Small Island, Big Cooperative

Beloved for its charming landscapes and fresh lobster, the rural community of Deer Isle, Maine is now gaining attention in the cooperative world. When Verne and Sandra Seile, proprietors of Burnt Cove Market, V&S Variety and Pharmacy, and The Galley, decided to retire last year, they sold their businesses to their employees. With 62 new worker-owners, Island Employee Cooperative, Inc. (IEC) is now the twelfth largest worker cooperative in the nation.

In a small community of just more than 2,500, with a workforce of 1,300, the loss of 62 jobs would have been felt intimately. Where family-owned businesses are significant, communities face additional challenges. Only 30 percent of family-owned businesses, like the Seile’s, survive to the next generation. When these businesses are closed or sold to outside investors, communities lose wealth. For example, an Institute for Local Self Reliance study analyzing the local multiplier effect in Maine, found that for every $100 spent at a big box retailer, $14 in local spending is generated compared to $45 when the money is spent at a locally-owned business. Additionally, communities sacrifice social benefits fostered by ownership of local business, such as good health and a politically engaged community. Hoping to keep wealth rooted in their home of over 40 years, the Seiles began working with the Maine- based Cooperative Development Institute (CDI) and the Independent Retailers Shared Services Cooperative to convert their businesses to a worker-owned cooperative.

As baby boomers reach retirement age and look to sell their businesses, the opportunities for cooperative conversions increase. Melissa Hoover, Executive Director of the US Federation of Worker Cooperatives, notes, “It’s generally just a lot easier and less risky to finance the sale of an existing business than to start something from scratch. These are going concerns, with a track record, customers, suppliers, relationships, employees... The barriers can be a lot lower than for a startup.” Despite these benefits, much work remains to be done. Most small business owners looking to retire in the next five years don’t have succession plans. Cooperative developers interested in co-op conversions, must first start by educating local business owners and their employees on the process of conversion. In doing so, they open up the possibility of creating two to four million new worker-owned businesses nationwide.

IEC’s potential was first envisioned with the assistance of the CDI’s Business Ownership Solutions program. CDI worked with the Seiles to structure a cooperative conversion mutually advantageous for the employees and the Seiles in addition to developing IEC’s governance policy. IEC drew financial support from Maine’s leading rural finance entity, Coastal Enterprises, Inc. and the Cooperative Fund of New England, which also helped finance the development of the Wellspring Upholstery Coooperative and the Real Pickles worker cooperative.

Thus far, IEC has formed a 10-member steering committee to develop the cooperative’s ownership structure and bylaws. Worker-owners receive technical assistance for marketing, merchandising, and general management from The Independent Retailers Shared Services Cooperative, a purchasing cooperative for independent grocers in New England.

Island Employee Cooperative’s example reminds us that the barriers to worker cooperative development are not insurmountable and that cooperative conversions are a viable – and increasingly common – option for businesses. So much so that Zingerman’s Community of Businesses in Michigan, a $50 Million business with 600-plus employees, just announced that it is on track to convert to a worker-owned cooperative. These developments substantiate Hillary Abell’s findings in her new report, Worker Cooperatives: Pathways to Scale, that with “ongoing training and cultivation of cooperative culture; design for business success; effective long-term support; patient capital; strong management and social entrepreneurial leadership; and good governance,” employee-owned businesses can build and anchor wealth in their communities.