How Do I...Form a Co-op?

Stephanie Lightfoot was running a small, successful business as a massage therapist but ran into a wall... literally.

She built her business slowly, working from two rented rooms. When the opportunity to expand her space arose, she couldn't afford the increased rental costs.

So Lightfoot looked into starting a cooperative. "So many business owners are trying to get up and running and don't feel supported and the idea of having their own location was out of their budget," she said. "I just put my feelers out for people who wanted to own their own business but weren't able to do it alone."



Members of the Good Life Wellness co-op in Savage Mill, Md. (Courtesy of Stephanie Lightfoot)

There are different types of cooperatives. Some are big -- like farmer co-op Land O'Lakes or ACE Hardware. The top 100 co-ops boast a combined $117 billion in revenues.

A co-op is different from a traditional business in that it's owned and democratically controlled by its members and it generally elects a director from within its membership. It's also common for a co-op to return any surplus revenues to members based on how much they use the co-op.

The National Cooperative Business Association offers detailed information on how to start a co-op, including legal and tax issues.

Lightfoot rounded up enough people to join her endeavor and invested in building out the new space. The team of women who decided to run their businesses under one roof named their Savage Mill, Md., location the Good Life Wellness building. The new space opened in February.

Group members operate related businesses -- massage therapy, acupuncture, chiropractic, naturopathic and life coaching. They hold workshops to educate each other about their respective skills. They also have monthly staff meetings and members refer clients to one another.

Members cross paths infrequently as their industries don't call for a typical 9-to-5 workday, but they have meetings, use online video conferencing, e-mail and put together a happy hour to meet and socialize, said Lightfoot. The businesses also offer short samples of their services every other Friday and meet to mull over marketing that could be done as a team.

Lightfoot's HandsOn Bodyworks business slowly went from one to seven massage therapists. She also runs Organic Life Bodyworks, the umbrella company that oversees the management and direction of the building. Each business housed in the Good Life Wellness building collects its own money, operates under its own name and is in control of its own schedule.

"Being the umbrella, I'm the one who is legally responsible for the facility and the insurance," said Lightfoot. "My benefit is that I was working...with limited space but have now been able to expand and take in more clients."

She said members also benefit because if anyone "outgrows this place, they'll be able to open a new location and they'll already have built up their business name instead of having to work under the Good Life Wellness name."

The Savage Mill co-op operates under a resource sharing agreement. All of its members pay a monthly fee covering rent, electricity and advertising. The fee is lower than if each member was responsible for her own facility.

When the co-op considers a new member, Lightfoot conducts an interview and co-op members meet with the candidate, who must offer a biography and an "intention letter" explaining why a co-op is the best solution for them.

"We have a detailed process and we know this person is here to grow their business so we try to make decisions based on the entire group," said Lightfoot.

Additionally, each co-op member has the ability to have other people co-op under them, "which allows each co-op member to grow," Lightfoot said.

Lightfoot said she really came to understand the importance of a feeling of ownership through her work in the Peace Corps and as a community organizer in Washington, D.C., and Baltimore City. In Baltimore she started the Orioles Academy, a school for kids who Lightfoot said "were about to be kicked out of their regular school." It received grants and funding through the Baltimore Orioles baseball team, but funding dried up when donations fell dramatically after the Sept. 11, 2001 terrorist attacks. The school closed, and Lightfoot decided to change careers and go to massage school.

Those experiences became the "foundation in which the whole concept of a co-op made sense," Lightfoot said. "It seems like people work harder when they have ownership of something. It's amazing how these women just cheer each other on and in a bad economy our businesses are growing."

By Sharon McLoone | September 17, 2008; 11:47 AM ET How Do I...

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