Implementing Wealth Creation Value Chains:

A Step-by-Step Methodology to Create New Entrepreneurial Opportunities in Rural Communities

June 25, 2013

Work in 64 counties of Arkansas / Mississippi Deltao Poverty > 25%o Unemployment > 10%o Outmigration

Wealth Creation Value Chain Coordinator since 2010o Exploration March 2010 to July 2011o Construction July 2011 to December 2012o Implementation at Community Level January 2013 to present

Since 1998, worked with over 4000 entrepreneurs to start, grow and rebuild their businesses

In 2011, became Community Development Financial Institution = microloans for working capital

Today: 13 full time professionals across 5 rural offices

Background on

Creating entrepreneurial opportunities is only one of many objectives in developing W.C.V.C.

Impact of New Businesses on Wealth Built – purchasing eye-sores and repurposing them Individual – building new skills Financial

o Encouraging local investors to invest in new businesseso Profits likely to be invested in community and value chain

Step 1: Map out Value Chain

Creating Competitive Entrepreneurial Opportunities

4

Disadvantaged Farmers grow seed

Restaurants generate used oil

Oil Collection Biz

Researchers test seed

Seed collection, storage, cleaning

Micro-Refinery

Two-Year College Training Program

Meal Collection / Processing

Glycerin Collection /

Refining

MidSouth ASTM Testing

Fuel Aggregator

Non-Commercial Use

FedEx

Biodiesel Stations

Farmers On /Off Road

Livestock Farmers

Cosmetic Mfgs

Green Financing Network

Bioenergy Value Chain

Manufacturer of Micro-Refinery

©alt.Consulting 2011www.altconsulting.org

Demand for biofuelLocal municipalities, school districts, farmers, truckers

Regional companies - Valero, FedEx

Local and

State Policy

Support

MSCC Mini Refinery Micro Refinery

Spring-board Diesel Mfg Dist

Gir Ener

gy Mfg

Angel Investor

Net workLoan Funds

Waste Vegetable Oil Collection Businesses

Source of WVO: restaurants,

convenience stores, schools,

hospitals,prisons,casinos, etc.

Community Mktg

Strategy Ed/promo materials

Community Recycling Programs

Progressive Community Leadership

Trans-porta-

tion

Camelina Seed Processing Company

Growers of Camelina:

Minority, Non-Minority Farmers

Camelina research

ASU, PCCUA

Camelina Agronomic

Service Business

USDA Support

Programs: NAP, Cover Crops, Crop Insurance

ADTEC RET

Train ing

Fuel Blend

er Distri butor

Animal FeedComposting

Cosmetic mfg

By Prod uct

Meal

By Product Gly ce rol

AGEN Opportunities for Entrepreneurs

Step 2: Identifying Gaps in the Value Chain

Use meeting with entire value chaino Creates sense of ownershipo Allows each member to see whole pictureo Creates problem solving relationship

Be prepared to revise and revise again Be intentional about principles when identifying

gapso Agronomic services businesso Means of engaging minority and low resource

farmers

Key Questions:

o Can someone make a profit by performing this service or making this product?

o Should this gap be filled by a non-profit value chain partner and need to be subsidized? By whom?

Step 3: Determine Link Between Gaps and Business Opportunities

Step 4: Feasibility Studies

Start with business that will be selling directly to consumer

Determine market size and competitive pricing Determine costs of production or service Determine equipment needs and costs Risk Analysis

o Market riskso Financial riskso Operational riskso Human resources riskso Regulatory risks

Develop clear mitigation strategies for each risk

One page Based on information and data gathered through

feasibility study process How will this business make money? Discuss steps from inputs to delivering to consumer Stage business model to ensure early success Keep in Mind: Businesses are interrelated. All should be

launched at same time. Reality: Who is first? Example: Seed Crushing Operation. Diversify inputs and

services from the start.

Step 5: Business Model

Integrated model:o Profit and Loss Projectionso Balance Sheet Projectionso Cashflow Projections

Determine capital needso Create asset listing and anticipated costso Use cashflow model to determine working capital needs

throughout first 3 yearso Develop Sources and Uses Table

Step 6: Financial Model

Ask community leaders and bankers to identify potential investors and make introductions

Secure initial interest /commitment from investors Identify potential entrepreneurs through investors Encourage investors to raise additional questions to

test feasibility of ventures Triple Bottom Line: financial, social, environmental =

impact YOUR community Do not overpromise! Don’t force investors into your intended structure

Step 7: Meeting with Potential Investors

Beginning with first meeting in community, ask for entrepreneurs. Start creating the “buzz”

Ask investors to identify entrepreneurs. They would rather invest in their “friends”

Publish stories in the local paper about opportunities Hold community meeting to discuss entrepreneurial

opportunities and results of feasibility studies Be intentional and creative about including interested

entrepreneurs from all parts of the community Too many interested entrepreneurs?

Step 8: Identify Entrepreneurs

During value chain construction, engage financing partners and gauge interest

Equity = patient capitalo Friends and family o Investment holding company to secure out of state

investorso Angel investor network

Bank finance = interest only for 6 months Seek out alternative lenders (CDFIs) Exit Strategy: Create strategy that will allow

entrepreneurs to buy out investors after 3 to 5 years

Step 9: Capitalization of Entrepreneurs

Soft launch = ensure everything is working according to plan

Celebrate: Engage the press and community Support: Provide intensive technical assistance

throughout launch phase Collect data and document so business can be

replicated in other communities Revise feasibility study, business model and financial

model to reflect reality

Step 10: Launch, Celebrate and Support

You are only laying the ground work for the private sector

Be aware when you need to get out of the way

Continue to be the keeper of the values!

The Pitfall: Playing Value Chain “God”

Thank you!