Business succession and co-operatives

October 2, 2014 - Tags: Managing, Planning

This guest blog is provided by the Co-operatives Policy unit of Industry Canada.

Are you thinking of handing over the keys to your business or acquiring an existing business? Are you preparing for retirement? Did you know that there are an estimated 200,000 Canadian businesses that will change hands by 2020?

You may want to consider the co-operative model as one of your succession planning options.

A co-operative is a corporation that is owned by an association of persons seeking to satisfy a common need. For many Canadians, co-operatives offer another option for business owners and for members of a community to retain a local business that provides essential products, services or even employment to their community.

For example, if you operate a small retail business and are thinking of selling, then a consumer co-operative might be a viable option where your customers become the owners and ensure the continued delivery of quality goods and services to your community.  

If you operate a business involved in the processing or manufacturing of forestry,  agricultural or other products and want to sell, the suppliers or farmers could incorporate as a co-operative and become owners under the producer co-operative model. This could include a feed or lumber mill where the producers have a shared economic interest in the viability of the business.

On the flip side, if you are an employee and have colleagues that are eager to have part ownership of a business, you could discuss the worker co-operative model with the owner. For example, employees of a local hardware store could become owners of the business and secure their own employment.  There are many innovative examples of entrepreneurs working together in this way.  For instance, a group of farmers came together to form a co-operative in western Canada to become the owners of a local short freight line, allowing them to pool their resources and ensure continued access to market.  Others are using the co-operative model to save local movie theatres, retail stores, community centres, and the list goes on.

Co-operatives have a unique ownership and control structure that allows the members to be equal decision makers in how the business is run. It can also generate local buy-in and community investment through different classes of shares that add to the viability of a business after it changes hands.

But nothing comes easy. Business succession is tricky and it can take a long time before you see results. There are emotional, financial, and legal hurdles at every turn.

That is why it is important to start the succession  process early and to seek professional advice on how to best sell or buy your business and what the benefits and disadvantages are of the various business models, including co-operatives.

For more information, consult our resources on co-operatives.

Comments

This is exactly what we did with our beloved movie theatre in Campbellford Ontario.  We are now in our fourth year of operation as a non-share, not-for-profit consumer co-op and we are doing really well.  If it wasn’t for the co-operative, we would have an empty building on mainstreet that has been a theatre since 1949.

By Russ on October 19, 2014

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