You just sold your fourth or fortieth home-developed product and are giving serious thought to starting a home-based or micro business of one type or another. The challenge is that you haven’t the cash needed to make it work without keeping your regular job, and keeping your regular job is what puts food on the table. What to do? Form a cooperative venture (co-op)! Here’s how to get one off the ground and running that will tell you in a short time whether you have what it takes to go big-time.

BEGINNINGS
To begin with you will have to generate the interest of others with similar or complementary products or services in your community who would be interested in testing their crafts, art, science, or other items in a mutually supported organization without the expenses of a business of their own.

For the sake of discussion, think art (this technique will work for dance studios, home repair, toys, flower baskets, or most anything you can think up). Contact the artists in your area with a small ad in the newspaper and invite them to a meeting in your church, bank, health care facility, or similar community gathering place. Talk with them about a co-op where everyone helps, everyone sells, and everyone shares expenses. Ask someone from your nearby SCORE division of the Small Business Administration to lead the discussion, it’s free, and you will receive valuable input. Use the following as a guide for discussion.

STRUCTURE
Incorporate. Most co-ops incorporate for the same reasons big businesses incorporate, reasons such as liability limitation and autonomy. Co-ops have a policy-making board of directors. They write bylaws, and have all the legal and financial trappings of ordinary corporations. The differences are in the way the profits are divided, the purpose of the co-op, and how it is owned and controlled. Don’t go into any kind of cooperative agreement without a legal foundation under your feet, you could lose everything including your home if things don’t go right.

PURPOSE
There are three broad categories of co-ops: purchasing, servicing, and marketing. Purchasing co-ops are designed to purchase goods for the benefit of the members. An example would be a food co-op where the members purchase groceries at substantial savings from regular supermarket prices. Service co-ops are developed to deliver electricity, gas, water, or some other communal service to members. Marketing co-ops usually market and sell the member's products or services to others. The type you are contemplating is a marketing co-op.

OWNERSHIP AND CONTROL
Co-ops are owned by the members, usually one share to each member with one vote per share. An elected board of directors hires a manager to make day to day decisions with ultimate control by vote of the membership. Members are often required to share operating costs or perform in-lieu services such as spending a specified number of hours per week performing tasks of cleaning, decorating, stocking, and selling (that’s why it’s called a co-op).

DIVISION OF PROFITS
The point of a co-op is to not generate profits for everyone, but to serve the interests of the participating members; to provide a place to display goods and to test the market for their product. Most of the money made from sales is returned to the member after their share of the overhead is met. This assures that everyone contribute in one way or another to the success of the venture but individuals still can make a lot of money if their product is in demand. This serves the additional purpose of keeping the cost of entry into the co-op low.

BENEFITS
A co-op is a great place to test everything before (or instead of) going big-time. You get to test the market for your product or service. The overhead of a store-front is shared with others. You have corporate protection if something goes wrong, and if you involve others in decision making you are less apt to go off in a costly wrong direction.

(NOTE TO EDITORS: PLEASE INCLUDE THE FOLLOWING.)
Paul Tulenko is a Small Business Success Consultant based in New Mexico. Additional tips and suggestions are available at www.tulenko.com or call (toll-free) 1-866-TULENKO.