Co-operatives
Co-operatives started out in Rochdale back in the 1840s. Back then, workers in the mills were paid by the same person who also owned the shop where they bought their bread and milk from. This shop would often be the only one in the area, so the owner could charge really high prices for low quality products. And before you say "why didn't people just get in their cars and go to a supermarket?", well, cars didn't exist back then and neither did supermarkets! Imagine that!
Anyway, a group of workers decided that they would all get together and open their own shop for the rest of the workers in the mill. They decided to all work together to provide good quality products at fair prices.
Before they could start, however, the new shop owners realised they had two big problems - they didn't have a shop and they couldn't afford to buy any products from the market to sell!
So, some smart person had a great idea - customers could become a member of the shop by paying a small fee. In return for paying a small fee, the new shop owners promised to share the profits with the members in the future. It was a crazy idea at the time but all of the small fees that people paid were added together so that the workers could afford to rent a shop and buy some products to start the business.
Everybody helped each other out to get the best deal for everyone! We could say that everybody 'co-operated' with each other to make life better. And that's where the name Co-operative comes from!
Fast forward 160 years and the above story has been used to help set up thousands of businesses around the world. Workers and customers pay to become members of the business and in return they receive a dividend, which is a share of the profits, just like in a Limited Company.
Anyway, a group of workers decided that they would all get together and open their own shop for the rest of the workers in the mill. They decided to all work together to provide good quality products at fair prices.
Before they could start, however, the new shop owners realised they had two big problems - they didn't have a shop and they couldn't afford to buy any products from the market to sell!
So, some smart person had a great idea - customers could become a member of the shop by paying a small fee. In return for paying a small fee, the new shop owners promised to share the profits with the members in the future. It was a crazy idea at the time but all of the small fees that people paid were added together so that the workers could afford to rent a shop and buy some products to start the business.
Everybody helped each other out to get the best deal for everyone! We could say that everybody 'co-operated' with each other to make life better. And that's where the name Co-operative comes from!
Fast forward 160 years and the above story has been used to help set up thousands of businesses around the world. Workers and customers pay to become members of the business and in return they receive a dividend, which is a share of the profits, just like in a Limited Company.
FC United did it - they were a brand new football club back in 2005 with no money, no players, no kit and no ground. But the fans (who are really customers) paid money to become members. They all attended meetings where members had one vote each, even if some members had paid in £100 and some had only paid in £10. They voted on the name, the price of tickets, who the manager should be, and even what the kit should look like. The customers (or fans) really felt part of the club and even helped to build a new ground in their spare time.
Today, FC United is still going strong, thanks to the co-operation of its members. Aw, what a lovely story!
Today, FC United is still going strong, thanks to the co-operation of its members. Aw, what a lovely story!
The Good Bits!
Co-operatives are similar in a lot of ways to Limited Companies. For example, the people who own the business all have limited liability and they all receive a dividend each year when the profits are shared out. But there are also some key differences, such as:
The Bad Bits!
As lovely as all of this co-operation sounds, it's important to remember that Co-operatives don't always succeed. The main reasons for this are:
Co-operatives are similar in a lot of ways to Limited Companies. For example, the people who own the business all have limited liability and they all receive a dividend each year when the profits are shared out. But there are also some key differences, such as:
- Each member only has one vote at meetings. This is different to a limited company where you get more votes depending on how many shares you own. Having only one vote makes everything much fairer, as it means everybody has an equal say, even if you are not rich.
- The members of a co-operative often vote to put the profits back into the business to make it better in the future. This is different to a limited company, where shareholders often only care about how much money they can make.
- Co-operatives are often very ethical businesses. This means that they are often very fair when it comes to workers conditions and pay, because after all, it is the workers who own the business! Also, some limited companies will go anywhere to make a profit. Co-operatives, however, often refuse to deal with companies or countries that have little concern for the environment or human rights.
The Bad Bits!
As lovely as all of this co-operation sounds, it's important to remember that Co-operatives don't always succeed. The main reasons for this are:
- Co-operatives sometimes have unrealistic beliefs that do not always match the harsh realities of the real world. For example, FC United members voted to turn down a large amount of money from a company that wanted to sponsor them. The FC United members believed that football should not be all about money, but that sponsorship money would have come in really handy to help build the new ground!
- Members of co-operatives may lack experience in running a business and don't always carry out the correct planning to succeed.
- Even after all the co-operation of members, it can still be hard to compete with the lower prices charged by the big name companies.
- Co-operatives often have difficulty in raising finance; Banks can be wary about lending to co-operatives, as they realise it is often being run by people without any experience. The banks are therefore scared that the business will go bust and they won't get their money back.