News
5.29.09
Potawatomi Business Development becomes Northwoods powerhouse
Not even two decades ago, the Forest County Potawatomi was among the state’s poorest tribes in one of the state’s poorest counties. Yet in a few short years, the Tribe has become an economic powerhouse, fueling growth not only to the benefit of their own tribal members, but to the benefit of the community as a whole.
This sea change began with the Tribe's foray into gaming, as provided for by the Forest County Potawatomi Community of Wisconsin/State of Wisconsin Gaming Compact of 1992. According to the compact, its purpose was to authorize the operation of gaming by the Tribe on Tribal lands "as a means of Tribal economic development, self-sufficiency, and a strong Tribal government."
Interestingly, the Forest County Potawatomi never considered gaming to be the final means of securing these goals. In the early years of gaming, the Tribe used its profits to reduce the long-standing poverty of its community by distributing wealth to its tribal members as a way to provide for health and raise the standard of living. Once the poverty issue was addressed, the Tribal government set its sights on ways to secure the Tribe's economic future.
According to Tribal member James A. Crawford, gaming brought "a huge revolution, an overnight change. There wasn’t much opportunity pre-gaming. Once [the compact] came about, that opened the door for us. I wanted to take advantage of this time that we’ve been given."
For the FCP General Council, that meant looking for new business endeavors. "Who knows?" Crawford said, "tomorrow gaming could be outlawed, or tomorrow gaming could be open to anybody who wants to have a facility. So we have to be prepared for the worst-case scenario.
"The best way to do that is by increasing our economic base outside of gaming," he continued, "and to gain more support from surrounding communities, because we’re doing good things for them – we’re expanding their children’s education and helping to bring them jobs. I really think that’s where it’s a win-win for all of us."
The general council approved the charter and bylaws of the Potawatomi Business Development Corporation in 2002, and then held brain-storming sessions with tribal lawyers to identify and assemble a group of well-qualified individuals to serve as the PBDC board, starting with appointment of Crawford as its chairman.
A lifelong resident of Forest County, Crawford was chosen because of his numerous business interests and commitment to his community. He is the owner and operator of The Crawford Insurance Agency, LLC, and the owner and founder of the Northwoods Recreation Center, which is, among other things, the home of the FCP Warriors Boxing Club. [see NNN article]
Crawford noted it was Lance Morgan who provided much of the expertise necessary to get the PBDC off the ground. Morgan, a Harvard graduate and member of the Winnebago Tribe, had served as CEO co-founder of the Ho-Chunk Corporation of Nebraska, the economic development entity of his Tribe.
Potawatomi Business Development Corporation structure
The PBDC is composed of two principal subsidiaries: the Potawatomi Capital Corporation and the Potawatomi Community Development Corporation.
Potawatomi Capital is concerned with making investments and acquisitions with a focus on securing the highest possible monetary returns. Its strategy is long-term, a careful blend of cautiousness and aggressive procurement of returns.
The Potawatomi Community Development Corporation, which opened the doors of its Crandon office in November 2007, was established to take advantage of the resources and expertise gained by Potawatomi Capital for the development of the Tribal and surrounding communities.
Strategy for Success
From its inception, PBDC set up several simple parameters to guide its growth under Morgan's guidance. It took the Ho-Chunk Corporation business model and changed and expanded upon it to fit FCP goals and resources.
"We started with small investments, doing some passive things," Crawford explained, "investing in some property, just to get rolling. We eventually moved into buying pieces of companies, and then finally whole companies."
The PBDC's early investments in the real estate, hospitality, housing and manufacturing sectors included significant shares of the Four Fires LLC Marriot Hotel in Washington, D.C., and Summit Hotel Properties LLC, of Sioux Falls, S.D.
According to the 2004 annual report, early "manufacturing investments include[d] a Minnesota company that provides high quality pre-fabricated housing, a Wisconsin company that provides 'patented' composite flooring for mass transit, and a Wisconsin company that provides popular 'patented' components for the auto industry."
In 2005 and 2006 the group completed its first major acquisitions: OneProspect Technologies of Crandon and Rhinelander, dlf Architects/Potawatomi Design Group of Oklahoma City, and government contracting firm Advancia Corporation of Oklahoma City. These and other acquisitions have proved very successful, with OneProspect and Advancia winning national awards for their achievements in 2007.
Currently, PBCD’s portfolio includes sectors such as architecture and engineering, marketing and public relations, construction, information technology, government contracting and logistics/distribution.
In its most recent annual report to-date, CEO Carol Leese summed up the corporation’s most successful year yet: "Our greatest accomplishment in 2007 was our ability to maintain net profit with explosive growth through our subsidiary companies. We grew top line revenue 600 percent from 2006 to 2007 while maintaining a consistent bottom line and dividend to our Tribe."
Considering its rapid success in a relatively short time, PBDC’s approach is astoundingly simple and straightforward. Indeed, its success is rooted in this simplicity. Rather than chasing stratospheric gains based on insubstantial Wall Street inventions, such as hedge funds and questionable mortgage-backed securities, PBDC was determined to invest only in solid companies that provided an actual product or service of value. Simply put, the corporation only invested in things they understood.
As a new investor, it is tempting to look for the new Google. PBDC resisted this, sticking with the tried-and-true, and some might say "dull" investments.
"One of the key things we learned was not to do anything too hard, to stay within ourselves,” said Crawford. “Once people found out we had money to invest we had people like nuclear scientists, with these great genius plans, stuff that there is no way we could understand. Those were things that we thought may be a great investment somewhere down the line, but it wasn’t something that we were comfortable with.”
He elaborated. “We wanted to find good businesses that had good workers, good management, keep them in place, and to buy those companies for a good price and find a way to grow them and to plug them into what we had. We tried to identify things that the Tribe could use, whether it be architecture and engineering, or technology, different things we could use to expand and grow."
Tribal wisdom vs. Wall Street greed
PBDC made diversity a cornerstone of its investment plan, carefully parsing resources and placing them in different sectors. It’s the same logic that at one time compelled farmers to plant a variety of crops, inoculating themselves against the devastation that plague or pests can wreak on a single crop.
In recent years, this approach has been undermined by genetically-modified crops, engineered to survive a particular cocktail of pesticides and herbicides, but leaving the crop vulnerable to the unexpected bug or fungi. Similarly, financial markets in recent years grew bloated on artificial fodder. In both agriculture and finance, reliance on what amounts to a “gimmick” has left each system vulnerable to disaster.
Crawford is aware of the dangers of incendiary and artificial growth. "When you go from not having much to having more than enough in a short period of time,” he said, “there’s a lot of growth that needs to happen – within the community, within the surrounding communities, within the leadership, within everybody.”
“You see sports stars get big contracts and then derailing after a while,” he continued. “We don’t want to burn out, or derail, or find ourselves in a position where we’ve been too cautious, or not cautious enough. It’s always a balancing act, just finding that middle of the road where you don’t have to risk everything, but yet you can still continuously grow and learn."
The recent collapse of the finance market, Crawford said, can be summed up in one word: "greed." In contrast, PBDC has deep connections to the people it serves. "The mentality here is that we work for more than just ourselves,” he said. “I’m invested in this because it’s an investment for my family, my cousins, my nephews, my nieces, my daughters, everybody. I’m not disconnected from it like a CEO of AIG might be. They’re just someone hired to do a job and there’s really no connection."
This sense of interconnectedness compels PBDC to mitigate risks while still reaching for profits and responsible growth. Crawford is almost apologetic about the PBDC's cautiousness, mentioning often how theirs has been a learning process, and that sometimes their progress is slower than they might wish.
From an outsider's perspective, however, their growth has been phenomenal, going from a net worth of just over $5 million in 2003 to nearly $34 million in 2007.
Compare this to what has happened in the last six months to the global economy: after peaking in December 2007, the Dow and the Nasdaq both had dropped by nearly 50 percent a mere 15 months later.
Although some of PBDC’s subsidiaries saw significant losses, their investment diversity enabled stronger sectors to buoy the weaker, allowing them to grow against all odds.
The 2008 annual report, not yet available, has preliminary numbers that are looking strong. According to Crawford, "We just did an analysis a few months ago. The stock market was in the negatives for their returns. We were still 7 percent positive. We were still doing very well."
Caution continues to prevail at the PBDC. "We’ve been scaling back a little bit to try to get things under control, make sure that everything goes well,” Crawford said. “We haven’t made any big purchases lately. Hopefully, soon we will. But since then we’ve opened up this [Potawatomi Community Development] Office, which is where I come in."
In 2007, Crawford ended his position as the head of the Potawatomi Capital division and assumed the helm of the Potawatomi Community Development Corporation.
Jobs and opportunities
For the Potawatomi Community Development Corporation, the potential for high monetary returns is only one part of the equation to determine the value of an investment. Jobs and opportunities are its main interests.
As Crawford explained, "Obviously we don’t want to get into an investment that will lose money, but I’ll tell you what, if it’s making a little bit of money but creating 50 jobs, or 100 jobs, that’s a win in my eyes."
A central goal is to encourage economic growth locally by tapping into PCDC experience, contacts and resources. "We’re looking to help people write business plans and create business,” Crawford explained, “as well as to give them the opportunity to borrow money through partners that we have, or by creating a revolving loan fund through this office."
It goes further than funding. "Once we get a revolving loan fund going,” Crawford said, “we don’t want to just give you as an entrepreneur some money and say ‘good luck.’ We want to be able to train, educate and to help you throughout the process so that you can be a success in your business.
Crawford made it clear that not all economic growth is necessarily good for the community. "We don’t want to have smoke stacks, and things that come with different types of investment. Finding the balance, finding the right thing for the area is the goal."
One of Crawford's greatest hopes is that the PCDC will "bridge the gap" between native and non-native communities not only in the Crandon area, but also in the greater Northwoods.
"One of our hurdles is to get everybody on the same page. We’re talking about communities that have historically not always seen eye-to-eye. Right now the Forest County Potawatomi is the biggest player in the Northwoods. We can do something that will benefit us all. We’re an asset, let’s do something together!"
The next seven generations
The Forest County Potawatomi is employing a two-pronged approach through education and opportunity. "We’re trying to get more involved in the education process of our youth and be more involved in the education of those who are out of school who maybe haven’t gone on to college but might have a good mind for business,” Crawford said.
Job-shadowing programs are a priority. "Our goal is to let the kids dream the dream," said Crawford, "and to give them an opportunity to fulfill that dream. It’s getting our youth to understand that there are jobs up here for lawyers, veterinarians, nurses or doctors that can be very well paid. If we can get them thinking, get them off to school and coming back here some day to become an entrepreneur, you’ll see everybody benefit from it."
By fostering economic growth in the region, the Potawatomi hope to create more opportunities for well-paying jobs for youth to come back to after college, and thereby create and perpetuate a more stable community for generations to come.