In Indian Country, Pride Fuels Profit

The Noonday Market Fuel and Convenience Store was opened by the Gun Lake Tribe of Michigan.

Pride /prīd/

1.  a feeling or deep pleasure or satisfaction derived from one's own achievements, the achievements of those with whom one is closely associated, or from qualities or possessions that are widely admired.

  At Blue Stone, we understand how important it is that tribal business and economic development efforts properly reflect the pride of its Nation in Indian Country. The people, the communities, the languages, the traditions―surrounded by breathtaking scenery―make each voyage unforgettable. Since 1998, we have been helping communities to develop and grow new economic opportunities through travel centers, fuel distributorships, smoke shops and quick service restaurants.

One of the things we realized early on about these operations is that these businesses don’t represent an individual or a family or a corporation, they represent a Nation that is steeped in the traditions of the past, yet forging a path towards a sustainable future. So, when these enterprises are developed and operated properly, they become an incredible source of community pride.

We have partnered with numerous tribes that have gone on to successfully operate new travel centers, smoke shops, quick service restaurants and even fuel distributorships and bulk fuel plants. We have also helped turn around several underperforming operations, restoring the pride the community once had in these businesses.

Blue Stone Strategy Group can help develop your C-store businesses or improve existing ones that create tribal member employment, new taxation revenue streams and strong profits, bringing economic change and stability to your community.

If you’re interested in developing new tribal businesses or if your current businesses don’t properly reflect the strength and the pride of your people, let Blue Stone help you build an economy fueled by pride!

Call today to schedule an appointment with our experts!

Strategic Planning Crucial for Tribal Economic Sustainability

“You have to make a long term plan for diversification, but it doesn’t happen overnight. It’s important to commit to the reinvestment necessary to accomplish your goals so you are not bleeding enterprises dry while on the path. [It’s] critical to continually educate the leadership and community about the plan and how it’s progressing.”

Strategic Planning Crucial for Tribal Economic SustainabilityTribes with significant gaming initiatives and related businesses can find themselves bombarded with myriad offers, opportunities and potential scams. Throughout Indian Country, many tribal leaders are often faced with a stack of business plans―from family and friends, as well as unsolicited proposals from off the reservation―awaiting their attention.

For tribal nations with an eye toward the future, dealing with the sheer number of opportunities can present a number of challenges, including wasted resources, implementation of projects that simply don’t work and stasis in decision-making. Taken together, these challenges can inhibit growth in Native communities.

With a thoughtful, well-organized Strategic Planning Work Session, however, tribes can follow a structured, objective process that can help align their internal goals for diversification with long-term sustainability that is crucial to maintaining governmental and economic stability.

Most tribes, says BSSG president John Mooers, are very cognizant of the importance of developing and implementing a viable plan that works―regardless of whether they are located near urban or rural areas. And depending on what a particular tribe’s needs are, BSSG has planning solutions for tribal governance, its business operations, or both.

“We have worked with tribes that spent many years and a lot of money on projects and initiatives that had produced no equitable results,” says BSSG President John Mooers. “So we set up a two-day work session to assess where they are and we go over what did and didn’t work for them. We review government documents, by-laws and ordinances and interview stakeholders, including the tribal council and economic council board members.”

Over the two-day work session, BSSG identified their top priorities and their existing resources to create and a practical, step-by-step action plan that can help them move in the direction they want to go, says Mooers.

Mooers says that it’s important to note that there are no absolute answers that apply to all of Indian Country. Each tribe has its own unique needs and goals, and enterprises that look profitable for one tribe might not look as promising for another. Therefore, it is vital to never assume that that a strategic plan developed for one tribe would apply to another.  

“Our work sessions are a very effective cost benefit for tribes whose economic growth has stagnated or started to decline,” says Mooers. “Our strategists always take detailed notes so that we are able to fully assess where the opportunities and challenges lie. Afterward we can bring real-world options to the table in creating workable solutions.”

One key aspect not often considered by tribes, for example, is how diversification will impact risk/return potential and job creation as a part of an overall business strategy. This concept, known as portfolio management, is a simple and powerful tool that helps leaders focus on the entirety of the tribal economic and financial picture, not just viewing single investments as isolated decisions.

“As we all know, governments don’t make money, they spend money,” says Mooers. “So a lot of  what we’re doing in Indian country is creating job opportunities and efficiencies in their enterprises to generate the profits and tax revenues necessary to fund the government, which in turn increases its ability to provide services to its members.”

Mooers says that while the Strategic Planning Sessions are two-days, BSSG also has buildable solutions for assessment, planning and implementation for a wide array of concerns, including governmental, business development, housing, healthcare, and more.

“Our work sessions are very effective at identifying and establishing a strategic action plan that is tailored to meet the specific needs and goals of a tribal nation,” says Mooers. “But we can also build a comprehensive plan that can help build a stable government with a growth economy.”

Tribal Economies: The Case for Diversification

In May, the President released his proposed budget with major cuts that will directly impact tribes across Indian Country. And as the growth of Indian gaming has begun to slow, now more than ever tribal governments should be focused on diversifying their portfolios as a means to build stronger and more sustainable economies over the long term.

“Gaming has provided a lift for many Tribes for many years, but the reality is that it hasn’t provided enough revenues to address the many challenges that confront most tribal communities, nor has it supported the growth of tribal economies beyond the casinos,” said Jamie Fullmer, Chairman/CEO of the Phoenix-based Blue Stone Strategy Group. “The gaming industry has been more successful for some than for others, but it is clear that now is the time for all Tribes to focus attention on diversification into other businesses to provide steady revenue streams and creating more tribal jobs.”

The National Indian Gaming Commission (NIGC) reports that Indian gaming revenues began leveling off at around 2007 at $26.1 billion and has had only incremental increases in the last decade, indicating that the industry’s major boom period may have peaked.  

Fullmer says that successful diversification depends on several factors, including tribal leadership, community commitment, geographic location, infrastructure capacity,adaptability in strategic planning and land use initiatives.

“The initial step for tribal leaders diversifying their economy involves gaining an understanding of their Tribe’s particular competitive advantages, the available local and regional economic assets, and access to capital beyond gaming revenues,” said Fullmer. “Armed with this understanding, tribal leaders can then effectively deploy the various diversification theories that are in accordance with their particular goals and opportunities to achieve long-term job creation and economic growth.  

“It is critical to study the local market and workforce, understand the needs and wants of the area beyond just the tribal community and evaluate the potential opportunities in a particular location and then develop action oriented strategies based on the current reality of the area not just the potential.”

Most Tribes find themselves in one of two situations, said Fullmer. They are located near a relatively large metropolitan population, or in a relatively rural, isolated location where gaming operations and ancillary businesses are based on destination resort models or on capturing customers who travel through or near the reservation on major highways.  

Opportunities available to tribal nations with little acreage tend to focus on creating retail and service-oriented enterprises that do not require square footage. Comparatively, Tribes with vast reservations often contain one or more marketable natural resources and agricultural opportunities that can―if chosen by tribal leaders―be leveraged for economic development purposes. While Tribes can have both rural and urban attributes, the options for diversification differ depending on the cultural fit, demographics, and community support in a particular tribe’s situation, said Fullmer.

In general, Tribes tend to fall into one of four categories: Those near metropolitan areas; rural tribes situated on high-traffic corridors; those isolated with natural resources and agriculture; and those who are isolated without natural resources.

“Naturally, Tribes near large metropolitan areas usually have a strong infrastructural and economic advantage, left to solve the straightforward challenge of capturing an adequate piece of the purchasing power of the existing customer base in those areas,” he said. “While Tribes in rural areas, particularly in the western United States, have rural isolated reservations that are not near any major population centers or high-traffic corridors.”

To overcome these challenges, Fullmer advocates for developing a strategy that leverages the Tribes’ sovereign rights and advantages, that looks at both on and off reservation opportunities outside of gaming and toward human and natural resources and  to capitalize on the economic opportunities that tribal leaders may sometimes overlook.

“Blue  Stone’s  goal is to help tribes to evaluate and plan their own unique diversification program to what they believe is best for them, both culturally and economically,” said Fullmer. “But there’s no question that Tribal Nations need to move beyond gaming and establish a secondary, more refined approach in achieving diversification.  We have worked very hard over the last decade supporting our Tribal clients in diversifying their economies by combining our respect for the uniqueness of each tribe’s culture and history, providing proven tribal methods and perspective, while pairing them with best practices from Indian Country and the corporate world.”

Blue Stone Receives Superior Rating From Open Ratings

In March, Arizona-based Blue Stone Strategy Group (Blue Stone) earned a “superior rating” on customer service by Open Ratings, a data research division of marketing giant Dun & Bradstreet. The confidential and independent survey, which assessed multiple performance criteria, revealed that tribal clients give Blue Stone a superior rating relative to other competitors with an overall score of 95 out of 100.

“Over the last decade we have been dedicated to economic empowerment with our tribal clients and Indian country,” said Jamie Fullmer, Blue Stone Chairman/CEO and former Chairman of the Yavapai-Apache Nation. “We remain committed to our purpose of serving tribal nations and supporting tribal leaders in their efforts to protect their sovereignty.”

The average survey score is based on client-­assessed individual ratings in various performance categories, including: Reliability to commitments; how closely costs met expectations; and the timeliness and quality of services. The survey also evaluated the attitude, courtesy and professionalism of staff, as well as the level of customer support and responsiveness.

Blue Stone, which is majority Native-owned and operated, supports tribal leaders in the areas of governance and economic development―including strategic planning, operational assessments and market analysis for project viability, as well as financial modeling for land development planning, housing planning and project phasing support, to name a few of the company’s services. Additionally, Blue Stone also provides assessment of tribal finance departments and human resource departments to evaluate and protect tribal resources and capabilities.

Past projects have included a broad portfolio of ventures both large and small―including business due diligence of grocery stores, retail shopping centers, travel plazas and large, mixed-used development as well as casino operational assessments.

“Blue Stone works exclusively with tribes, tribal businesses and tribal organizations,” said Fullmer. “Every one of our team members is experienced in working in tribal settings and in critical situations.  Our team consists of a core team of Strategists with more than two dozen subject matter experts deep with experience working in Indian country."

“We appreciate that each one of our tribal clients is unique in culture, organization, geographic location, demographics, financial resources, assets and aspirations,” said Blue Stone President and co-founder John Mooers. “We’ve tried to blend the best practice of business with a deep understanding of tribal priorities and tribal cultural values and tribal community systems.”

"Regardless of the size of the project, Blue Stone is driven to quality customer service and providing culturally relevant services and guidance to strengthen tribal nations," said Fullmer. "I believe that our success depends on continuing to remain committed to serving the best interests of tribal clients, no matter what they are facing.”

Blue Stone Adds Eddy Edwards to its Strategy Team

Blue Stone Strategy Group today announced the addition of Eddy Edwards to its tenured team. Edwards is a former Keweenaw Bay Indian Community Tribal Council Member with extensive tribal government and housing expertise.

“We have a responsibility to continue to be the best in class in Indian Country and for our tribal clients and I believe that with the addition of Eddy Edwards we are adding another great resource to our tribal advisory team,” said Blue Stone chairman and CEO Jamie Fullmer.

An enrolled member of the Keweenaw Bay Indian Community (KBIC), Edwards has served in numerous positions within his tribal community, including tribal council, tribal treasurer, director of retail development, and executive director of his tribe’s housing authority.

As a senior strategist and subject matter expert at Blue Stone, Edwards brings decades of leadership experience specializing in tribal housing, economic and community development.

Given the remote location of the Keweenaw Bay Indian Community’s L’Anse reservation on Lake Superior, within the exterior boundaries of the State of Michigan, Edwards understands obstacles to economic development faced by tribes in similarly isolated areas. Gaining unbiased perspective from top subject matter experts can drastically improve a tribe’s economic trajectory.

“Tribes are notorious for being in rural, hard-to-­reach areas where expertise is also hard to find,” said Edwards. “Accessing outside expertise that is competent in working in Indian Country to provide assessment and actionable plans is critical to success.”

Edwards’ experience in tribal economic development started in 2000 when he was hired by the KBIC as director of retail development. He implemented best practices from the Harvard Project on American Indian Economic Development, which he studied for years. Edwards built two commercial FM radio stations, and developed and opened three different convenience stores within the reservation boundaries, overseeing acquisition, design, construction, negotiating wholesale supply, and more. For more than eight years, Edwards actively managed these C-­stores.

Additionally, Edwards helped create tribal codes to incorporate a tribal corporation, Aanikoosing, Inc., for his tribal community. He served on the board of directors of this corporation for several years.

In 2004, Edwards’ tribe appointed him Executive Director of the Keweenaw Bay Ojibwa Housing Authority (KBOHA). Over six years, Edwards took the KBOHA from under $2 million a year in revenues to over $11 million a year. Edwards created a homeownership program, a supportive housing initiative, chore services for the elderly and many more programs.

He additionally launched profitable businesses, including Do It Best building supply store, a BP-­branded C-­store, and a construction company that won numerous million ­dollar contracts. The KBOHA then created and spun off a non-­profit corporation in 2008 that eventually became a native community development financial institution (CDFI) certified by the U.S. Treasury.

As Executive Director of the Keweenaw Bay Ojibwa Housing & Community Development Corp., since 2008, Edwards continues to lead an organization that promotes community financial literacy, home buyer education, and a matched savings program known as Individual Development Accounts (IDA) that help tribal members save for college or homeownership.

Edwards expanded that program to include three different revolving loan funds for home improvement, homeownership, and business start­up or expansion. As Housing Director, Edwards successfully managed more than $20 million in federal grants from numerous federal agencies to benefit his community.

Edwards served as tribal council treasurer for two terms, and was directly involved in managing the tribe’s finances, health care plans, retirement plans, and more. An active legislator, he introduced numerous laws. In 2014, the tribal council asked Edwards to supervise the tribe’s two casino operations. Edwards hired executive management, implemented new systems including a slot management system and a point of sale system casino wide. Edwards also developed a plan to acquire land, finance and build a new casino on the Lake Superior waterfront.

Edwards earned his Bachelor’s degree in economics at the University of California Los Angeles in 1988, and received his Master’s degree in business administration (MBA) from the University of Phoenix in 2004.

Edwards was born in Los Angeles California after his mother was relocated by the Bureau of Indian Affairs from the Keweenaw Bay Indian Community’s L’Anse reservation, located on Lake Superior, within the exterior boundaries of the State of Michigan. Edwards has been involved in his tribal culture from an early age. Edwards’ parents brought him and his siblings back to the reservation every summer to visit his family and participate in their tribal community. Edwards met his wife, another tribal member, while attending their annual pow wow held in late July every year. Edwards and his wife were married on the shore of Lake Superior by an Ojibwe medicine man.

Edwards and his wife moved back to the reservation in 1998 and Edwards became deeply involved in his tribal government. Edwards and his wife also became licensed foster parents and have hosted numerous children in their house as foster parents. Edwards and his wife adopted three girls from agencies in Michigan, Florida and Wisconsin, through the Indian Child Welfare Act.

Now more than ever, Edwards believes that tribes need a plan for self-­sufficiency, given predictions of discretionary funding cuts by this administration.

“It’s exciting to assist tribes as they develop strategic plans to become better at governing and developing their economies by becoming more self-­sufficient,” Edwards said. “Indian country has to be ready for less from the federal government, not more.”

Part 3 of 4: Metropolitan, Rural, or Somewhere In-Between? How to Diversify Relative to Location.

Part 1    |    Part 2    |    Part 3

Location is everything, or so the saying goes. But that’s only partially true, and Indian country is living proof of that. Some of the most remote Tribal communities thrive thanks to off-the- beaten-path, destination-style resorts, tourism, utilizing natural resources, or by leveraging water rights in the arid southwest. Meanwhile, some tribes in populated cities may not be capitalizing on their full potential, like hiring staff with advanced financial acumen and efficiency skills, or marketing their in-house skilled talent pool by providing consulting services to other tribes or commercial businesses.

From large metroplexes to middle-of-nowhere America, tribes are both strengthened and limited by their location and economic geography. There are a few tricks of the trade for strategizing a big-picture, economic development plan, relative to where a tribe is situated on the map. Blue Stone has some insights, whether you are:

  1. A tribe near a metropolitan area
  2. A rural tribe on a high-traffic corridor
  3. An isolated tribe with natural resources
  4. An isolated tribe without natural resources

Below we lend some innovative perspectives based on first-hand experiences advising tribes, as well as approaches rooted in fundamental economic principles, applied to unique tribal situations.

Read on to learn more about capturing a bigger share of your city’s wallet through competitive advantage, leveraging economic “clusters,” honing in on growth industries, analyzing industry trends, conducting profitability assessments, eliminating “leakage,” and much more.

Evaluating Options

“Looking back, our advantage as a tribe was that we learned to look at what others were doing and see what worked and what hasn’t. We learned from their mistakes, as well as what they have done right.”  (Ed Pigeon, Gun Lake)

As discussed in Part 2, the first step in a tribe’s diversification effort should be to assess the economic opportunities available to the tribe based on its particular location. The economic development opportunities on reservations that feature predominantly trust land are fundamentally similar to that of large, master-planned land-use programs.  This means that in order to understand what’s economically possible, you have to understand the potential consumers, or customers, available given a tribe’s specific location.  Naturally, there are multiple strategies that tribes can use to overcome their geographic limitations. For example, some tribes use a ‘destination’ or ‘resort’ model to attract customers from relatively distant locations for multiple-night stays in their casino. The key is to learn the potential opportunities a tribe can explore based on its particular location and economic geography, and then develop customized development strategies based on that reality.

Most tribes find themselves in one of two situations: They are either near a relatively large metropolitan population, in which case they likely have developed gaming ventures to attract nearby customers; or they find themselves in relatively rural, isolated locations, where gaming operations consequently are based on destination resort models or on capturing customers who travel through or near the reservation on major highways on their way from one metropolitan area to another. Tribes with land along a major highway or interstate are best situated, as they can still establish profitable gaming operations despite being relatively rural. Others find themselves in truly rural environments without easy access to major markets, and likely have small gaming operations typically frequented mostly by tribal members. At best, truly rural gaming tribes can build large destination resorts to which customers are willing to travel long distances and typically stay for multiple nights.

Determining which diversification path best suits a tribe’s particular needs depends in part  on its geographical location. Opportunities available to a rural tribe tend to depend heavily on the size of its reservation and the natural resources it holds under trust. Tribes with little acreage tend to have to focus on creating service-oriented enterprises that do not require square footage.  Comparatively, tribes with vast reservations often contain one or more marketable natural resources that can – if so chosen by tribal leaders – be leveraged for economic development purposes. While each tribe is unique – one can have both rural and urban attributes – it is helpful to break down possible economic development opportunity sets into four categories: Tribes Near a Metropolitan Area, Rural Tribes on High-traffic Corridors, Isolated Tribes with Natural Resources, and Isolated Tribes without Natural Resources.

The options for diversification differ depending on which category best describes a particular tribe’s situation. Recognizing that some tribes have multiple characteristics, let’s examine a few situations to better understand how the economic diversification opportunity sets for tribes are determined in each category.

Planning for Diversification: Tribes Near a Metropolitan Area

Expanding upon the three types of commercial locations outlined in the previous chart, a large part of planning for diversification depends on the degree of access to a metropolitan population that can supply customers for potential enterprises. Naturally, tribes near large metropolitan areas have a strong structural economic advantage, left to solve the straightforward challenge of capturing an adequate piece of the purchasing power, or share of the wallet, of the existing customer base located in those areas. This assumes that the tribal population in and of itself isn’t large enough to generate sufficient economic value, which is typically the case for most tribes that have a member population much smaller than a neighboring city.

While Tribes near a metropolitan area can pursue economic diversification with any strategy or set of strategies, it is most likely that the strategy with the most likelihood for success will be based on capturing the market potential of the nearby population. In many ways, this concept is similar to the logic that drives large gaming initiatives for tribes near metropolitan areas. Whether they are located in New England, California or the Southwest, the question for Tribes facing the diversification challenge is how to leverage this concept through enterprises other than gaming.

Utilizing some common academic frameworks and concepts from traditional economic development can help answer this question. The first is the concept of competitive advantage.  Put simply, the idea is that any business or enterprise should focus its efforts on activities where it has a distinct advantage compared to its competitors. For example, because tribes have tax and regulatory advantages over neighboring non-tribal governments, they can create businesses that can make and/or sell products on reservation land cheaper to customers. As a result, customers looking to save money will leave the metropolitan area and drive to the reservation to purchase these goods. This phenomenon is common across the United States and serves as the basis for many tribal enterprises from gas stations to firework stands to smoke shops. The notion of competitive advantage predates gaming and is the economic basis for much of the growth of tribal enterprises in the pre-gaming era. Applying this concept in the post-gaming era presents tribes new diversification options where the same inherent competitive advantage applies.

The second theory that helps to illuminate the diversification options for tribes near metropolitan areas is the concept of economic “clusters.”  This notion, now widely applied in economic development, is originally based on the work of Harvard Business School Professor Michael Porter, who first coined the term “Porter’s Five Forces” has for decades advocated the notion of competitive advantage and industry clusters. There are many different definitions of “clusters,” but all basically describe a collection of skillsets that are located in the same geographic area and have developed a collective capability or benefit that is greater than what they would each contribute if they operated independently. Examples of this are found all over modern life and range from the concept of shopping malls (stores located together attract more total customers than they each could separately) to the metropolitan area of Detroit (where suppliers and manufacturers are closely situated to reduce transport information sharing costs).

Combining the basic principles found in clustering and competitive advantage and applying them to Tribes Near Metropolitan Areas provides concrete, viable options for economic diversification.   Consider the graph below developed for a gaming tribe with a casino and resort located New Mexico.

This model considers four particular criteria for diversification options. First, a tribe needs to consider whether the project is a good cultural fit. While acknowledging the primary focus of this book, Blue Stone Strategy Group always works with tribes to screen new business ideas through a cultural lens.  For example, there may be particular aspects of a tribe’s culture or traditional practices that they would like to leverage economically, such as traditional foods or arts and crafts, such as with many of the Tribes in the Southwest. Conversely, a Tribe’s culture and core values might argue strongly against engaging in economic activities that contradict or endanger its culture and values. Examples of this include strong opposition to uranium mining on sensitive cultural sites.

The second, whether or not the industry is a growth industry. This is a simple initial screen that provides some macroeconomic development cushion to any project a tribe is considering.  Diversifying into industries that are expanding as a whole will have a higher likelihood of succeeding in the overall economy, especially if the industry is a growth industry in the surrounding local economy. In this example growing industries in the area where highly focused around healthcare, pharmaceuticals.

Third, the capabilities that the tribe already has. This term will be used throughout this section in numerous concepts. Simply put, this consists of the skills that a tribe currently has – through its leaders, employees and potential employees. This can range from capabilities around land management and government administration to running large casinos. The capabilities, or skills, that are contained within the tribe and its enterprises can be far greater than is often given credit.  As sovereign nations, but also as business owners, most gaming tribes have in a relatively short time acquired skills critical to operating a wide array of businesses. Whether it is accounting, marketing, management, financing, public relations or even public policy, most tribes with gaming enterprises have cultivated a strong reservoir of skill sets that can be leveraged and transitioned into other related businesses. In the Isleta example, the sheer size of the tribe’s casino required substantial and complex cash management, compliance and working capital management skills.

Fourth, consider the competitive advantage. In this example, the Tribe had access to water rights in the southwest where water rights carry substantial value. The “use it or lose it” provision with respect to those rights meant that the Tribe was heavily incentivized to put to use as much of its available water as possible to ensure that those rights were retained for future generations. Like most tribes, this example also included the standard set of tax and regulation requirements that were much lower than the neighboring metropolitan area.

In this example which considered competitive advantage, cultural fit, industry growth and existing tribal capabilities, two clear answers emerge as potential avenues for diversification: Healthcare tourism/elective surgeries and banking and financial services. Using this methodology, these two options pass the test in all four focus categories.

Banking and financial services stem from the fact that this Tribe’s casino operations are robust enough and they have been through enough project financing that it’s very likely they have internal skill sets – individuals with the requisite knowledge base and experience – to be able to expand into providing some form of financial services to the enterprise.

Managing the budget, cash flow and accounting of the casino operations requires staff to have an advanced level of financial acumen and information technology sophistication that can be leveraged in other enterprises. This may be as simple as insurance brokering or as complex as purchasing a local credit union or bank. Another option could be to start a payroll processing enterprise that first handles existing accounts for the casino and government but then extends to offer services off of the reservation to the nearby business community.  We will explore this concept, known as “exporting internal functions,” further in subsequent chapters.

The second diversification option is based on Isleta’s operations management capabilities gained from running a resort coupled with a large demand for elective surgery in the nearby metropolitan area. “Healthcare tourism” refers to when individuals travel to another country specifically to obtain medical care.

Across the globe, private delivery of elective medical procedures has developed into a lucrative, high-growth industry. Thailand’s “star rated” hospital system caters to regional executives looking for extended-stay luxury accommodations to accompany cosmetic surgery and childbirth procedures. In the United States, hospitals such as Texas Children’s have substantial offerings for foreign nationals requiring a range of non-emergency services.  Locally, for tribes, the bureaucracy and increasing costs of the United States healthcare system presents an opportunity to provide fee-for-service elective medical procedures in a convenient location offering full resort-style amenities to patients and their families.

These services often come with high-margin procedures and – when combined with an existing resort – primarily involve acquiring the appropriate medical staff and equipment. One example of this is “birthing centers,” which are increasingly popular in the United States and, depending on state law, can be staffed by a team of certified midwives. These facilities command high fees and provide a currently desired alternative for women who want more substantial support and enhanced accommodations compared to a home birth, but do not wish to have a hospital birth.  This is just one example of the healthcare-related opportunities that Tribes Near a Metropolitan Area may have to create diverse streams of revenue aside from gaming by leveraging existing capabilities from gaming-related enterprises.

“Every tribe must have at least one person with business experience who is strategic, has critical thinking skills, understands the entire process and is able to see it from conception to completion. This means they have not only the vision, but also the attention to detail and analysis skills. They must be able to make timely decisions and have the ability to identify key critical decision points. ‘Go, no go’ determinations are critical.”  (Lynn Malerba, Mohegan)

Planning for Diversification: Rural Tribes on High-Traffic Corridors

Many tribes around the country find themselves situated on a rural reservation that is not particularly near a metropolitan area, but is between two metropolitan areas with land very close if not adjacent to major highways. In these instances, the potential for diversification opportunities that should first be explored usually relate to the traffic that is flowing through or near the reservation. There are numerous examples of this, such as Acoma Pueblo located on both I-25 and historic Route 66 in New Mexico; the Gun Lake Tribe situated midway between between Grand Rapids and Kalamazoo, Michigan; and the many tribes located along I-5 in California.

In these situations, the first step to planning for diversification is to understand the customers that are literally driving past or through tribal lands:  Who are they? How old are they? What do they like to buy? What needed services are not nearby? Why are they on the road? Etc. This is the basis for many tribal truck stop, convenience store, and casino variations. While some tribes moved quickly to capture this “passerby” market, others have yet to take full advantage. Those that have typically find that they capture a much more sizable “share of wallet” than can be generated by selling a tank of discounted gas. For example, let’s consider Blue Stone’s work with a Tribe in the Upper Midwest region.

This Tribe initially developed a casino and then began investigating what other ventures could generate revenue for the tribe. From an economic standpoint, it seemed logical to investigate diversification into a gas station given the proximity to the highway. However, like many tribes, leadership desired to have more than a few pumps offering discounted gas. They wanted to capture as many cars and trucks passing them as possible and as much share of wallet as they could. But generating a consensus among members to diversify beyond gaming proved to be an uphill climb.

According to its Tribal chairman, “Diversification is something most tribes strive to do. In our case just getting people to talk about diversification is a huge win for us.”  To help achieve this, Blue Stone conducted on-site visits that included financial, market positioning and competitive profiling of eight convenience stores within the same market. Wholesale gasoline distribution and supply points were identified and combined with customer behavior research to determine pricing. Blue Stone also provided an extensive general convenience store industry trends analysis. This information was then used to develop financial models for a potential Store.

The overall convenience store industry has displayed remarkable stability despite volatile gas prices, and has experienced steady increases of 1-2 percent per year for the last 10 years. The number of stations owned by independent (non-chain) operators has increased over the last decade due to increasing gas prices and the increasing availability of reliable quality, unbranded fuel.

Traditionally, store performance is comprised of the three largest sales categories: Gas, cigarettes, and alcohol. Gas sales provide revenue and volume at low margins, in-store sales offer higher margins (from 30 to 40 percent) that drive bottom-line profit. Candy, chips, soda and coffee provide additional profit centers for convenience store operations. Car washes cost $200,000 - $300,000, yet they generate between 500 and 1,100 percent profit margin on a per-cost basis. In recent years the primary area of innovation for store operations is the offering of food service: fresh foods (pre prepared sandwiches, salads, etc.), hot food offerings (burgers, burritos, hot sandwiches, etc.), and franchise food services. This area has been the fastest growing segment of in-store profit for the past several years.

From their perspective, the advantage of being adjacent to a highway translated into an average of 30,000 vehicles passing through each day, with an unusually high percentage of truck traffic due to the large furniture manufacturing nearby. Traffic data also indicated a commuter pattern with spikes just before and after working hours and a significant drop in traffic on the weekends. Some variation occurred during summer, when boating/recreation traffic increased on the weekend.

Both of these factors were offset by steady casino traffic. The casino tallied over 150,000 players club customers in the last 12 months, which helped to offset the ebb and flow of the traffic patterns and ensure a regular flow of customers.  Their location also offered some obvious strengths: highway visibility and a dedicated exit, proximity to the casino, and a lack of direct, immediate competition. Blue Stone evaluated eight area competitors and generated estimates for volume, pricing, and profit for each store. Among these eight, stations exist two miles away in either direction on the highway, and less than one mile away on a nearby road. However, none of these are able to offer comparable pricing or the added bonus of an adjoining casino.

Like many tribes, their situation also offered pricing and tax advantages. Competitors’ pricing was highly variable. There was as much as a thirty-cent differential between the highest and lowest in the area. This presented an opportunity for the Tribe’s operation to compete within a wide range of prices; however, it also presented a challenge in that management had to monitor area prices and adjust based on the market dynamics. Pricing on a cost-plus model  could be detrimental to volume. They can keep two thirds of the six-percent sales tax (below $5 million in sales; half of the 50 percent of the six-percent sales tax above $5 million) applicable to all convenience store items.  Because the tax dollars go to the Tribe, they can be used as pricing leverage against competitors. Based on the current compact with the state, the Tribe does not have the ability to charge tribal gas or cigarette taxes in lieu of state taxes.

Given this situation, there was a strong option for diversification with a restaurant and convenience store combination that, based on conservative calculations, would produce a minimum annual profit of $700,000, would cost less than $5 million to build, and could be completed in fewer than 180 days. A travel plaza and truck center, it would be located across the street from the casino and would be equipped with ten gasoline pumps (or twenty fueling positions) with a separate eight diesel pumps (or sixteen fueling positions) catering to semi-trucks. The store would offer mid-range trucking options (increased seating and merchandise options, parking spaces, and showers), but would not be a full-service (repair, trucking gear, etc.) operation. The concept would include a 2,000 foot white box shell for a nationally branded QSR (fast food) and have the casino either run the operations or negotiate a lease. Operations also would also be integrated, as the Travel and Truck Center and the casino engaging in cross-marketing, with customers being able to redeem casino player’s club points at the Travel and Truck Center.

This example illustrates a classic example of diversification for a rural tribe located close to a roadway with high-volume traffic.  With a relatively small investment, they can secure a strong, stable, cash flow-positive enterprise and tax revenue stream for decades to come.

“Gaming revenue is everything. It’s the revenue you create with gaming that sets the stage for the future,” says their Tribal leader. “A lot of tribes look at diversification that is gaming where construction companies launch goods and services that could be a spinoff of gaming; that’s how tribes have started.”

Many tribes in that particular region intuitively understand this opportunity. However, only through careful planning and systematic research of the appropriate economic development concept or concepts designed to capture the most customers and the most dollars from those customers can tribes can realize far greater financial benefits.  What customers will pull off the road and pay for varies widely from situation to situation. For commuters, tribes often focus convenience store enterprises on frequent fueling programs and offer takeout hot food items for working families coming home to children. For truckers, the focus is much different, based on extended dining options and amenities such as showers, truck washes and sometimes entertainment options. By combining traditional competitive advantages such as fuel taxes with a focus on a thoughtful business plan, tribes can take full advantage of their location near high-traffic corridors.

“Tribes need to have a bigger view of what is possible out there. Don't restrict yourself to the resources that you have right now - develop other resources and support systems like roads, railheads, bridges. You have to think bigger, and have the confidence that you can go out and develop a framework for how to get things done.”  (Mel Tonasket, Colville)

Planning for Diversification: Isolated Tribes with Natural Resources

Many tribes, particularly in the western United States and in Maine, have rural, isolated reservations that are not near any major population centers or high-traffic corridors. Some of these reservations have natural resources in abundance, which provide a natural starting point for options for diversification beyond gaming. In these situations, tribes typically struggle with gaming in general because of a lack of access to a large enough population capable of providing enough casino patrons to make gaming profitable.

To overcome this challenge, in some cases tribes develop ‘destination resorts’ that seek to attract casino patrons from long distances for multiple-day stays. When combined with marketing for small-scale conferences and corporate ‘retreats,’ this approach can prove to be successful. For example, pueblos in New Mexico have developed modestly successful models based on this approach.

As tribes in this situation look beyond gaming, reservation natural resources are likely the first place to capitalize on economic opportunities.

For tribes in the northwest and Maine, this often means timber, agriculture and fishery enterprises. For some tribes where it is culturally acceptable, opportunities in the extractive industries, such as coal and natural gas, present prime opportunities for economic diversification. In the arid southwest, natural resource opportunities also can come in the form of water rights. Take for example the a Tribe in Arizona, which has leveraged their ground-breaking water rights and available desert reservation land into one of that state’s largest farms.

Over time, the Tribe developed an economic diversification strategy to utilize their most valuable natural asset, 85,000 afa of permanent water supply. Covering 18,000 acres, it produces almost $20 million in revenue and $10 million in returns to the tribe annually from alfalfa, barley, potatoes, pecans, milo and corn silage. Their tribal farming facility professionally manages its portfolio mix optimizing across numerous factors, including: local demand, price stability, water usage, ease of cultivation, efficiency in watering, and fertilizer timing.  Farm managers also hedge the farms’ commodity exposure to reduce overall variability and risk. By leverage their water rights into a profitable enterprise, they have illuminated one viable path for relatively rural and isolated tribes to diversify beyond gaming.

Blue Stone Strategy Group also worked with the tribal council to evaluate and conduct a business development and profitability assessment to determine whether to acquire the a local golf course.  The geographic location of the golf course placed it within the boundaries of the Community’s original land base and was now adjacent to its current land base, providing them a significant cultural incentive to purchase the business.  The Community envisioned owning and operating the course in tandem with its adjacent gaming facility, targeting casino patrons to “stay and play,” thus creating a destination resort.

The initial evaluation revealed that the course had a good reputation; however, it was losing money annually to the tune of $300,000.  Its operations were in a critical state, and the facility and equipment were run down and in need of significant maintenance, which would require investments of more than $500,000 if the course was going to compete in the regional market.  Blue Stone conducted a comparative rate schedule study identifying inefficiencies and opportunities to raise the midweek rates to help close the deficit.

During the preliminary financial review of the facility, it was determined that the tribe would at a minimum have to increase to 100 rounds per week, charge new players $50.00 per person for green fees to offset the losses, and nearly double the room capacity at the Casino Resort to provide lodging to the additional players. In addition, the quality of the food and beverage menu and services was below industry standards and required a transformation.  It was determined that increasing the overall food quality and selection would nearly triple their income from foods and beverages. Operational improvement recommendations were made to improve inventory control and financial operations and also standardize pricing.

Upon concluding its assessment, Blue Stone recommended to the Tribal Council that the Community create a cost savings by eliminating the management contract and have the operation of the facility be conducted by the tribe, that it revise its compensation structure to represent the regional market, and that it utilize a national reservation system. The recommendations that they ultimately implemented resulted in increased revenues and reduced expenses, allowing financial pro forma to move from an operation loss of more than $300,500 to a forecasted operating profit of more than $330,000. Additional casino and hotel revenues also were generated based on the “stay-and-play” concept.  Tribal employment also increased, with the golf course alone creating an additional 20 jobs. The strategy to create a stay-and-play environment by creating adjacent amenities for individuals visiting the location created a positive impact to the overall community.

In addition to these efforts, the Community, with Blue Stone’s assistance, conducted an assessment of its community store and an efficiency assessment of an improvement project for its farm business. The Community had a convenience store that sold grocery items located on their tribal lands. The facility was in very poor condition and required extensive maintenance.  Unsanitary conditions, spoiled goods, limited product offerings, poor pricing and high turnover rates were all issues plaguing the facility, making it impossible for the business to serve quality products in the community’s best interest or meet industry standards. The facility was located nearly two miles off of the main highway near tribal member housing.  Community members did not want an influx of non-tribal members coming into their residential area.

The Community wanted to explore whether it made economic sense to upgrade the existing facility or build a new facility that could expand upon what the current store offered. It was specifically interested in the costs and benefits, investments, and capital requirements associated with each. The facility provided a limited number of jobs, fuel, produce, and other goods to the community.

Blue Stone, in cooperation with the Community, evaluated the current facility and developed two recommended options, the first being to tear down and replace the existing facility with a new structure of similar size in the same spot. This facility would have a more convenient and marketable store layout fully utilizing the square footage of the facility, upgraded fuel pumps and point of sale systems, additional cooler space, and an array of new products. Store vendors also were evaluated and it was concluded that if the store changed its vendors then lower prices could be offered to community members.

Also to be considered was improving customer service through staff training, the use of weekly specials, providing a clean environment and shopping experience, and providing quality service to community members. The second recommended option to consider involved situating a new convenience store adjacent to the highway. This new facility would be unique in nature, as it would be constructed using an existing fire station, which would be converted into a full-service convenience store and gas station. The new facility would offer gas, diesel, and a larger selection of c-store products. This unique approach of renovating an existing structure saved the tribe substantially on construction costs instead of building a new one from scratch.  It also brought a sense of community and culture to the facility, as there was a communal history associated with the structure.

As a result of the evaluation, the Tribe decided to build a new convenience store within a quarter mile of its existing gaming and hotel operations. This enabled it to cross-market using a player points system, which attracted additional customers. The facility was able to employ 13 more tribal members and provided lower costs to customers, a clean environment, and a variety of new product offerings to the community. The new facility provided more than $1 million per year in tax revenues and profits back to the Community. A portion of the profits were then used to rebuild the community grocery store.

Planning for Diversification: Isolated Tribes without Natural Resources

Using the framework Isolated Tribes with Natural Resources, discussed in the beginning of this section will provide most tribes some important food for thought regardless of their geographic locations and natural resource characteristics. However, the economic reality of some tribes features little in the way of natural resources and no meaningful access to a large population base. Tribes in this situation often have a traditional village or community located in a particularly isolated location as a result of various forced or unforced migrations dating back typically to the 19th century. In these cases, gaming in general, beyond that for local village, can be difficult let alone diversification.

Tribes in this situation are often left with no choice but to consider purchasing urban or highway frontage acreage or pursuing off-reservation investments or economic development ventures.  Some tribes have attempted to leverage their isolation and inherent notions of economic sovereignty into a vision for economic independence. This diversification model is founded on local economy principles and can be quantified in many situations. For example, working with the leadership of a Tribe in New Mexico.

For the purposes of investigating and planning for diversification, our selected example is focused on the Tribe’s capital town, as opposed to the broader reservation. This town has relatively little pass-through traffic, as it is cut off from major metropolitan areas by vast mountain ranges and accessible only via 85 miles of winding road.  Home to roughly 2,600 people, this town is home to the only high school within one hundred square miles

The Tribe’s council had expressed an interest to Blue Stone in studying the town’s economic “leakage” – or the amount of dollars flowing out to businesses outside of the town – in an effort to understand how to diversify tribal revenues and provide more consumer goods and services to their residents.  Viewed another way, The leadership wanted to position the Nation to capture more of the local spending power that the town possessed.  Doing so would improve what is commonly referred to as the “multiplier effect” – where each dollar a community possesses is spent locally multiple times, thus maximizing that dollar’s local economic impact before it finally leaves the community. It also would provide a more diverse revenue base for the Nation in the form of taxes, rather than relying solely on the small casino and hotel in the center of town.  This situation is common for rural isolated tribes, a twin desire to provide services and an amenity to members living on the reservation, and also to capture as much economic value internally, to be economically self-sustaining as much as possible.  Taken a step further, it is a fundamental expression of economic sovereignty, the desire and effort to become less economically dependent on service providers outside the reservation, not just for funding government, but for tribal members who want to obtain consumer goods without having to hand over dollars to non-member businesses outside the reservation.  We will explore the sovereignty aspect of this approach later in this book. For now, let’s take a closer look at their economy.

Using some basic assumptions based on demographics, the spending ability of residents can be defined in dollar amounts.  Reviewing average income and net worth statistics from U.S. Census data, Blue Stone designed an analysis to estimate the percentage of household income that is spent locally and, conversely, the percentage spent outside of the community. Over the years, the leadership has gradually built up available goods and services by establishing enterprises to meet the identified needs of tribal members.   The tribe operates a snack bar and dance hall, liquor store, auto repair shop, full-service grocery store, hardware store and two gas station/convenience stores.

Nearby entrepreneurs just outside the reservation and town boundaries operate a few restaurants and a dollar store that drains funds from the economy.  More impactful, however, is the metropolitan area of Farmington, New Mexico, which pulls Tribal spending into fast food restaurants, a shopping mall, big box retailers such as Walmart, and movie theaters.  Consider below the initial estimates outlining the impact of this ‘leakage’ of dollars into surrounding, non-tribal communities.

This analysis measures two different aspects of leakage or its opposite, ‘capture,’ to determine the dollars staying in the economy. Both methods assess only ‘regularly re-occurring’ spending, so one-time purchases such as automobiles, or large electronics (televisions, etc.) are excluded.  The first method takes the per capita income of the community and compares that to the Nation’s existing business enterprises, adjusting for spending at the casino, and uses an economic multiplier to account for the times dollars turnover in the economy. The second method is more a bottom-up approach that takes the average income per household and compares that to the enterprise revenues to determine the percentage of dollars spent locally.  While many different methods can be used for this analysis, the results of these two produced a range of between $11 and $14 million dollars leaking out of the economy annually. From a tribal government perspective, at an assumed 10 percent tribal tax rate, this means that the Nation misses out on $1.0 to $1.4 million a year in tax revenue. Additionally, the associated jobs lost to the economy outside of town is estimated at more than 100 jobs.

It is tempting in these situations for tribal leaders to work to capture every penny possible in the local tribal economy. In reality, it is important to understand that capturing near 100 percent of residents’ spending power simply isn’t realistic in the modern world.

From internet sales to utility bills to federal taxes paid, there are only so many local dollars that a tribe can keep local, even under the best of circumstances. In this case, the tribe had already captured some of the biggest chunks of spending in the community: gasoline and food. Roughly 42 cents of every dollar was staying in the local economy. However, when surveyed, residents expressed a strong preference for “going into town” at least once a week to shop at the mall, dine at some of the restaurants, and see a movie in Farmington. It was more than a necessity; it had become a ritual that many residents carried out each week. Blue Stone worked with the Tribe’s leadership to understand how the economy could be further diversified to capture, or prevent the loss of, another 10 cents.

The analysis showed that retail was one of the main points of leakage, as was fast food. Car washes and ‘sports bar’-type entertainment were also activities that residents were currently spending money on outside the community. Using a general zoning principle, different areas of the town’s main street could be designed to facilitate spending in the local community. Blue Stone outlined the above map to highlight possible geographic combinations of enterprises that would encourage more local spending and provide natural buffers for culturally sensitive activities such as adult, night-life entertainment (including the casino), and day-time retail and car care enterprises.

To help infuse the economy with outside dollars, an expanded higher-end RV park was also assessed and located in an area where it would not interfere with residents’ retail activities. Taken as a whole, the analysis of the “leakage” provides a salient example of how rural isolated tribes can evaluate and plan for different economic diversification options.

In this section, we have broken down the first and perhaps most important step toward diversifying a tribal economy: Evaluating options and developing a plan. The various paths and options available to a tribe depend to a great degree on its geographic location and the natural resources it possesses. To help narrow down the various available options, it is helpful to divide tribes’ situations into a few categories with common characteristics. Tribes located near a large metropolitan area should begin by looking to diversification options that take advantage of their competitive advantage and existing capabilities.

In many situations, financial services and elective health care services can be good places to start for tribes already operating large resorts and casinos. For tribes in more rural locations but with access to a high-traffic corridor, capturing the spending power of travelers flowing through or near the reservation is an obvious first place to examine for pulling in outside dollars into the tribal economy. Rural tribes without this access can look to “exporting” their natural resources, if culturally appropriate, as a diversification tool.

Truly isolated tribes without natural resources can consider building strong local economies where dollars circulate between enterprises and the tribal village can provide diversification opportunities. Using these examples tribes can best evaluate and plan their own unique diversification program. In the subsequent chapters, we will move beyond the planning stage to discuss how to achieve diversification by using some unique tribal methods and leveraging some best practices from the corporate world.

“Many tribes have a lot of the same issues, but every tribe is still different. They have a unique location, a unique culture and a unique set of historical circumstances. Only the tribes themselves understand the best way to deal with that and economic development gives them the ability to address their own needs.”  (Glen Gobin, Tulalip)

A note from Jamie Fullmer – Assessing from the foundation up in 2017

At the start of each New Year, we personally spend time assessing our lives, our habits, our goals. As businesses, we often re-evaluate our collective direction and priorities. Tribes have the same priority with tribal governments and enterprises.

Your tribal system or tribal business is only as good as its people. Human Resources (HR) is the vital link that provides staffing, guidance and advice to all levels of tribal business. Improve the efficiency and effectiveness of human resources, and you set the stage to improve performance and leadership systematically for your ever-growing tribal Nation.

Staffing is the life-blood of any organization. Having enhanced HR team process and support will assist decision-makers in improving their abilities to handle complex situations and make smart, informed decisions.  Through HR assessment, programming reviews, on-boarding, and training, your tribe can equip your HR team with crucial insights and procedures.

Blue Stone Strategy Group does not rely on blanket or universal recommendations for realigning HR structure and drafting new policies. Thanks to the last decade of experience working with tribal human resources departments, we have ample proven-effective best practices and management models to pull from — we adapt and refine those models for each individual tribe.

As a majority Native-owned and -operated business that has spent the last 10 years supporting tribal leaders in governance and economic development issues, Blue Stone Strategy Group clearly grasps the unique structures of tribal governments and enterprises, and how vastly different those can look from tribe to tribe.

2017 is already moving forward so should you!  The time is now to kick start your tribe’s economic development from the ground up, beginning with HR. Here’s what Blue Stone has to offer your human relations department: overall assessment of the effectiveness of your HR department; HR training and development; savings and retirement plan administration; performance and development; recruiting, employment and on-boarding administration; tribal preference policy; compensation analysis; compensation policies and procedures; safety, workers’ compensation, risk management and benefits review; responsiveness, staff workload, and reporting relationships; regulatory compliance audients; update policies and procedures. Check out Blue Stone’s many testimonials from tribal leaders:

“Blue Stone brought a wealth of knowledge and expertise to our organization while emphasizing the need of Unity and helping bring Our Vision to fruition,” said Marshall Pierite, former Tribal Chairman of the Tunica Biloxi Tribe of Louisiana.

So what’s the next step? Schedule a call. Call us today at (949) 476-8828, or contact us via Let Blue Stone help take your tribe’s economic development and prosperity to the next level.

Through strengthening your economic stability and tribal sovereignty, we empower Indian country as a whole.  Plan ahead. Stay ahead!


Jamie Fullmer

Blue Stone Strategy Group
Serving Tribal Nations
(949) 476-8828 office
(949) 861-7419 fax

Part 2 of 4: Planning for Diversification

Part 1    |    Part 2    |    Part 3

The first step in evaluating diversification options is to analyze a tribe’s current customers, their demographics, desire for services and willingness to spend disposable income.

Next, applying two economic development principles can support tribes as they work to answer the diversification imperative:
1.  Capturing incremental customer demand
2.  Stage-based diversification

In the corporate world and even in the realm of small business, there are a couple of basic marketing strategies for business expansion that can be very useful to gaming tribes, particularly those who do not currently have other businesses outside of gaming. These strategies are related in that they both seek to grab more significant participation from a given customer.

The first step in evaluating diversification options is to analyze your current casino customers. It helps to literally visualize customers and think about what they are going to do with the disposable funds in the course of their visit or stay at the tribe’s casino. They will spend a certain amount on gaming, but how much would they spend on food? What kind of food would they prefer—fast food, buffet or fine dining? Would they spend money to stay the night? Would they bring their spouses if there were things for them to do? Would they bring their kids and pay for activities for them? Would they pay extra for higher-end services (i.e., valet parking, dry cleaning, spas and salons)? Are they in a hurry and want to enjoy gaming without all the distractions?

“When you start from a position of economic deprivation, the first time you see money coming into a community there is a thirst for it. So the biggest problem is the ability to suspend the desire for economic benefit for the time needed to invest and allow those businesses to grow." — Rob Porter, Seneca

With these questions in mind, what other operations is the tribe capable of running? Getting to know your customers and what they spend their dollars on is a critical step in pursuing both strategies.

The logic behind these questions relies on the fact that most customers are willing to spend more money on things that are leisure-related if you can pinpoint the right type of product or activity or service that they want. By fulfilling their needs and desires, they will reward you with their spending. Across Indian country, we see this play out in the gradual expansion of gaming. Most tribes start with a small casino, often a converted bingo hall or a temporary roadside tent. Then, over time, as many generate sufficient gaming dollars, they expand.

The first step typically involves the construction of a more substantial, permanent, dedicated casino building. Then gaming-related amenities are added, usually starting with more and different dining offerings. Often, a simple restaurant or buffet comes first. As the casino grows, restaurants with different cuisines and price ranges are established. Finally, accompanying hotels, spas and golf courses are added to target the entire available spending power of existing casino patrons and attract new ones.

This sequencing is so common, we are not going to spend much more time analyzing it, but it is worth noting. As tribes look to diversify, the same diversification concept applies, it just must be taken a step further and viewed through a lens of new enterprise creation that is less directly reliant on gaming. First, it is important to understand how the following two traditional marketing principles can support tribes as they work to answer the diversification imperative.

Capturing Incremental Customer Demand

The notion of capturing Incremental Customer Demand (ICD) involves the alignment of a customer’s desire for additional products or services with the enterprises’ ability to fulfill those needs. Beyond conventional gaming strategies such as adding table games or hotel and resort amenities, customer research and market surveys can help tribes identify and pursue more innovative commercial options that casino patrons may be willing to shell out dollars for.

For destination resorts, this may mean a vast array of retail options where the traditional casino resort has expanded into an outlet-style shopping complex. Patrons tend to be tourists who come not just to game, but shop and enjoy contemporary cuisine. By broadening their focus well beyond gaming, Tribes are able to capture an entirely new range of purchases from the same patrons who frequent their casino.

With Blue Stone’s help, a Tribe in the Southeast United States conducted an examination of its customer base and found that despite offering a full-service resort, what the local community really desired was an event venue for weddings, debutante balls, graduations, and other social gatherings. Because of its quasi-rural location near multiple small towns situated on a strip of land stretching over 100 miles, the region lacked significant family-friendly entertainment and event space.

Further investigation of the customer demand illuminated a strong desire for multipurpose entertainment venues such as modern bowling alleys. In Blue Stone’s experience, bowling alleys are rarely profitable and rarely a strong diversification option. However, in this particular case study, there was a quantifiable high customer demand for a facility that provided a range of entertainment formats (youth-oriented late-night bowling, weekday bowling leagues, slots for birthday bowling parties, and sports bar and gaming-related formats). Nearby bowling alleys were few and far between (about 30 miles apart), outdated, and primarily catered to day-time leagues. Furthermore, adult-oriented nightclubs were also non-existent despite a large under-forty single population in the area.

Working with estimates combining various development options, Blue Stone blended together a mid-range hotel, conference/event space, bowling alley and nightclub, producing a formula for diversification that stood a good chance of effectively answering local customer demand. Each of these entities by themselves were not likely to be economically viable, but when combined into a single format customized to local needs and conditions, the overall enterprise showed the potential for significant financial returns. Below is an illustration of the options that the Tribe considered.

Illustrative Summary: Steady State Pro Forma

Internal Rate of Return (IRR) is a measure of the cost vs. benefit of the project’s overall worthiness based on both the upfront construction costs and the future estimated gross earnings after overhead costs. This measure assesses the percentage of cash flow compared to the initial costs of the project over a 20-year period, growing at a modest three percent per year. It should rise above the cost of capital in order to be deemed a feasible project. The above figures are meant to support a decision to further investigate feasibility; they are not intended to be official feasibility estimates, which should come from building contractors. For example, based on these estimates, the bowling center would take the Tribe up to 10 years to pay back the construction costs, while the hotel would take longer because of the steeper construction costs. The idea of diversification requires these kinds of long-term, strategic decisions.

Tapping into incremental customer demand also tends to increase the crossover value of existing gaming and other enterprises, when properly connected through cross-marketing and loyalty programs. In this particular example, synergies with its casino and the identified community benefits added further value to the project. The longstanding desires for both family and nightclub entertainment would be answered by this approach, in addition to incremental new revenues and profits generated from increases in:

  • The overnight stay percentage of current casino patrons
  • Casino customers pulled in by the bowling center and/or hotel
  • Bowling center revenues from potential slot locations inside the facility
  • Convenience store and Dairy Queen customers
  • RV customers
  • Movie theater customers
  • Number of golfers

Taken together, these factors—even if not that impactful individually— provide a healthy financial buffer against lagging performance and fixed-cost burdens when viewed from the perspective of the overall tribal economic benefit from the bowling alley and entertainment venue project. These additional value creation aspects, conservatively estimated, should push the overall project above a 10 percent IRR threshold. Conducting due diligence and gaining an in-depth understanding of the venture or opportunity into which a tribe is going to invest its time and money is essential to ensuring that it is viable long-term economic option and also a proper fit for your community. According to the Tribe’s chairman, one of the obstacles that the Tribe encountered was difficulty with being patient during the process of evaluating and considering the array of economic development opportunities.

At the root of this inactivity was a clear lack of alignment between the Tribal Council and its business board. The business board did have an organizational structure in place, but it lacked guiding policies and procedures, an investment strategy, an approach to ensure due diligence, and internal systems, contributing to a mindset among board and staff that, “any idea is a good idea”— which certainly did not engender much confidence among Tribal Council or community members.

Blue Stone worked with the Tribe to examine and improve its existing policies and procedures and developed new ones designed to facilitate its economic diversification efforts. The Tribe's economic development corporation (EDC) had been in place for 17 years, however, during this time it had not made any investments on behalf of the Tribe, raising concerns among tribal members. Consisting of a governing board and three staff members, the operating budget was roughly one million dollars per year to operate, but had done little to justify or recover that cost. Although the Tribe was allocating funds to operate the entity, there was no agreement on or approval to move forward on investment opportunities.

With the assistance of Blue Stone, the Tribe developed internal systems, instituted onboarding and training processes for all business board and staff members, and formalized and approved a clear due diligence process that outlined a step-by-step process by which the board would consider acquisitions or joint ventures. It also developed dashboard reporting for the board and Tribal Council, enabling members to quickly review data and the progress of each investment opportunity in order to identify and address risk factors and craft a diversified investment strategy. In addition, the Tribe designed a plan to create clear lines of communication between the board and Tribal Council and fully define the roles and responsibilities of each as well as reporting structures and policies governing the relationship between the two.

Equally important was its establishment of monthly meeting updates and quarterly reporting by the board to tribal members. With Blue Stone’s assistance, the Tribe also developed a standards-of-conduct manual, employee handbooks, an Indian preference policy, and a tribal job creation plan that provided education and trainings for community leaders. With these things in place, the Tribe possesses the decision-making infrastructure necessary to effectively evaluate and capitalize on investment opportunities.

For example, the board decided to make improvements to the existing convenience store and product offerings to meet industry standards. It also developed and finalized a feasibility study for a second convenience store, which would produce an estimated 120 percent return on investment and payback in just three years. Blue Stone helped the Tribe secure Bureau of Indian Affairs loans to fund the project and assisted with the necessary project management trainings. The project is currently under construction and will be located adjacent to the Tribe's gaming operation; is expected to employ 16 tribal members; and will likely produce over a million dollars annually in revenue from profits and taxes back to the community.

This example illustrates two principles: 1.) Understanding the opportunities for capturing incremental customer demand and 2.) Understanding the impact that new diversification projects can have on existing projects in terms of meaningful returns for the tribal economy.
In this case, there also was the added social benefit of providing space for family and friends to gather near the community rather than having to drive long distances. This type of traditional approach to diversification is particularly helpful for tribes who have exhausted their initial set of diversification options, such as resort amenities and convenience stores. Our next example examines how another traditional marketing strategy can help a Tribe diversify its customer base rather than enterprises.

Stage-Based Diversification

This concept is referred to under many different labels, but for the purposes of this article we will rely on the label coined by Dartmouth University professor Chris Trimble: Stage-based Diversification—the notion that a Tribe or its business entity faces fundamental choices when it comes to expansion. It can either pursue new markets for the products or services it currently provides or it can pursue new capabilities to produce new products and services; however, it likely will not be able to pursue both new markets and new capabilities at the same time. This fundamental insight enables expansion and diversification opportunity mapping over time, as shown in the following graphic.

To illustrate this methodical progression towards economic diversification, consider the example from a Tribe in California. Its reservation is located in southern California nearly 30 miles from the Mexican border surrounded by forests. The Tribe has occupied their region for more than 10,000 years practicing their customs, traditions and engaging their community. Today, they have developed one of the most modern government and business enterprises in Indian country. The tribal members agree that the lands are to be used to capitalize on the value of the property without compromising their cultural respect for the lands.

Step 1 (Casino Expansion), the Tribe will begin by building its first gaming facility. After several years of operation, the Tribe will have developed a management team and supporting cast of individuals with skill sets or capabilities necessary to effectively run a casino. A natural next step is to then leverage those capabilities into expanding gaming operations by building a second casino to reach a new market. This could be located in a different area of the reservation or it could seek to target a different part of the same geographic market in order to offer higher-end amenities to more wealthy customers. Alternatively, the Tribe could stretch the capabilities of its casino management team by expanding the existing casino into a resort with multiple new hospitality operations under one resort and casino umbrella. This path leverages the existing market for the current casino while further growing the capabilities of the management team. This tradeoff between developing new capabilities or pursuing new markets continues in the next stage of expansion.

Step 2 (Diversification) outlined above, the traditional gaming tribe is faced with same tradeoff. For this Tribe, this process took place at the end of the last decade, when it had to consider whether to further diversify in the wake of the significant success of their resort and casino outside of San Diego. Examining the experience it had gained in hotel and resort management, they recognized that it had developed significant skills and expertise in the general hospitality business and could utilize those capabilities to manage hotels off of the reservation. With an off-reservation venture came the need for additional financing. Reviewing its growing knowledge of casino and resort financing, the Tribe determined that it could—and would benefit most from—financing its own off-reservation commercial expansion.

Attempting to move into a new market and develop new capabilities at the same time (by building a manufacturing facility, for example) would be far too afield for the tribe and increase the odds of enterprise failure. But by incrementally growing and branching out along the markets and capabilities axis (see previous graphic), tribes can reduce their risks and diversify with a greater likelihood of success.

Step 3 Return-Driven Projects (RDP) and Self Financing begins with all the capabilities developed from past diversification efforts and the customer bases of existing enterprises. Taken together, the portfolio of investments and the inherent capabilities of this Tribe resembles a real estate firm or a company highly skilled at managing and financing large cash-driven assets (casinos, hotels, etc.). In the corporate world, the closest analogy would be a Real Estate Investment Trust (REIT). In this case, the Tribe could look to new market real estate investments in luxury apartments that leverage its ability to manage high-end real estate properties in any domestic location. Moving in the other direction, in an effort to further develop its cash management and financing capabilities, the Tribe could get into commercial banking by purchasing a small existing bank or chartering its own to service the Tribe and nearby communities. Using this model, the Tribe is able to essentially self-finance real estate or banking projects that only a decade before would have seemed entirely unrealistic without vast amounts of outside support and assistance.

“The most important thing for any tribe is not to invest in a business but to support the people and entrepreneur support. There is a real need for sound planning and to avoid going after the 'quick buck', so the two things we look for are sustainable revenue and employment, which offer tribal members a chance to grow and have opportunities while building a sustainable revenue source for the tribe that we can build upon as a vehicle for job creation. ” — Jon Greendeer, Ho-Chunk

As you can see from this diversification progression, a Tribe can gradually expand in stages by leveraging either existing customer markets or existing capabilities to grow. By not going too far and too fast in pursuing new markets and new capabilities at the same time, a tribe can avoid higher-risk enterprises and the costly failures that sometimes result. Over time, taken in stages, diversification can be an exercise in low-risk expansion that proceeds at a pace that the Tribe can control. In addition, by connecting each stage together, a long-term strategy emerges from the distinct choice that a tribe makes at each stage between new markets and new capabilities. Blue Stone has mapped out diversification path options for many tribes at various stages of development across the country. In each case, the framework provides tribes with a clarity of choice that helps eliminate project options that are too ambitious or far afield for tribal decision-makers to effectively execute. From a financial perspective, this framework also has the indirect benefit of increased likely returns because the projects chosen are more likely to be successful over the long run.

As previously discussed, the stage-based approach to diversification can work hand in hand with the strategy of attracting incremental customer demand. Each time a tribe develops new capabilities in an existing market, it in effect captures incremental demand. Taken together, these two approaches can be extremely helpful to tribes who are seeking to plan and execute economic diversification. In our next article, we examine other frameworks for diversification that are more unique to tribes’ particular economic development situations and challenges.

What are you doing to prepare for the uncertainty in 2017?

There have been considerable concerns raised throughout Indian Country about the uncertainty that lies ahead in 2017 and what changes might occur in the coming year with the new administration.

Do you believe your tribal leadership is aligned and positioned to overcome potential challenges and take advantage of opportunities that lie ahead in 2017?

Over the past decade we have worked exclusively in Indian Country for more than 150 tribal clients.  Blue Stone Strategy Group is uniquely equipped and qualified to help tribal leaders position themselves to be focused and thrive in 2017. We are committed to helping protect and strengthen tribal sovereignty, by working with tribal leaders to improve economic development and tribal governance.

Read comments from tribal leaders who have worked with us.

None of us can be exactly sure of the changes for the upcoming New Year, but Blue Stone Strategy Group understands that having a strong, sustainable tribal economy, a vision for improvement, and clear strategies with efficient processes and systems in place will position tribes for success.

One way to jump start the planning process is by participating in a strategic planning work session uniquely designed to address the specific opportunities and challenges your Tribe is facing. Each tribal work session is customized based on your specific goals and circumstances and are led by Blue Stone Strategy Group senior team members and strategists who bring best practices and actionable options to the process.

We would very much like to talk with you to explore areas that we can support you in the coming year.  Please schedule a call to discuss today at (949) 476-8828.

Community Visioning

2-Day Work Sessions

When advancing any initiative for the benefit of the tribal community as a whole, it is critical to consider the point-of-view and expectations of the tribal citizens. Whether validating developing strategies or gaining insight about new or existing programs, community visioning is a key component in successful development and implementation. (Read more)

Strategic Planning

2-Day Work Sessions

Strategic planning is a critical initiative in accomplishing a Tribal Nation’s goals. Whether to support economic development, diversification, government, best use of land and other resources, or any other area impacting tribal stability and sovereignty, developing a unified vision and strategy is key for successful implementation. (Read more)

Leadership Alignment

2-Day Work Sessions

Strong leadership built on an aligned vision with a clear plan forward is critical to protecting tribal sovereignty. Alignment of leadership direction, strategy and resources is critical to maintaining a balance between the immediate needs of the community and long-term sustainability of Tribal Nations. (Read more)

Tribal Governance Made Easy with Blue Stone’s Soft Touch


Author: Gale Courey Toensing

Blue Stone Strategy Group
, a majority Native-owned and –operated business that supports tribal leaders in governance and economic development issues, has reached an important milestone: October marks its 10th anniversary in business.

That’s a major achievement, since less than 50 percent of new businesses last that long, according to the Small Business Administration. “About half of all new establishments survive five years or more and about one-third survive 10 years or more,” SBA says.

For Blue Stone co-founders Chairman and Chief Executive Jamie Fullmer and President John Mooers, the anniversary is a time to celebrate. “Not only are we celebrating 10 years in business, we’re celebrating the economic impact of our work with over 100 tribes across Indian country,” Mooers told ICTMN.  “We continually review and reflect on the business practices that make us a long-standing, solid and strong team.”

That continued self-examination inspires Blue Stone leaders to re-commit to Blue Stone’s mission – helping tribal leaders protect tribal sovereignty by providing them with supportive services in governance and economic development that promote sustainability and economic independence.

“We are solidly committed to our purpose of serving tribal leaders and helping them to support and protect sovereignty,” said Fullmer, former chairman of the Yavapai-Apache Nation.

Tribal leaders have much on their plates and tribal government systems and their economic development arms are often stretched thin because of competing priorities for time and resources, Fullmer said.

The partners pride themselves on community-based, strategic planning with tribes. “Our focus is not only creating viable solutions, but the ultimate test is to ensure smooth and successful implementation. The last thing tribes need is another binder of plans on the shelf that never gets implemented,” Mooers said.

During their ongoing self examination this year Fullmer and Mooers looked closely at where tribal leaders are having the most challenges. “How can we provide the best support with our work? How can we make sure we’re providing the best project teams with the best subject matter experts?“ Fullmer said. He and Mooers relied for help on Blue Stone’s own internal leaders who guide the firm’s vision and mission.

There probably isn’t a single word to adequately describe what Blue Stone does — neither “consulting” nor “advisory” covers all the firm does. It works exclusively with tribal governments to improve their two core functions: the inextricably intertwined branches of tribal governance and tribal economic development. In line with the fundamental tenet that strong tribal governance protects and strengthens tribal sovereignty, Blue Stone helps tribal leaders develop a vision and structure to promote and grow the services their communities need, as well as the strategies, processes and systems required.

The firm provides tribal governments with analyses of the strengths and weaknesses of their operations, practical advice on becoming efficient and transparent, and strategies for improvement, with workable step-by-step plans. Blue Stone covers all facets of tribal governance, as can be seen on its website, including: tribal financial health, housing, compensation and benefits, training and development, human resources, executive management support, tribal leader development, master planning, tribal land planning, healthcare planning and more.

Blue Stone has helped tribal businesses increase revenues and profits across a wide range of fields, including economic development boards, investment due diligence, feasibility assessments, real estate services, land planning, casino performance, loan restructure, business/enterprise assessment, leadership economic development planning and more.

Each project the firm takes on gets a dedicated project team that includes former and current tribal leaders and subject matter experts who provide one-on-one guidance to the tribal client’s leaders in leadership training and development, governmental financial literacy and accountability to support continued internal leadership growth. The team also reviews departments and programs with an eye to improving efficiency and accountability.

Blue Stone has completed around 400 projects over the past 10 years, working with more than 100 tribes, large and small, all over the country.

The work is challenging, Fullmer said, because each tribe is unique in its culture and how it’s organized, in how the community participates, in financial resources, in demographics, in geographic location, in what they prioritize culturally and in what they prioritize as a government. All of those factors are considered as Blue Stone develops a tribe’s strategic plan. Fullmer added, “People say, ‘Use the cookie-cutter approach,’ but we can’t do that.”

A common element for Blue Stone clients is that differing priorities among leaders have to be resolved for the tribal nation to move forward, and Mooers said that is the main reason Blue Stone is called in. “If there is a lack of alignment on initiatives and timelines and so forth, then things don’t get done.” It’s a challenge, but it’s also one of the best opportunities for Blue Stone to assist.

“Some of the best work we do is work with diverse agendas, diverse political interests. We take a long list of priorities and initiatives and work really closely with leadership to bring them into agreement on the top three or four or five items that are really going to move the community as a whole forward,” Moers said.

The growth and success of Blue Stone’s tribal clients over the past 10 years is the best predictor of Blue Stone’s prospects, because when a business reaches that 10-year anniversary milestone, its future looks bright, according to the SBA, which says, “As one would expect, the probability of survival increases with a firm’s age.”

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