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Strategizing 'a national economy for Indian country'; PART SIX

WASHINGTON - In this conclusion to a series drawn from a presentation at
the National Indian Business Association Annual Conference and Trade Show
in September, Chuck Johnson of Johnson Strategy Group Inc. in Albuquerque,
N.M., summarizes the big picture economic planning he advocates, urges
tribes to diversify their businesses and create sustainable value, and
closes with a caution against bad business practices directed at tribes.

You start with a planning process ... But this is a whole process. It's
gotta start with the big picture and end with how do you close and perform
and evaluate performance ...

Basically diversification is variety. It's not just gaming. It's business
clusters that are complementary with the tribal economy, it's vertical and
horizontal integration [of businesses], it's growing long-term value
through sustainable businesses. I've seen many tribes who invest in a
business, and the only reason they keep the business alive is because it
provides a tool for job generation. That's not a business, that's a welfare
program. That's a transfer payment.

You [instead] create and attract capital providers that include the value
of the cultural environment and you satisfy community needs. One tribe ...
is working on some wellness concepts which go back to fundamental
traditional kinds of wellness but also could be an entrepreneurial activity
for the tribe, because of how you build on the U.S. move toward spas and
wellness, you know, hospitality and things like that, but you make a
traditional fit. It's also likely to be more beneficial and long-lasting if
it grows value.

So what the heck is this deal that we're doing? I would suggest most
tribes... instead of zooming out to the opportunities ... there's a
tendency to only look at one-off, one-part, one-business opportunities, to
access only banks and lending institutions and grants, to look at
infrastructure only for specific development plans, to have management
capacity only for businesses and not for deal flow and negotiation and
closing, and to market things only by a specific business to satisfy a
specific niche.

But there are opportunities out there. That's why there's billions of
dollars of capital and that's why there's a lot of global companies who are
accessing markets beyond what you have, and that's why the chairman of
Pechanga is going to be successful distributing goods and services outside
the boundaries of their own band.

So what's value? Value is basically what people buy ... Value comes from a
difference. Again that's why I get concerned about the
round-up-the-usual-suspects stuff in business selection. You want to be the
first or early innovator, which has much higher returns. You want to have
technological innovation. You may have a new business model for doing
things - you may combine wellness, which is a popular fad, with traditional
concepts of wellness. You may brand your image or product ... Indian brand.
We Indians sell to Indians. That is a brand proposition. Indian tribes
selling to Indian tribes. Indian entrepreneurs selling to tribes. That in
itself has a powerful brand proposition ...

High value-added businesses are generally small businesses. You're on the
cusp of where the U.S. economy is going. Small business creates 60 to 80
percent of the jobs and about 60 percent of value. It's not the big people
like Intel. They're high-profile people, but if you look at the national
aggregate economy, you know, you have high-growth companies that start up,
and you gotta help those individual Indian entrepreneurs get their story
out ...

All of us have been "spectatored" by the way other people sit and watch
you. I would say many of our federal partners are spectators. Cynics are
the ones who say, "Aw, we've been there. Can't do it. You know we just
can't do that." How many times you heard that? "Can't do that - tried that,
can't do that." Players say - 'We're gonna do it. We can do it and we're
gonna do it.'

... A planning process will find a thing that makes the deal or the
proposition work for you ... And that's what we're all about. We're trying
to basically make sure we succeed.

... Just some warning shots across the bow. First off, don't be suckered
into being investor of last resort. If someone's coming to you, ask them
who they shopped their deal to. I've been in situations with a tribe where
the tribe was the fourth tribe in that same region that this investor came
to. So you ask them, "Who have you shopped this to? Who are your investors?
Let me see your legal background. Let me see your financials." You want to
look hard where someone is selling a business or offering an investment
opportunity to your tribe. There are no stupid questions. There are no
stupid questions. "Why are you coming into this? How will this structure
the deal? What will this business look like in five years if I invest with
you? How many people are you going to train and employ? If this is such a
great real estate proposition, why didn't this other person down the street
buy your proposition? - you know, what's the market for this?"

Beware of brokers bearing deals. Do not pay any up-front fees to anybody.
That's the first signal. That's a red flag. They want something in advance?
Well, they want their commission or their fee. They don't want your
benefit, they want your payment.

Don't get stuck with another party's forms and contracts ... Make sure you
have internal staff that writes its own contracts ... Don't be afraid to
ask for professional help and structure it very tightly, for that deal.

Use earn-outs. Basically the former owner receives a part of the price
based on future performance. Basically you want to make sure the joint
venture partner earns it ... If someone asks you for a million dollars, you
say okay, we're going to give you 200,000 starters, and in six to 12 months
we're going to do a review ... then we'll make it another 200,000, but
we're not going to give you a million dollars up front. That's your side of
the deal, not our side of the deal. We want to make sure you perform,
according not to industry standards but to tribal standards. So you
basically make the partner earn his share of the deal ...

It's your game. You can structure your game the way you want to. Because
it's your sovereign responsibility. You also owe it to your people, and you
owe it to your elders.

Johnson Strategy Group Inc. can be reached in Albuquerque, N.M., at (505)
323-1612, or by e-mail at