Last year I wrote a blog about my experience starting a worker cooperative.
Starting a Worker Cooperative from Scratch • One Year Later
Time for year two!
January 2023 • Everything Everywhere All at Once
We overdid things at the beginning of the year. We went into it intentionally, but being intentional doesn’t make things less hard.
We had two clients starting, one client scaling up significantly, and another client who restarted work with us. Plus, we were going through the hiring process to handle all the work.
If I had to do it all over again, I’d probably make the same decision. Sometimes it’s ok to take what’s presenting and try to make it all happen.
February 2023 • April
April joined Cooptimize in early February. The fourth month of the year is now known within Cooptimize as “Abril” for clarity.
We had previously decided that no one gets “assigned” to a Project. Everyone is asked for consent to become part of a project. I screwed this up at my first opportunity.
Operating on a consent basis isn’t difficult, but it’s completely new for all of us. It takes time to retrain our brains into a new way of working. I apologized and tried to articulate how the process should have worked – asking if April consented to join another project.
March 2023 • Just What I Always Wanted: More “Managers”
Now that there were more than two cofounders, we were back at trying to figure out the legal structure of Cooptimize and how to vote in additional people to the cooperative.
We ended up with a “Manager Managed LLC”. Eric and I, the cofounders, remain the legal owners (Members) of the Cooptimize LLC. Running the business can be done by anyone voted in as a Manager. Eric and I are also considered Managers.
This structure allows us to have additional employees voted to help run the business without having to go through the legal complexity of a modified LLC every time someone is added. This is an imperfect cooperative structure, but we all voted that an imperfect structure is acceptable for now.
Abril 2023 • Death and Taxes but Mostly Taxes
Once in my life I filed taxes for an S Corp, and I hated every second of it. We switched to a C Corp for tax purposes.
An LLC filing taxes as a C Corp is very unusual because it would mean double taxation on dividends. Here’s the thing – we cannot have dividends. Only employees can take money from Cooptimize through Salaries and Profit Sharing. If anyone leaves Cooptimize, they are not entitled to future payments.
A traditional Worker Cooperative pays out something called “Patronage” which is basically a way of pre-allocating future Dividends. These are payments that would be available post-employment. That’s one of the reasons why there are special corporate structures for cooperatives who pay out Patronage.
May 2023 • 💰
We finally had net profits for the history of Cooptimize!
Here’s how our profit sharing works:
- Calculate the Net Income (after taxes and all expenses) for the Quarter. Let’s say it was $48,000.
- Of that Net Income, put 25% of it in Savings ($12,000). We’ve named this our “Employee Development Fund” and is money set aside for investing in ourselves. Could be spent on training, conferences, biannual meetups, etc. This is shared money and isn’t available for payment to employees. In a traditional cooperative, this is similar to an “Indivisible Reserve”.
- The remaining 75%, $36,000 in this example, goes into the profit share pool. It is paid out over the next 12 Quarters – $3,000 per quarter. We pay profits out slowly to keep a healthy amount of cash on hand.
June 2023 • Josh.5
Then we were 4.5.
Josh joined us as a subcontractor working on a client for two days per week. We’d been collaborating with Josh since the beginning of Cooptimize, so this was more of a continuation of what we’d been doing.
In October 2023, Josh joined us as a full-time employee!
July 2023 • Big Tech Continues to Demonstrate Why Worker Solidarity is so Important
Around this time last year, executives and boards of many profitable large tech companies were laying off huge numbers of employees so “they could stay profitable” and vague “future economic conditions”.
Unfortunately, this treatment of people has been normalized over time.
IT’S NOT NORMAL!
Mass layoffs from profitable companies are lazy management. This is why workers should be unionized – so they can push back against lazy management. There are dozens of other paths companies could take instead of layoffs. I suspect these aren’t really cost saving efforts – they are more likely collusion to soften the labor market and reduce overall wages and raises.
August 2023 • Automation and the Great (Data) Migration
We are getting more and more into a world of helping with Data Migrations. Being a part of a data migration during a Dynamics 365 implementation:
- Uses our existing data skills and tools
- Allows us to understand new system better for reporting
- Automates the migration process for clients so we can run 10x or 100x the number of migrations as a typical implementation.
September 2023 • What Does “Growth” Even Mean?
Throughout my career that companies I’ve worked for have had solid business strategies. Instead of having a good strategy and letting it play out, there was always a chase after “growth”. I’m not sure if it was money they were after or it’s a common personality trait of capitalist owners. “We have to grow because…reasons.”
I started at a small consulting firm called Greenlight BTS. We grew by doing excellent work, including a lot of rescue projects for bad implementations. That company wanted more new customers and to have their own sales funnel. Fine, but then we entered into this weird partnership with sa.global. We all had two emails and two calendars and two business cards and it was a giant cluster. They wasted five years trying to solve a problem they created.
Then we became officially part of big sa.global. Sort of. Even though they just spent five years trying to solve the name of the company, they still hadn’t solved the ownership structure of the company. We weren’t on the same team, so they wasted a lot of time and energy negotiating with each other – inside the same company!
(This is around the time I should have realized I was never going to become an owner of any of these companies.)
To add some excitement to the mix, the sa.global USA group later merged with another firm without the blessing of the sa.global corporate group! More merger fun! In a not shocking turn of events, after all this time the sa.global USA group got a divorce from corporate and merged into HSO. If you’re doing the math at home, it was about 12 years of dorking around with corporate bullshit instead of focusing on clients.
I got a job at Dynamic Consulting who also had a good business strategy. But again, there were constant management grenades thrown in to change with the strategy. And we had to spend a bunch of time looking at a crystal ball to predict what would happen next year. None of these tasks were helpful in providing better consulting. Eventually they completely abandoned all the strategies and sold to sa.global corporate. For sa.global, it took a total of about 14 years dorking around to build their USA subsidiary.
I tell this story because it’s depressingly funny. But also, I think it illustrates where a growth obsession can completely derail being better at making a product or delivering a service. Growing <> success. If you’re in the business of consulting, then success should mean doing excellent consulting. Utilization, revenue, project sales, FTEs, or how much money a firm is willing to loan you are not measures of success.
Should Cooptimize grow? How big? How fast? I don’t know and I don’t really care. My goal is a group that does excellent work no matter what size we are.
October 2023 • Worker Owner, or Whatever We Call It
Tanner became the first LLC Manager voted in since Cooptimize was founded!
It’s ironic because we don’t actually have any hierarchical managers at Cooptimize, but we all have this legal title of Manager.
November 2023 • Fractional Data Teams
Fractional Data Teams™️ was our concept from the beginning of Cooptimize – expert data help on a part time basis. At the beginning our strategy was more around selling “Packages” instead of “Teams”. We’ve tried to evolve our concepts to make it easier for our Clients and Prospects to understand how we work.
I would say our language over the first two years has evolved quite a bit. Our business concept has stayed consistent.
December 2023 • Cooperating
I had one of the most fascinating conversations in my career at the end of last year. We all sat down to discuss our salary formula and decide on how we wanted to allocate money for raises. It’s an unusual feeling to simultaneously advocate for yourself and your colleagues. It was a challenging and fun meeting!
We have these types of conversations throughout our personal lives. We make collaborative decisions with our spouses, children, extended family, and friends. It can take a lot of practice to have healthy interactions during these conversations.
We are all better when we can have transparent, inclusive, and validating conversations. We should be having these conversations in the workplace as well.
Joel Leichty 