Why they can fail

When co-operatives fail, it is often due to the lack of commitment and unity of members, or the economic environment in which they operate. Around half of newly formed co-operatives do not survive the first five years. Failure can be the result of:

  • Inability to balance benefits to members with retaining/raising sufficient capital to invest in the business.
  • Low returns, poor market, or poor product or service.
  • Idealistic, impractical, poorly stated or conflicting objectives.
  • Inadequate planning or research.
  • Inability of members to co-operate or offer sufficient support.
  • Large users who seek more control.
  • Lack of communication and co-operative education.
  • Failure to use and control competent consultants or management.
  • Hijacking by management or some of the membership.
  • Directors not comprehending the needs and motivation of members.
  • Ignorance of legislation and legal obligations.