Considerable time and effort are spent in starting a co-op, and like most businesses, co-ops are most vulnerable in their early formative years. Chances for the successful formation of a co-op can be increased by avoiding the pitfalls experienced by other co-operatives.

Lack of clearly identified goals and objectives: The operations of a co-op should be in line with a clear mission statement with definite goals and objectives identified and developed by the members.

Inadequate planning: Detailed plans for reaching defined goals are important. In-depth surveys of the potential members' needs coupled with business feasibility studies are necessary. If there is not sufficient interest in the project by potential members or if it is not a sound business venture, a co-operative should not be formed.

Failure to use experienced advisors and consultants: Most people interested in becoming members of a new co-operative have not had co-operative business development experience. Using advisors experienced in co-op development can save a lot of wasted motion and expense.

Lack of member leadership: Calling on the services of experienced resource people can not replace leadership from the organizing group. Decisions must come from the potential members and the leaders they have selected.

Lack of member commitment: To be successful, a co-operative must have the broad-based support of the potential members. The support of lenders, attorneys, accountants, government agents, and a few leaders will not make a co-operative business successful.

Lack of competent management: Hiring an experienced and qualified management team increases the chances for business success. Most co-operative members are busy operating and managing their own businesses and lack experience in co-operative management.

Failure to identify and minimize risks: The risk in starting a new business can be reduced if identified early in the organizational process. Careful study of the competition, federal, provincial, and local government regulations, industry trends, environmental issues, and alternative business practices helps to reduce risk.

Poor assumptions: Often, potential members overestimate the volume of business and underestimate the cost of operating a proposed co-operative. Quality business assumptions tempered with a dose of pessimism often proves to be judicious.

Lack of financing: Regardless of the amount of time spent in financial projection, new businesses are often underfinanced due to inefficiencies in start-up operations, competition, complying with regulations, and delays. The first months of business operations and even the first years are frequently not profitable, so adequate financing is important to survive this period.

Inadequate communication: Keeping the membership, suppliers, and financiers informed is critical during the organization and early life of a co-operative. Lack of, or incorrect, information can create apathy or suspicion

Source: How to Start a Co-operative. Rural Business/Cooperative Service, United States Department of Agriculture.