:
- All businesses have rules, about who the owners, the directors, the management are. About how profit is spent or allocated. About everything. In UK law there is no special definition for a co-op, it is incorporated just as any other business just with different rules.
- Because of this you can invent any laws you like. This is cool. However, you probably want to use an off-the-shelf set of laws as it is cheaper, and they are more likely to work. A bug in your rules could open your company up to a negative destruction that benefits one party, but is overall bad.
- Up until about 20 members co-ops tend to decide things on one person one vote. After that it is too big, and the membership instead appoints directors. This isn’t any different from the currently more common sort of company, where shareholders appoint the directors who appoint the management. Just different people making decisions.
- New co-operatuve businesses have a higher chance of survival than other business structures.
- People are flattered to join a co-op and they show real commitment, as they are running the company. This is a rational economic structure for many business types. I reckon the only reason that it is not more common is social. Given two existing businesses that are quite old, one should expect the co-operative one to do better as it would attract and retain better staff. Certainly, given the choice of two successful software companies, one a co-operative and one not, the co-op would be a more sensible choice for me on a power and (if it is structured right) a financial basis.
- If only one thing could be said about starting a business, it is this. Decide clearly, on your own, what you want from the business. For example, how much and for what reward you are prepared to work, what your goal for the market that the business is in, what exactly is it trying to achieve? When everyone involved has done that, then decide which set of rules suits your purpose the best.
- Founder syndrome. This is where someone does an excellent job of inventing, promoting, pushing and creating a new business. After a few years it is a successful enterprise. Then they cling to it possessively, it is my business. This stifles things, and is bad for the business. The EasyJet chairman recently gave up management to avoid this happening to him.
- Your members (i.e. directors) can be anyone the rules say they are – workers, customers, investors, or a mixture of them all. Having a major customer as a member is oft a good thing, as it cements the relationship and creates loyalty and trust. You need to definte clear rules as to the conditions for membership.
- CCDA partly serves to do for co-ops what organisations like Business Link do for other businesses. However, recently, Business Link have funding specifically for activity relating to co-ops. CCDA are themselves a co-op whose members are its employees, co-ops in Cambridgeshire and local government representatives.
- You can have trigger laws to force wind-up of the company if there is no choice but to break them. This can stop the company escaping too much from its purpose. These rules will usually redistribute assets to charity or to the co-operative movement. I say that in software, it should make it open source.
ICOM are the folk who can help you incorporate your co-operative enterprise. They sell off the shelf rulesets, and provide other support and services.