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Native American Tribal Propane Feasibility

March 9, 2022

A Native American Indian community was looking for new opportunities for economic development within its tribal territory. The goal being to provide more income and jobs for tribal members. The Tribe currently owns a propane company that provides propane and distribution services to meet the heating and electricity generator needs of their tribal community.

Capacity Consulting, Inc. was hired to conduct a feasibility study to explore the costs and benefits of having the tribe pursue expansion and to determine if marketing outside the current foot print would be viable. The study would then identify the next steps required to pursue any opportunities.

Capacity conducted an analysis of the current situation, including demographics, geographics, competitive comparison, industry analysis, and financial projections. Capacity concluded the best opportunity was to improve upon its current operations and use existing programs to fund some of its biggest expenses thus increasing net profits without expansion.

Understanding that the main goal of the tribal council was to expand, we continued by assessing several growth scenarios including those outside Indian country.

These test scenarios resulted in a recommendation to further expand the program into one neighboring area where they already had some market share. Because most households in that already had a propane tank, they could further reduce costs and increase potential profits for the company.

Trying to expand their customer base beyond those neighboring tribes would not be feasible due to the several factors. Tribal members tend to have their own propane tanks at their homes while non Indian customers tend to rent their tanks from their propane supplier. Expanding to non tribal members would require a significant investment in tanks to supply to customers whose old supplier would take their tank back.

The rural landscape created additional risk to expanding. According to industry standards and competitor patterns in the region, a 30 – 40-mile service area is typical for retail propane companies. This standard is a balance of operational output and financial gain. Mileage expansion increases the need for bobtail trucks, maintenance, personnel, marketing, and other direct expenses. Expanding the company’s boundaries to far outside the Reservation exhibited a clear point of diminished returns.

With our recommendations solidified, we developed a strategic plan. This action-based roadmap addressed general operations, policies and procedures, personnel plan, marketing strategy, management and organization, business goals, and additional pertinent operations.