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Welcome back everyone! Last month we talked about the potential difficulties that can arise in joining an acupuncture business partnership. In other words, a few things to consider before you dive into a partnership agreement with a friend.

Today, I thought we’d talk about a very viable, rarely discussed business partnership arrangement:

The cooperative business model. Aka, the co-op.

For whatever reason, the co-op is rarely (if ever) mentioned as an option for acupuncturists in school. Perhaps because it’s infrequently used? We talk about DBAs, PLLCs, partnership, incorporation, etc. But the co-op, as far as I know, is almost never mentioned in practice management classes in acupuncture school.

This is a shame because the co-op model offers security and stability in a way that the traditional business partnership typically doesn’t. And though it may sound a little intimidating initially, there are many resources out there (low cost or free, as we’ll see below) to assist you setting it up.

Today I’m excited to speak to Alison Loercher, co-founder and member of The Vital Compass, an acupuncture and Chinese herbal dispensary cooperative in Portland, Oregon.

Let’s get to know Alison and then pick her brain about the co-op model and how it can serve acupuncturists.

Alison shares:

• Why the co-op model is different from a traditional partnership set-up
• How the member-owners get paid
• How to get started setting up a co-op
• How the co-op model has benefited Alison as an acupuncturist specifically

And here are the free and/or low-cost resources Alison mentions throughout the article:

• “Steps to Starting a Worker Co-op” from the Northwest Cooperative Foundation
• Resource List from the Democracy at Work Institute (DAWI)
• The DAWI’s guide for developing bylaws
• International Cooperative Alliance’s 7 guidelines to determine the mission of your co-op

Okay, here we go!

Hi Alison! Thanks for chatting with us today. Where did you go to acupuncture school?

I attended the Oregon College of Oriental Medicine (OCOM) from 2005-2008.  It’s a school with a great community and I’m glad to be contributing to it now as a clinical supervisor in the Masters program.

How did you become interested in acupuncture?

In my early 20s I developed an allergy to the cold and damp that left me with an itchy and exhausting rash nearly every day. Living in cold, damp, Portland, OR, I had hives almost all the time!  I was prescribed a steroidal anti-inflammatory that seemed to make the condition worsen when it wore off.

Acupuncture was the magical medicine that finally made the hives manageable and then disappear.  When I realized how acupuncture made not only the hives better, but also my quality of life, I knew then I had to do what I could to make the medicine more available to the world by making it my career.

You’re a member of The Vital Compass, an herbal pharmacy that is structured with a worker-owned cooperative business model. I think most of us are not familiar with this model of setting up a business. How does it work?

Cooperatives are a great business model for any industry as they put the needs of the workers and members first.  I think acupuncturists have a real opportunity looking into building cooperatively owned businesses because workers/acupuncturists and their relationships with the patients are really the heart of any acupuncture business.

Co-ops can be set up in a number of ways, but the basic tenet is “one member, one vote.”  In our business, each acupuncturist is a member/owner and has one vote.  This means that no major decisions are made without everyone’s input.  Someone can abstain from voting, but still has the opportunity to voice their opinion.  It is an intentionally democratic model.

For us, since we also have member-owners of our herbal medicinary that do not work within the business, they also have a vote and a voice in all major decisions that influence the direction of the business.  We have a board of directors that represents both the worker-owners and the member-owners. It is a business structure that intentionally seeks to serve and benefit everyone involved, rather than just one or a few owners at the top of the business structure. This type of model is often called a “Solidarity Cooperative”, meaning that there are two types or “classes” of members.

To set up a Cooperatively structured business you just need people who are looking to set up an equitably structured organization that will benefit themselves and their community.  There are a lot of great resources within the cooperative community to help set up and sustain a cooperative business.  Here’s a link to a pamphlet called “Steps to Starting a Worker Co-op” from the Northwest Cooperative Foundation and here’s a link to the Democracy at Work Institute (DAWI) who has a wonderful resource list and helpful staff. 

How did The Vital Compass come to exist?

The Vital Compass was founded by myself and Green Wayland-Llewellin who had previously co-founded Third Root Community Health Center in Brooklyn, NY.  The clinic was born on a bus ride after a clinic shift at Seven Star Acupuncture where we both practiced.  If I remember correctly, one of us said “I wish we had a cooperative herbal medicinary in Portland,” the other said “me, too!” and then the work of dreaming and organizing started.  We wanted a structure that would both meet our individual needs as practitioners as well as the needs of our community.

What are the benefits of being a member of a worker-owned cooperative?

Oh, where to start!  There are so many.  I think the one benefit that has been evident from the start until now is the support of the community we have formed.  I have worked in a variety of settings, from solo practice to employee at a large non-profit, and nothing has provided the support as a business owner and practitioner as well as The Vital Compass.

We have created a structure in which all of the practitioners can feel supported in their clinical practice, and the job of running a business is shared by all of us.  We all are payroll, and HR, and marketing and front desk and medicinary manager.  Over time, we have outsourced the headaches of laundry, bookkeeping and cleaning, though! If we had a different brink and mortar set up, we might have kept these tasks in house.

When I am having a bad day as a business owner, frustrated with bookkeeping for example, there is  someone there to talk to and bounce ideas off of.  When I need inspiration, help or feedback about a patient there is another practitioner to help.  When we meet a milestone, we celebrate together..  When I need a vacation or a sick day, the clinic stays open and my patients can be seen.

When it’s time to retire or move on, the clinic will still be owned by everyone else there and my patients can still be treated in the same place by practitioners they have already met.  I can honestly say that I am not sure I would still be in practice were it not for forming The Vital Compass.  The difficulty of wearing all the hats as both business owner and practitioner is overwhelming!

It looks like there are four acupuncturists that currently work at/own The Vital Compass. How is the income for the cooperative divided up amongst you? In other words, how do you keep track of who brings in what business, and how do you decide who gets paid what?

There are a lot of ways an organization could do this, but what we do is pay a flat salary to all owners with the agreement that any profit left at the end of the fiscal year will be divided among all the members according to our Bylaws.  (The Bylaws get a little complicated, so we’ll save this for another time!)

The salary was decided upon based on the cost of living in Portland, OR as well as the current market and the sort of financial accessibility to acupuncture we want to provide.  There was a while when the business was getting started where Green and I were not making our ideal salary.his was tough, but we were still paying ourselves which I understand isn’t always true for all new business owners.

When Green and I hired the two other practitioners we now own the clinic with, they entered into a worker-owner track agreements where they agreed to be paid an hourly wage as well as a commission with part of each paycheck going towards a buy in to the business.  Once that buy in, a fiscal contribution and tally of hours worked was met, they both became full owners of the business and became salaried.  We recently hired front desk help who we hope will also want to become worker-owners.

I think as soon as you start mentioning things like bylaws, things start to feel a little intimidating. For example, I would have no idea how to write up bylaws, how to make them legal, etc. How did you do this? Did you have a lawyer who specializes in setting up cooperatives? Did you find bylaws that were mostly pre-written, and then adapted them?

Yeah!  Bylaws is a scary word, isn’t it?  Fortunately, it’s not any more scary than writing a business plan or applying for a business loan, and way less scary than taking those board exams.  One of the (many) great things about cooperatives is the sixth cooperative principle “cooperation among cooperatives,” so there is a lot of support within the co-op community to be found.

Here is a link to DAWI’s guide for developing bylaws.  Allow me to diverge a little here to introduce the “Seven Cooperative Principles.”  These seven guidelines are used to drive the mission of every co-op that is built. The sixth principle is “Cooperation among Cooperatives” which is often interpreted to mean that each cooperatively owned organization has a call to help all other cooperatively owned organizations.

This means that along our journey we got to talk to a wide range of cooperative organizers, owners and employees who eagerly shared their resources–including their bylaws.

We used another company’s existing bylaws as a template.  It was a useful tool as we envisioned how we wanted our business to work and continues to be a useful tool to answer the big questions that come up from time to time.

After we had drafted something complete and that we agreed upon, we found a lawyer familiar with cooperative law in Oregon (each state has different laws around business structures, though federal law recognizes co-ops in all states).  The lawyer verified that the bylaws would work in Oregon and helped us file as a cooperative corporation with the state.  DAWI has a great Resource Guide on their website to find lawyers and other professionals to help set up your organization.  In addition to a lawyer, I’d recommend finding a book keeper at the start as well.

Are the bylaws a living document, or mostly static since the beginning? Are they easy to change?

Yes, the bylaws are a living document.  The board has the power to change the bylaws.  Changing them could be as easy as calling a meeting of the board.  We have changed assorted things since we started, and have created documents like our Standard Operating Procedures (SOPs) together.

So when you hired front desk staff, that means that you first voted among all owners to determine if you all felt hiring an employee was necessary? Did you also all recruit/interview candidates, or did you agree to assign a single person those duties?

Yes, we all agreed that we needed front desk staff to grow as a business.  We developed a description of the position, a vision for our ideal candidate, and a strategy to advertise together.  Then when we found promising candidates we all interviewed them.  If there were more than 4 of us, this might have been a challenge!  Two of us conducted the first interview and two of us the second.  In the second interview we were able to offer the applicants a job if we felt the interview went well and had positive feedback from the first interview.

I imagine as we grow, we will designate a hiring committee.  However right now, we are small and need to ensure that all of our worker-owners get along, so we decided that all four of us would be involved in the interview process.

You mentioned that you each get a salary. What did you do in the beginning of the business, when income was (I’m imagining initially) not enough to pay the both of you? How did you determine who made how much money?

We were both working the same number of hours (full time or more), so we just split what we could spare after business expenses and called it a “salary.”  Once we had salaried people working different numbers of hours, we created salaries based on a $25/hour wage.  This might not be the right number for everyone and could be changed with other tweaks in the business model, such as the cash at time of service rate or square footage dedicated to treatment space.  For us, it is the amount we all currently agree upon that can support us as individuals as well as keep the business thriving.

Since we have the agreement that any profit at the end of our fiscal year is split among our worker and member owners, and since all major decisions are voted on by everyone, this ensures that any additional money made by the business goes toward supporting everyone involved, rather than it being counted as corporate profit or going directly into the pockets of the people at the top of the corporate structure.  This actually means that there are good tax incentives to starting a cooperative corporation as well.  If you’re curious, look into “Subchapter T” of the federal tax laws.  There are some good links on the SBA website.

I assume being salaried means it doesn’t matter how many patients you see each week. Does that mean you’re expected to be in the office a certain number of hours per week, helping in the dispensary or running the administrative side of things? Because that would imply that different practitioners may bring more business (i.e., patients) into the business (more or less than other practitioners), but still make the same salary as other practitioners?

Yes, that’s true.  It doesn’t matter week to week how many patients each of us sees, though we have personal as well as company wide expectations and goals.  We all know exactly how many patients we need to see in a day to keep the business working, and all have scheduled hours to be in the clinic.

However, the basic premise is that no work is valued above any other work.  For example, this means the monetary value of answering the phone is worth no less than seeing a client, because we recognize that the phone was not answered the client would not be seen. How many times in solo practice have we all had the experience of missing a call and losing a patient?

I think that, as professionally trained medical providers,  we tend to forget how much time business administration really takes and how much a job well done impacts the success of our business.  Answering the phone is just one tiny example!

Honestly, I never thought I’d say this, but I’ve grown to really enjoy some of my non-patient office time! At TVC, we all have administrative tasks we expect each other to complete.  For example, each of us is in charge of ordering some of our inventory.  Being salaried equally to one another also eliminates in-office competition and fosters a safer and more supportive work environment.

When one of us has a lighter patient load, and it has been an issue for our revenue, we have asked “what can we do to support you in increasing your patient numbers?” rather than relying on a reduced income for that person or individual stress to incite creative marketing solutions, which in my experience both does not work and leads to resentment among coworkers.

Having these open and honest conversations with each other has led to greater trust in each other and career saving camaraderie.  Sometimes it’s a deeper issue–like confidence in one’s ability as a practitioner, or current lack of inspiration with the medicine–and we talk each other through it.

How many years has The Vital Compass been in business?

We opened in January of 2013, but planned for 2-3 years before our opening date.  I’m happy to share that we’ve just signed another 5 year lease and have a met all of our goals for revenue and business growth so far.  I’m excited to see where we go from here, and so glad to begin sharing this stable and inspirational business structure with other practitioners.

The Vital Compass also prepares herbal formulas for other acupuncturists, so that they do not have to have full herbal dispensaries on site at their own clinic locations. Who is in charge of managing the dispensary and filling these orders?

We all are! When we started, we had the idealistic vision of practitioners either working in shifts at the “front of the house” filling orders and helping walk in customers or the “back of the house” seeing clients in our treatment rooms.

But, how it really works is that we usually have two treatment rooms and 2-3 people working at any given time, so whoever doesn’t have a patient fills orders and helps customers.  This will probably change as we grow and hopefully become more clear cut into front or back of house “shifts” but it works for now.  On the plus side, it means that all herbal formulas are filled by fellow practitioners.  This avoids a lot of the mistakes students can easily make in school medicinaries as they are learning the particulars of herbal medicine.

But, on the downside it sometimes means that there is not quite enough help in the medicinary as we need.  As far as problems go, this is a good one to have! We look forward to making this smoother as we continue to grow. So far, our new front desk staff is really helping here.

Is there anything that you would do differently if you were to set up another co-op in the future? Any lessons that we can learn from your experience? 

One of the greatest things I’ve learned is that a lot of business people, including banks, lawyers and those with MBAs, don’t understand what a cooperative business entails.  Unfortunately, the Cooperative Corporation structure is not taught alongside Sole Props, LLCs, C-Corps or S-Corps in business classes even though it is a federally recognized business structure.  If folks don’t understand your vision, explain it to them!  Explain even when you’re tired of explaining and can’t stand to be misunderstood.  You’ll likely find an ally and a cooperator.

Thank you so much for sharing your knowledge and passion, Alison!

Again, the resources Alison mentioned are here:

• “Steps to Starting a Worker Co-op” from the Northwest Cooperative Foundation
• Resource List from the Democracy at Work Institute (DAWI)
• The DAWI’s guide for developing bylaws
• International Cooperative Alliance’s 7 guidelines to determine the mission of your co-op

If you have questions for Alison about her experience, please feel free to email her at alison.loercher@thevitalcompass.com