Guide: Exit Your Business | Option Seven

Worker Co-ops

Considering a worker co-op exit strategy? First understand, ‘What is a worker co-op?’ - A worker cooperative is a value-driven business that puts worker and community benefit at the core of its purpose. A business is owned by its workers. Employees can buy a membership to become an owner. They are then entitled to a portion of the money that the business makes and have decision-making abilities during business related votes. The two central characteristics of worker cooperatives are:

  • Workers own the business and they participate in its financial success on the basis of their labor contribution to the cooperative.
  • Workers have representation on and vote for the board of directors, adhering to the principle of one worker, one vote. 

An exit strategy by Co-op can be particularly advantageous for ventures that have a strong purpose, rather than making money alone. Chances are high the employees working for the business will be as committed to that purpose as the founders themselves. Employees will gain from taking ownership of the company, not only financially, but also from being able to influence the company's strategic future. 

For employees, it is likely that their motivation will be greatly enhanced, as opposed to a sell-out to new owners. They will have a more direct sense of participation in the future of the enterprise. The process may be somewhat drawn out, with a larger number of individuals involved compared to a sale ownership transition. The Co-op route may require more negotiation, given that while the commercial operations continue as normal, the employees may be more reserved about the change.

The owner who seeks an exit strategy by Co-op needs to proceed cautiously. This strategy requires a longer lead time to plan than an outright sale of the business, given the human factors involved. Human factors are probably the most critical aspect of an exit strategy by Co-op. Buying into the dream created by the founders is not easy, unless the company founders have already created a way that meets the aspirations of the people employed.


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