alt.Consulting: Helping Small Businesses Grow in the Arkansas-Mississippi Delta

CDAC Member Spotlight

Ines Polonius is a founding member and executive director of alt.Consulting. She has personally worked with more than 200 small businesses in manufacturing, distribution, service and retail. Polonius and her team are working on small-business financing models for businesses in low-wealth communities that utilize managerial assistance as a means to reduce risk. She has developed and taught numerous seminars on financial management and strategic planning. Prior to pursuing an MBA and MA in economics from Boston University, Polonius worked for three years with rural microenterprise development projects in Chile and the Dominican Republic. She is also a member of the Community Development Advisory Council (CDAC) for the Federal Reserve Bank of St. Louis.

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CDAC members are experts in community and economic development and financial education. They complement the information developed through outreach by the District's Community Development staff and suggest ways that the Bank might support local efforts. A list of current members is available at www.stlouisfed.org/community_development.

While everyone was talking about job creation in 2012, alt.Consulting created 202 new jobs in the Delta. (See Figure 1.) While everyone was hoping for an improvement in the economy in 2012, alt.Consulting created 21 new businesses and its clients added $32 million in new economic activity to the Midsouth region. In 2013, alt.Consulting celebrates 15 years of creating, growing and rebuilding small businesses, strengthening rural communities and low-wealth neighborhoods in Arkansas, west Tennessee and northern Mississippi.

FIGURE 1

Click to enlarge

Graphic courtesy alt.Consulting

History

As a not-for-profit economic development organization, alt.Consulting has provided intensive managerial assistance to more than 4,000 rural and minority businesses since 1998. In 2007, as the financial crisis was looming and clients were struggling to obtain capital, the company made the decision to become a lending organization. In 2010, alt.Consulting set out to create new, competitive entrepreneurial opportunities in rural communities by building wealth creation value chains around renewable energy and local foods. In 2011, the organization was certified by the U.S. Department of the Treasury as a Community Development Financial Institution (CDFI). By utilizing managerial assistance to mitigate risk, alt.Consulting has been able to offer loans to small businesses that do not qualify for traditional financing, making $500,000 available in the form of 31 microloans with a loss rate of less than one percent. (See Table 1.) In 2012, the organization's average client engagement took 54 hours, with many entrepreneurs receiving in excess of 100 hours of on-site assistance. Today, alt.Consulting's team of 12 full-time professionals works with more than 300 businesses each year across five offices in the Arkansas-Mississippi Delta.

Changes on the Ground

During the past 15 years, alt.Consulting has observed continued outmigration from the Delta, increased poverty with average per capita income dropping to $17,000 and an average unemployment rate of 10.25 percent. (See Figures 2 and 3.) The majority of those living in the Delta have no net worth and few assets, and already low real estate values have plummeted. In all of this, alt.Consulting sees opportunity.

FIGURE 2

Per Capita Income Comparison

FIGURE 3

24-Month Average Unemployment Rate

Every year, more mayors and community leaders embrace the fact that they need to create jobs locally by growing their entrepreneurial base. The Delta is rich in entrepreneurial spirit and individuals eager to create jobs for themselves. Organizations and communities are beginning to work together regionally to support economic development.

Communities of Innovation

In this context, alt.Consulting set out to pursue a parallel strategy of working with rural communities in the Delta to implement entrepreneurship strategies, while continuing to provide direct services to entrepreneurs throughout the region. In communities with both elected and nonelected progressive leadership, the organization conducts an assessment of assets, resources, existing entrepreneurs and business opportunities. Local leaders working with alt.Consulting then develop an Entrepreneurship Plan for their communities. Depending on the needs and opportunities presented by the Community of Innovation, the company provides a combination of the following services and initiatives:

• Renewable Energy: A farm-to-fuel value chain offers numerous new entrepreneurial opportunities while creating income opportunities to farmers through a winter-based energy crop.
• Local Foods: In partnership with Heifer International, a farm-to-table value chain provides new business opportunities from composting to mobile farmers markets. By growing produce, farmers and community residents also have the opportunity to create their own value-added food products.
• Delta Made: These value-added products as well as crafts originating in the region are promoted under this joint brand, originally developed by the Rural Heritage Development Initiative (RHDI). When the pilot for RHDI ended in 2012, alt.Consulting was asked to take over the brand and continue to grow it. The organization provides both branding and marketing services for products and entrepreneurs who initially want to focus on producing their product, later growing into the management of a full-fledged business.
• Adult-Family Homes: In 2011, in partnership with the Arkansas Department of Human Services, alt.Consulting developed a detailed manual for starting adult-family homes that provide care for the elderly and for disabled adults in a home setting. This creates a business opportunity for anyone who owns their home, while allowing the elderly and disabled to stay close to family and friends.
• Keep It Local: In 2012, alt.Consulting launched this initiative to save viable businesses by matching young entrepreneurs with business owners seeking to retire. The new entrepreneurs receive assistance with the issues necessary to operate and grow the ventures profitably – securing funds, tools and managerial assistance.
• PopUp Shops: This year, alt.Consulting is working with the Mayor's Innovation Delivery Team in Memphis to bring new business to empty storefronts. PopUp Shops give new retail entrepreneurs the opportunity to test their business ideas from one day to six months, while giving landlords new interest in their buildings. The concept has been a success from New Haven, Conn., to Oakland, Calif., but has not yet been tested in rural communities.
• Angel Impact Investor Networks: A successful Community of Innovation requires a network of financiers willing to invest in their local entrepreneurs. alt.Consulting provides due diligence services for investors while also developing creative exit strategies, which are often challenging in rural settings.
• alt.Capital: Availability of working capital up to $50,000 to both new and existing entrepreneurs helps to fuel all of these opportunities. alt.Capital also helps business owners leverage larger amounts of capital through local banks and other CDFIs. The organization recently became a trustee of Kiva, a crowdfunding initiative. Startup entrepreneurs with viable business concepts who do not qualify for a microloan can be posted on the site to secure investments from individuals around the world.

The backbone of each of these programs is alt.Consulting's intensive managerial assistance, which provides new and existing entrepreneurs with the tools and training they need to ensure their success.

alt.Consulting has been implementing each of these programs with individual entrepreneurs around the Delta for many years. Now the organization seeks to go deeper in communities that are prepared to provide the necessary connectedness and support to entrepreneurs. "Communities of Innovation" is not a certification program but rather a branding initiative for those towns and cities ready to embrace a new economic development strategy and "grow their own."

The first such community is DeWitt, Ark., in the heart of Arkansas County and the Delta. With a population base of 3,200, DeWitt has seen its share of business closures. The city's progressive mayor is working with the community college and alt.Consulting to implement the farm-to-fuel value chain as its starting point on the journey to a more vibrant entrepreneurial base. alt.Consulting is meeting with graduates of the community college about operating a microrefinery, starting a waste oil collection business, launching an agronomic services business focused on the new energy crop, and looking into the business of crushing the seed to create a highly nutritious feed and the oil needed by the refinery. Others in the community have approached alt.Consulting about trying the PopUp Shops initiative as a means to revitalize their beautiful town square.

In this community, residents are focused on the opportunities and not the otherwise depressing statistics that mark so many towns in the Delta. alt.Consulting is right there to support both the community leadership and the entrepreneurs who are ready to shape their future.

For more information about alt.Consulting and all of the initiatives described above, please visit our new website.