Challenge

A Native American Indian community sought new avenues for economic development within its Tribal territory, aiming to generate additional income and create job opportunities for Tribal members. The Tribe currently owns and operates a propane company that provides essential heating and electricity generator services to the community. To explore the potential for expansion and assess the viability of marketing beyond the existing service area, the Tribal Council engaged Capacity Consulting, Inc. to conduct a comprehensive feasibility study.

Process

Capacity Consulting initiated the study by conducting an in-depth analysis of the current market conditions. This included a thorough examination of demographic and geographic factors, competitive landscape, industry trends, and financial projections. The objective was to identify the most promising opportunities for growth while considering the Tribe’s existing operations and resources.

The analysis revealed that the most advantageous approach would be to enhance the Tribe’s current operations by leveraging existing programs to offset significant expenses. This strategy would increase net profits without necessitating an expansion of the service area.

However, given the Tribal Council’s primary goal of expansion, Capacity Consulting also evaluated several growth scenarios, including the potential for distributing propane to areas beyond the current reservation boundaries.

Solution

After testing various expansion scenarios, Capacity Consulting recommended extending the Tribe’s propane services to a neighboring area where the company already held some market share. This approach capitalized on the existing infrastructure, where most households were already equipped with propane tanks, thereby reducing the need for additional capital investment in tank procurement and maximizing profit potential.

Expanding the service area beyond this neighboring region was deemed impractical due to several critical factors. In particular, non-Tribal customers typically rent their propane tanks from their suppliers, meaning expansion would require a significant investment in tanks for new customers, as their current suppliers would repossess their tanks.

Moreover, the rural landscape posed additional challenges. Industry standards and competitor practices indicated that a 30–40 mile service area is optimal for retail propane companies, balancing operational efficiency and financial return. Expanding service beyond this radius would necessitate increased investment in bobtail trucks, maintenance, personnel, and marketing, leading to a clear point of diminishing returns.

With these insights, Capacity Consulting developed a strategic plan that provided a detailed roadmap for the Tribe’s propane company. The plan covered all aspects of the business, including general operations, policies and procedures, personnel planning, marketing strategy, management structure, and long-term business goals.

Conclusion

The feasibility study underscored the importance of strategic growth and market analysis in economic development. By identifying the optimal expansion area and avoiding overextension, the Tribe was able to find the right balance between growth and sustainability, ensuring long-term profitability without risking undue investment in impractical ventures.