Rural System's




Business Plan

See the Contents of the Business Plan - link to desired sections, or scroll down this page.

Capsule

Rural System is a proposed corporation, a conglomerate of about 80 small natural resource related enterprises. Some of the enterprises, subsystems, are new, some very old. It is a system doing modern, sophisticated, computer-aided management of the lands and waters of an eastern US region in order to sustain long-term profits and quality of life for citizens. Concentrating on superior resource management, it includes outdoor recreation, specialized tourism and rural development, forest and wildlife management, and works on restoration, enhancement, and lasting production from the rural land resource. It produces a variety of "goods and services" and other benefit classes.

The umbrella entity is an employee- and citizen-owned for-profit conglomerate spending a proportion of its profits on improving regional resources. It may use national and state lands and waters but, most importantly, it provides opportunities for the owners of private lands and waters (often for absentee owners and those within forestry cooperatives) to experience profits related to superior rural land management. While managing the assets of such lands, Rural System provides related services and products from the unified business units. Half of these units work from the private managed lands that are under contract. A central unit provides incubator-like services and allows the corporation to harvest public research investments, to achieve economies of scale and division of labor, to gain synergism, and to stabilize employment.

The enterprise leads the region in computer-aided, year-around, private land management. It shares projects and funds with citizens and investors. It links citizens as well as visitors to the land and its long-term potentials for profits. It provides an alternative town and regional identity, one of a place for modern regional rural resource development and management. It links buyers and users with producers of certified forest products and wildland resource opportunities from well-managed rural land and water resources. Successes are achieved via diligent work with personal incentives, diverse enterprises and products, and computer optimization of a total system. It overcomes the old failures of natural resource management, i.e., diseconomies of small-scale operations, mixed objectives, lack of diversity, seasonal work, lack of annual income, and failure to add value to products and efforts. It capitalizes on innovative uses of optimization, the Internet, global positioning satellites, and computer mapping throughout the region.

The system is described thoroughly at www.RuralSystem.com.

The vision for the enterprise is that its success in helping improve the social, economic, and environmental health of the region can allow the enterprise to become effective and expand through franchises. Thus, similar influences can be transferred, years later, throughout southern and western Virginia, then eventually internationally. The work will be recognized as the product of a special paradigm in rural resource and wildland management. As such, Rural System will become a profitable conglomerate operating well past this century, given its 150-year planning horizon sliding forward annually.

It's the private company
that works for the region and its people

Objectives (or Goals)

Rural System is a corporation, probably unlike any other, that:

Business Concept


Rural Business may not be a bad idea. Simply:

If you carefully stabilize reasonable profits
from the land over a long period,
society will be the better for it.

Land is a code word for all lakes, ponds, streams, soil, crop fields, gardens, mined areas, pastures, rangelands, brushy areas, fencerows, and forested areas. It includes the roads, houses, barns, and related buildings. Whether it is "wild" or not may be only a temporary Designation and that is often a personal perception. Land is a volume, not just an area, and throughout the Rural Business it is usually treated as many 30 x 30-yard squares, from 1 mile below sea level to 1 mile above the Earth's surface. It is "land" as in "landscape." Rural is similarly a difficult word. It is the total non-urban system, but includes urban factors as they affect the conditions and dynamics of the rural volumes and their people over time.

It achieves its objectives by hard work within the interlocked enterprises, all with complex incentives and all making money for the employees, participants, and citizens ... and using earned money, part of its "profits," to improve the rural system. Much of its work is on Rural System Tracts, privately-owned lands that are managed under contract.

Operating Rural System is a financially sound way of doing what some people call "conservation." Like a diverse industrial conglomerate, its many enterprises are profitable when working together as a system for the long run. With elements of agricultural and forestry cooperatives, the enterprises collectively produce profits as well as employment and an improving quality of citizen life. Success is achieved when resources and land are protected, restored, and improved, and then given superior management ... resulting in improved conditions for people. The fundamental premise: If you carefully stabilize reasonable profits from the land over a long period, then Rural System and society will be the better for it.

Current Situation

The concept of the system was developed over many years. There has been parallel thought, for in June, 2002, Amory Lovin said:

"Natural capitalism combines four richly interlaced and mutually reinforcing principles:
  1. Using resources 10 to 100 times more productively,
  2. Redesigning production on biological lines (www.biomicry.net), with closed loops, no waste, and no toxicity,
  3. Shifting businesses from selling goods to leasing a continuous flow of services, and
  4. Reinvesting profits to restore, sustain, and expand natural capital." Natural Capitalism: A New Revolution for a New Century, Annual Review, Environment Matters, World Bank

This business plan seems to be about "natural capitalism." There are no similar businesses. Prior work was and still is done on state and federal lands. "Extension" and state cooperative "outreach" programs provide free advice. Agencies and their programs are unstable, citizen distress in service is high, and a small public staff cannot make needed improvements on so many widespread private lands. Public attitude is against increased agencies and their high costs. There is low incentive for agencies to increase efficiencies or accountability. Land problems (e.g., erosion, pests, low production, and vandalism) remain high. "Environmental impacts" are expressed daily. Theft of timber and arson is common. Thousands of acres in the region are in absentee ownership and they need services. Society rapidly urbanizes. There is a timely opportunity to continue functions begun by some agencies, meet citizen needs for services, create new markets, respond to new needs (e.g., security for and demands of eco-tourists and residences at the urban fringe), and to capitalize on vast government research results in natural resource management.

The key factors now integrated for success of Rural System:

  1. A computer-based comprehensive "general systems" or industrial engineering approach with high uses of computers and analytical technology throughout
  2. Emphasis on enterprise productivity, not just production from the land (e.g., wood, fish, or coal)
  3. A tendency to make small systems work (thus better than what we now have), then combining them
  4. Leadership grounded in 50 years of practical consulting, teaching, research, and planning-commission work
  5. Look to the land as a platform for ideas
    and gains, not just as a source of trees,
    other plants, and livestock forage
    Intensive new uses of geographic information systems (GIS) for site-specific optimization of forestry, livestock programs, gardens, and crops.
  6. A clear objective (unlike the situation on state and federal lands), i.e., constrained, discounted profit maximization
  7. Economies of scale never before seen with the topics of the enterprises
  8. Planned synergism and economies achieved by an "incubator"-like central unit
  9. Year-around work and shifting employment
  10. A great resource of available, under-employed, motivated, well-educated graduate students
  11. Great diversity, both in the plan elements, the groups, as well as in opportunities for employees and citizens
  12. A "high calling" ...significant improvements in rural lands since funds become available for their effective management.

The Founder Proposal

This business plan is not a typical concept for it is for an enterprise from which something else that is great may emerge. It has its roots in a genuine concern for the quality of life for people and an underlying concern for the natural environment upon which that life quality will ultimately be based.

A founder for Rural System is being sought. We have begun to explore a revolving load fund or line of credit. Memberships in an employee-owned company are being considered along with stock/membership funding. A county, an agency, an organization may find a way to start and subsequently benefit from the enterprise. . It is well within the range of many individual investor/benefactors. The profits gained will be part of an innovative development program, one not bound by charitable contributions and annual appeals or donations, and persistent (often annoying, off-putting) appeals for contributions. While contributions of all types are encouraged and accepted, the system provides evident direction for monies with observable payoffs. It also provides great diversity in opportunities for contributed funds to be used wisely and strategically for achieving the objectives of an entire region
It works for its money
of the state and nation. Importantly, it may lift charitable and citizen groups from their knees as it faces the changing face of government financing. It no longer is dependent on political or other bases for growth and management.

The expected gains are substantial and discussed in the next section. They are unlimited and grounded in the creative work of the staff and incentives. They are a proportion of the total profits.

The other reasons for select group involvement:

...and potentially developing other similar relationships throughout the region to meet cost effectively the growing needs for superior living conditions for the population of the region.

Financial Situation

A line of credit is being sought for creating this low-capital-investment, high-service enterprise. Operation can begin at once, but full-scale development will occur over 6 years requiring an estimated $ 4.8 million. Full payback at the end of that period is estimated, with projected returns on investment of 7%. Conservative estimates suggest that this can be maintained thereafter. A cautionary investment, a first-year line-of-credit of $500,000, is required. Grants and venture capital will be sought. As now planned, the financial gains are returned to the initiator, citizen-participants, and county groups as incentives that feed back for improving rural resource development and management. Secondary financial gains occur in enhanced real land value, expanded associated businesses, business diversification, reduced social costs and risks of environmental litigation, and diversified employment. The employment is estimated as 150 mean full-time-equivalent salary positions after six years. See Financials below.

Areas of the US
Type Millions of Acres
Total 1,887.4
Non-Federal 1,485.6
Rural - Developed 106.3
Rural 1,379.3
    Crop 369.6
    CRP land 31.8
    Pasture 116.9
    Rangeland 404.7
    Forest 404.9
Other 51.4
The Vision

General

Rural System becomes a nation-wide corporation. It expands in size and effectiveness in improving the social, economic, and environmental health of the rural component of the New River Valley, a southwestern Virginia region, other regions of the US, and certain areas of the world. Several centers of activity develop. The work of the diverse conglomerate will be recognized as a major paradigm in rural management and stabilization and, as such, will become the basis for a highly profitable business operating well past this century, given its special 150-year planning horizon.

Milestones
December, 2001 - Encouragement from Foresters, Inc., Blacksburg, Virginia
January, 2002 - Support assured of the Conservation Management Institute, Virginia Tech, Blacksburg, Virginia
February, 2002 - concept discussed with Mr. Chris McKlarney, Economic Development Director, County of Giles Industrial Development Authority
March, 2002 - Completion of first sale item, the "Peculiar Manor," a CD of essays relating to forestry and wildlife.
June, 2002 - Support gained of Consulting Forester, Mr. Billy Newman (Nelson County) and Mr. Nelson Lafon, Virginia Department of Game and Inland Fisheries
July, 2002 - Submitted concept to Rural Nelson group, via Mr. Newman to Mr. Ed Weed, chairman (../NelsonPivot/index.htm)
September, 2002 - Discussions and expression of interest from Harry Groot, Next Generation Woods, Inc., www.nextgenwoods.com
October, 2002 - Concept discussed (with the web site demonstration) with The Woodland Community Trust of Clairfield, Tennessee (../Pivotal-Rig/index.htm)
October, 2002 - Initial stages of development of the Stoneworms, a trail-design and building enterprise with leadership from Mr. Michael Davis
October, 2002 - Shared Giles County documents with Mr. Donald Chance, NannyCatch developer (Eggleston, Virginia)
November, 2002 - Concept discussed with Prof. John Politis, Business Technology Center, 1872 Pratt Drive, Suite 1725, Blacksburg, Virginia 540-231-2730
November 12, 2002 - Presented concept to Craig County, industrial development group, New Castle (../CraigPivot/index.htm)
November 15, 2002 - Purchased the RuralSystem.com URL
November 20, 2002 - Presented the concept to Mrs. Karen Skeens, Director of Development, Warm Hearth Village, Blacksburg, (declined in January)
December, 2002 - Confirmed interests of Mills Associated Arborists December, 2002 - Presented design for ecorods (ecosystem monitoring) to Polymer Solutions Inc., Blacksburg
January, 2003 - Initiate student work on market plan (Virginia Tech)
February, 2003 - Continuing conversations with Mr. Charles Patterson, Mobilemedia, North Carolina, relative to GPS and other developments. February, 2003 - Correspondence with Mr. Buz Pierce, Louisa, Virginia, Amherst Co. land owner and cabin manufacturer May, 2003 - Analyze completed business documents from students.
October, 2003 - desired formal start-up operations
Annual reports of progress, 2003

December, 2008 - complete payment, close line of credit, and continue sustained developments, adding to and improving effectiveness and scope of services and products.

The Business Model

Rural System does not exist. Parts of it are well known (e.g., logging, hunting preserves, bird watching, dairy herds) but although several authors have discussed agricultural systems, I know of none outside of existing large corporations. The proposed enterprise, a conglomerate, is a puzzle to understand (and describe). The pieces are:

The specialized actions, so different from other natural resource work is:
  Maximize long-term profits
   Maximize long-term profits
      Maximize long-term profits
 

Locale

Half of the enterprises in Rural System may be viewed as "indoors." They use land as a "platform" for creativity and productivity (e.g., memberships, conferences, product sales, music, and publications). Some profit centers seem far removed from products of the land like hay or saw logs. There are more than 15 actual products sold (list attached). As private lands are recruited into the Pivotal Tracts (which are like little state or national forests, rangelands, or lakes (but private)), they become centers of activity (e.g., for producing careful schedules of wood harvests (including reserved tracts, value-added sawing, solar curing, etc.). The activity also includes recreation, trails, hikes, sporting events ... all by educated and motivated members of the many interest-specific organizations within Rural System Services of all types are sold to other private landowners, those who do not have lands or waters under contract.

Model

The raw business model is that of general systems theory:

The Elements, Enterprises, or Affiliates of Rural System

System Central

System Central is the administrative, management, education, and leadership unit that provides the major economies for the other enterprises. By centralizing many services and functions (marketing, accounting, legal, computer service, library, insurance, transportation, rentals, etc.) this group overcomes a major reasons why similar enterprise-efforts have failed. It includes: The Software Group collecting federal software and programming and creating new systems, and the Energy Group because of its universal importance in sponsoring energy conservation and production from alternative sources.

Office-Based Groups
1. Dogwood Inns - inns developed in older homes, cabins, and lodges nearby
2. The Realtor Group - automated property analyses for assisting in sale or purchase
3. Camps - existing camps, and new ones; youth and adult, and writers' camps
4. The Memorials Group - providing a variety of awards and memorial services
5. Pivots - an organization for everyone in the communities and all of their activities
6. Nature Folks - organization for people interested in nature (with the following units)
7. Coyote - interest in the wild dogs of the world, particularly the coyote, all aspects
8. The Owls Group - night tours, publications, research, general interests
9. Prospectors - tours, publications, web site, geology and mineral interests
10. The Plant People - plant collection, wildflower gardens, seasonal-change maps
11. The Butterfly Band - insect identification, collections, field trips; bee keeping
12. The Wildland Knowledge Base - commercial library searches on natural resources
13. The Foresters - an organization for people interested in all aspects of modern forestry
14. The Tours Group - local, regional , and international field trips, commercial tours
15. Fog Drip - original rural music and associated CDs
16. Floats - E-chapbook, poems by and about rural people and conditions
17. The Products Group - arranges for production and sale of products (list attached)
including Outfits, a group designing and testing outdoor clothing 18. Sculptors - primarily a woodcarvers' group
19. GPSence - geocashing sport, sales, training and service of GPS and related units
20. Inquire: The Unified Laboratory - a multi-purpose laboratory serving many enterprises
21. The Safety and Security Group - rural security patrols, security equipment, safety inspections and services
22. Belles and Whistles - auto mechanical education, primarily for women and youths
23. Fire Force - landscape analyses, computer analyses, "hotshot" fire crew
24. Competency - field-based performance-assurance for natural resource specialists
25. System Base - system promotion and extension of services to corporate and other members; part of System Central

Most of the above are enterprise units that can be operated without Pivotal Tracts. While recruiting private landowners and developing their lands for profitable uses is an important activity of Rural System, the enterprise will offer services to any landowner.

Partial Product List

Some of the activities of the groups will be conducted on National Forest and state lands, others on private lands under contract.

Outdoor-Based Groups

Private lands of the region that are brought under a specialized contract and used for profitable developments of the enterprise are called Pivotal Tracts. The related enterprises for these lands as well as work on other lands and projects are:
1. The Forest Group - a total forestry system
2. The Certification Group - which develops Smartwood certification of lands and products as sustained forest
3. The Trevey - a dynamic land use planning system
4. Walnut Vales - wood, nut-meats, and other products
5. The Arborist Group - residential and landscape tree systems
6. The Deer Group - total deer management system, guides, damage controls
7. The Fishery - total system with ponds, lakes, wetlands, and streams divisions
8. The Raccoon Group - single species system, fur management
9. The Black Bear Group - tours, management, research system
10. The Bobcat Group - monitoring, tours, fur, organization within Nature Folks
11. Official Avi - the new sport of bird watching (with golf-like courses)
12. The Wild Turkey Group - hunting, life-list building, total system
13. The Covey - a bobwhite quail system
14. The Dog Group - shows, dog training, field trials, wild-dogs of the world interest
15. The Pest Force - vertebrate pest damage management
16. The Wildland Crew - adult good work on good projects for fun and fitness
17. The 4 x 4 Group - vehicle interest, education, community service
18. Wildland Walkers - hiking and camping group
19. The River Runners - a group concentrating on all aspects of local rivers and on watershed analyses
20. Tree Tops - an organization and activities for the sport of tree climbing
21. Novosports - development and promotion of new outdoor games and sports
22. The Wilderness Group - using and studying ancient forests
23. Stoneworms - a trail-building and maintenance group
24. The Stables - pastures, rentals, trail rides, horse health, wildlife and horses
25. The Fence Group - production of specialized local fences; fencing systems
26. The Pasture and Range Group - pasture and range management systems
27. The Gardens Group - system of many small flower and vegetable gardens
28. The Vineyards - grapes grown on computer-selected areas
29. Viewscapes - scenic analyses and viewscape management
30. The Goats System - dairy goat system, milk, cheese, hides, services, health
31. The Rabbit Group- dispersed rabbit raising units; centralized marketing
32. The Goose Flock- a system of many goose flocks

There are 57 enterprises that are being proposed for development as a single system.

Market Analysis

The market for the many diverse services and products to be offered is very large. The initial scope is the entire human youth and adult population in an area of western Virginia, West Virginia, northwestern North Carolina, and eastern Tennessee and Kentucky - about 3.5 million people. The non-metropolitan adult population in this region is increasing at about 3%. Beyond the sales potentials of this group is an Internet and tourism trade that is worldwide.

The market segments can be described as

Alternative Major Segmentation

Many of the enterprises are new or readily said to be of the "cottage industry" type. Few will "work" profitably alone, but they can be successful when operated within a system. There are few market analyses. TVA tried an unsuccessful analysis for wildlife-related interests in the late 1970's. None have been done for a group with performance as a system with its designed economies and optimization. We know that single-enterprise efforts have and will likely continue to fail. Market analyses are not needed for that proof.

Forests in the region (by several standards) are poorly managed, unplanned, and logged without a forester's supervision. With intensive management, average per acre profit production can be increased by 15%. By developing wood under new "certification," gains of 5% in the worth of wood on the stump can be expected. The goal for the enterprise is to bring 300,000 acres under our management within 6 years. Productivity on many sites is low and will require long restoration periods. However, the demand and price for quality hardwood lumber increases. Our planned, diverse uses of the land during the long tree-growth periods are innovative.
Simplified Conservative Estimates of the Wood-Only Scope Current performance of the system: 300,000 acres
x 0.8 (the proportion in working forests)
x 1200 board ft per acre
x $0.20 profit per board foot
/ (150 (harvesting only one-one-hundred-and fiftieth annually))
= $384,000

The wood produced, with our marketing strategy, can have over three times the current market value of harvested wood. The annual financial gains on acres of forested tracts after full operation are in the range of a multiple of 3 to 7 -- while reserving ancient-forest tracts; protecting wildlife and watersheds and improving fishing; increasing land value; protecting land from fire, vandalism, and theft; and providing stability in local employment. With full enterprise development, the profits per acre far exceed those for the same acres used to produce wood only.

We promote a broad view of dispersed outdoor recreation, ecotourism, and related terms and call it "ranging" to include residents (e.g., in sightseeing) as well as visitors. To develop effective ranging, a lasting, high-quality environment is essential. Market analyses are complex, expensive, often flawed, and users are changing. Socioeconomic status affects recreational styles and choices. Current state and local economic conditions are clearly in flux; populations change; discretionary income changes; ethnic make-ups change. Few potential customers will be able to respond meaningfully to conditions and recreational opportunities that they have never been able to experience. Imagine the variability in responses to "How much will you pay to go on a rattlesnake hike?" The recreation and leisure industry has become the fifth biggest category of US personal consumption at nearly $250 billion. In Virginia, forest recreation (exclusive of hunting and fishing) contributes over $500 million in expenditures, part of a $3.3 billion tourism and travel industry. In state forests of southern Pennsylvania (grossly 240,000 acres), 566,000 visitor-days were spent. Non residents (270,000) spent $17 per day, $5 million in direct measurable benefits. In Vermont, willingness to pay studies suggest state park visitors value the system as about $61 million totally. Studies show that "as long as tourism development remains in balance with other economic sectors of the economy, residents perceive that tourism benefits them." There are, as expected, discrete groups that oppose it.

We propose to market creatively from an expert base of knowledge, one that continually monitors, models, predicts, and responds to visitor profiles, recreational patterns, beliefs, development preferences, communication tools and education, and beliefs about depreciative behaviors. Studies show that recreation is unique locally, not subject to much theory, and changes with use by urbanites.

For years, people in wildlife-related work debated the "worth of a duck" ...and still do. We dodge that agency/government issue and correlated ideas about difficult-to-evaluate non-commodity values. We just market the services, experiences, and wares of the enterprise, sustaining production, thus, carefully, profits. The market for wildlife-related activity (until now largely in the hands of agencies) is almost untouched. While we have management and advisory services and offer land units for classical legal hunts, primarily by educated and pledged members, we are not in "hunting business" or the "fishing business." Many reports document financially beneficial hunting activities on Texas and western-state ranches. There, dollars from wildlife exceed those from crops and livestock. Excellent local hunting is well known, but expanding strategies (number of people, success rates, access, time) expand the market. Nationally, hunting declines (less than 12% of the local population now hunts) but we in Rural System will add year-around wildlife-related activities and interests for all ages with new organizations, contests, and rewards. In the past and only slowly changing, are hunting-based economic trends - 180,00 hunters spending $80 million in Maryland. The dollar value of hunting licenses still exceeds $400 million, a good indicator of the scope and magnitude of interest. Expenditures for wildlife-associated equipment, travel, food, lodging, and permits total about $56 billion. One-fourth of the population fishes (increasing at 2-4%) and 16% of the anglers of the US are in the corporate region, thus an important market with the many ponds of the county and region.
"Private firms are likely to be more involved in fishery management in 2020 as use becomes more privatized and public agencies become more limited by budgets. Agencies need to anticipate how they will coordinate with and regulate these private ventures, and view them as potential benefits to their program, and not as nuisances."
Fisheries Futures: What's on Line for 2020, p.45, T. G. Coon, in 2020 Vision: Meeting the Fish and Wildlife Conservation Challenges of the 21st Century, T.J. Peterle, editor.

Twenty percent of the US population spends over 2 months a year in residential wildlife-related watching and activities such as bird feeding. About 60% of the population 12 or older participated in non-hunting types of wildlife recreation. The Outdoor Industry Association stated (2004) that preserving wild lands is not only good for people who like to hike, bike and raft there but also for the businesses that sell them gear. That Association represents 4,000 companies that make and sell outdoor gear and guide city folks on backcountry trips. These businesses employ 500,000 people and generate $18 billion a year in sales. Studies vary, results are gross, and they completely ignore the potential effects of effective novel local marketing planned for Rural System.

Data on recreation and tourism are available, but they are probably not comparable to the structure and functions of the proposed conglomerate or to the region. They may be suggestive. Ohio has 72 state parks, charges no entrance or parking fees, has 60 million visitors, but charges for special services such as camp site rental, cabin rental, dock rental, picnic shelter rental, golf green fees, etc. Sixty percent of Ohio citizens visit state parks at least once every 5 years. Their revenues from such activities were $19 million in 1995. Preserving the rural character requires woodlands and pastures or croplands and well-kept farm structures. Computer optimization of pasture management, site-specific crop and grass prescriptions, and group processing and sales and value-adding strategies assure increasing profits from continual, accepted, rural land use.

Changes in the Market

There are three major increasing markets affected by increasing urbanization, the move to residential and urban areas. People seem to desire brief environmental experiences (like a hike) or extended experiences and turnkey services. The three markets:

Customer Characteristics

The above three gross groups:

Income (in brief) is from:

Analysis of Competition

The profound competition is "the old way of doing business." The other competitor is the staff of a group of public agencies, once with essential developmental and research roles, now largely regulatory and educational. Public lands have few or low perceived payoffs or unclear objectives making accountability impossible. Public lands such as those of the state Department of Forestry and Department of Game and Inland Fisheries (of Virginia) offer competition but use rates there are high, users non-selective or untrained, and safety and vandalism problems are reported to be increasing. We offer an alternative, with distinctively different services and opportunities than those found on public lands. Our products support activity on public land; we will take tours/trips on public lands as well as on our lands (of course with proper no- or low-cost permits and authorizations). Each of the enterprises within the conglomerate has slight competition, but there are no known direct competitors for the regional (initially) system. No individual competitors have the support structure and economies provided within the proposed system. The State/Federal Extension Service has "free" services and is thus competitive. That agency is now being reduced in Virginia and, with less than one agent per county, the level of service is low and not competitive in our select enterprise areas. Few counties have our creative computer mapping systems for planning and precision management. It is likely that competitors will emerge. We shall attempt expansion into adjacent regions, perhaps leapfrogging to compete with Non-adjacent competitors, or making attempts to form partnerships with other groups in their early stages of development.

Threats and Risks

Management expertise (fundamental) may not be obtained readily or timely. Effective sales require a demonstrable product of demonstrated service in the early stages of the system. An effective computer system needs to be quite vast; programs on the shelf need to be moved into action and their services sold. It will take time to build to great effectiveness that can be demonstrated. Achieving the early development is a risky task. Unseen or unknown competition may arise. Existing groups (e.g., funeral homes) may see our Memorials group as competitive rather than, as intended, supportive and providing an extra or alternative service with profits for them. Miscommunication abounds.

Major fires and continuing drought can dampen enthusiasm and cause project failures but overcoming these is part of the service to be provided.

Landowners just may not join! (Two people have said "no" in preliminary conversations (others have said "maybe.")) Others have never had an option presented; none have been able to hold their land and gain annual profits and tax relief. Nevertheless, it needs to be noted that 20 of the enterprises are "indoors" and can operate effectively entirely on public lands and on one or two large private tracts. There needs to be the famous "hybrid-corn-success demonstration plot" and profit-sheet demonstrated, then the major risk of landowners not joining will pass.

Unavailable fossil fuels for travel and typically-high agricultural system uses may become a real barrier in the future. Early efforts in energy conservation and developing alternatives will be a gain for the enterprise as well as for customers.

Strategy

The enterprise is grounded in R.H. Giles' experience and studies over 50 years and on his lectures and writing (list available) on a systems approach to natural resource management and computer-based wildland management. Experience included that as a state wildlife biologist, forest land owner, professor (University of Idaho and Virginia Tech), doctoral program at Ohio State (studying the ecological effects of a radio-isotope-labeled insecticide applied in a forested watershed), consultant for TVA and others, early GIS applications, Powell River Project initiator, and Blacksburg Planning Commission chairman. The work involved creative efforts with graduate students on closely-related thesis projects. Work continues on building a useful Internet resource at www.RuralSystem.com. The Rural System enterprise concept has been being built over many years. We've sought interest from The Egg Factory (Roanoke, Virginia), The Explore Park (as an operational center), Hollins College, Western Virginia Community College, The Community Foundation (as a regional start-up platform for supporting charities), Western Virginia Land Trust, Foresters, Inc., Warm Hearth Village, Longwood University (Farmville, Virginia), and the Giles County Economic Development Office (Tourism Committee).

The active parts are now:

Several people have asked, "How do we start?" We have started. The next planned steps, seizing opportunities as they are seen, are:

Marketing and Sales

A marketing strategy is outlined within The Trevey. The strategy includes concepts of:

  1. Pleasing activities, adventures, and opportunities
  2. Consistent high quality and modest prices, balancing the (quantity x price) relationship
  3. Moving users and buyers into memberships in different internal organizations
  4. Abundant awards, rebates, and incentives for participants and members
  5. Intensive Internet uses for information and sales in many enterprises
  6. Strong links between enterprises, each selling for each
  7. Intensive use of press and media for reports of staff progress, discoveries, developments, community enhancements
  8. Clear financial incentives for staff based on proportions of
    (1) total system profits and (2) individual enterprise profits.

Operations

Human Resources

A simplistic, useful Human Resource Plan is used. Called "human heuristics," the parts are:

Incentives

David L. Lyon, Ph.D., argued beautifully in a paper on the population problem in the Living Wilderness ( Spring, 1967) for a strong sense of individual responsibility and that the individual decision to reproduce must be tempered by a strong social conscience and consideration for the interests and future welfare of generations yet unborn. "A fresh conception of man's relation to nature is needed before the [population] problem can be attacked with any real hopes of solution. Concomitant with changes in attitude toward population regulation must go change in perception of and attitude toward the natural environment. Man must learn that like all other organisms he performs a role within nature rather than perceiving nature as a segment of man's world which can be ignored or embraced as whim dictates. This new attitude will at the very least change to significant degree his orientation to the most important questions of the time - man's responsibility to man, and man's responsibility to his natural environment."

Dr. Michael Rauscher argued (2001) that " at the heart of the ecosystem management paradigm lies a shift in emphasis away from sustaining yields of products toward sustaining the ecosystems that provide these products." We believe this is commendable but an evolutionary step toward clarifying desired products and the net values of these. Since needs and values of products and services may change quite rapidly (several times within a human generation) the real needs are in a shift to sustaining values from productive platforms, espacially financial values ... clearly dependent upon productive but changing systems.

Changes have been made but such appeals have not been sufficient. It seems time to try a financial-incentive strategy, one called entrepreneurial conservation and manifest in Rural System

When objectives are clearly seen, incentives for reaching them become clear. Rewards for doing so are usually clearly seen. The system has a scoring mechanism, a simple answer for "how are you doing? " Group pleasure with successes can be life enhancing. There are salaries, memberships, awards, reduced dues or costs, public recognition events, trips, etc. all designed to provide a lasting system that makes profits without exploiting people of the land. Members benefit financially. The government benefits directly as well as through the building tax base. The existing tourism groups and other local corporations benefit from the beautification and improved context of their investments.

Facilities

Initial rental space for six people seems needed during early growth. Home offices for part-time workers will be rented. Several of the membership related activities will be operated from home offices. A central conference or meeting room will meet most needs. Services of local business incubators will be sought. Services for computer mapping (examples attached) will be obtained at first from the Conservation Management Institute. Parking spaces for field vehicles and storage space for equipment will be rented until cost-effective alternatives are seen.

Computer Mapping

Since 1969 the developer of the Rural System concept has been working with and developing geographic information systems (GIS) with his staff and graduate students. The technology is now very advanced. The Conservation Management Institute of Virginia Tech now has major GIS capability. We propose to use the resources of that group for producing publishable products for sale, preparing maps on demand for clients, supplying maps that are send to land owners via the Internet, and making daily decisions about work on the land. The advantages of these systems are poorly known and their potentials barely used. We see potentials in making pseudo-soil maps, precisely locating gardens, avoiding plant disease conditions, locating utility corridors, and mapping in three dimensions the dynamics of optimum land use on individual farms.

Demonstration of a county-specific computer map. Major roads in Craig County are shown with elevations shaded in 10 classes, light areas being higher elevations.
Some maps will serve for insurance protection, for legal testimony, and for rapidly educating new employees about lands and their potentials and problems. Three examples of computer-produced maps follow. The first shows elevations for Craig County with the major roads. The elevation database has many uses for producing other maps (e.g., slopes) and for interpreting relations (e.g., resistant rock formations on ridge tops). Hundreds of such maps are now available for the entire region proposed for the work of Rural System The system uses the Alpha Unit concept, 10-meter by 10-meter mapping units.

Cover types are shown only on private lands within the county, along with streams. As needed, a GIS map can be created for only one or several cover types.
The second map (using Craig County, Virginia, as an example) places national forest land in white and emphasizes private land, showing the land cover and land use types within such land. Streams, shown here, may be removed from the map. Scale may be varied for individual farms or forests. The third map shows results of division of land by a very few criteria. The fourth map shows statistical work on the probability of occurrence of an endangered wildlife species. This is a map of a USGS topographic map (a quad sheet). Such maps reduce the chance of adverse impacts and the costs of litigation and delays. Similar probability maps are essential in making the difficult land use decisions for the future.



Financials

Sources of income were discussed above. A loan, a line of credit for a maximum of six years is proposed as the means of financing the start of the system. Rural System is a not-for-profit corporation and the needs are to get started, then to be self-sustaining. Unlike other educational and conservation corporations, it does not depend on taxes, government subsidy, or charities. The diverse nature of the business, the different starting times and very different likely progress of each makesprecise financial estimates impossible. With payback of the loan, which begins almost immediately from some enterprises, the corporation is self-sustaining. "Profits" flow to staff, land owners of the Pivotal Tracts, and to the founder(s).

Costs

"What will it cost?" is a typical question asked about a typical project. The best current estimates of the six-year start-up costs and returns that are likely are shown in Table 1. Much too large a project by some accounts, nevertheless the project is created or "built" over six years. Annual needs will vary but the average annual cost or investments are about $800,000. Of course, all enterprises do not have to be implemented, but most are needed. Success lies in diversity, similar to that within the average stock portfolio or ecological communities. While phases or desired-sequence-of-development might be listed, such documents will be worthless because of changes from offers, appearance of special people with talents and resources, difficulties in attracting special leaders, cooperative work with local companies, and many other reasons.

The proposed corporation potentiates investments in land. It "mines" billions of dollars spent on satellite technology and forestry and wildland research over the past 50 years. It develops a resource base for an uncertain future. It provides inestimable public relations value for its region. It reduces losses and has its own special security and limited fire protection program. It shows an alternative to agency management of land and current tax rates and destructive real-estate taxes.

There are large expected net returns (including yet-unquantified reduced risks, increased land value, and social gains) from investments. Pride will grow in being the place where an important enterprise was sponsored and developed. Forests in the public domain (such as national forests) are usually financial drains on their neighbors. Even if direct costs of public land ownership are ignored, ownership represents a loss of land for taxation for communities. The cost of owning land is, at minimum, the annual tax burden on the landowner. One bottom line for success of the corporation is that, at least, the annual real-estate tax-equivalent of landowners who associate with the corporation is paid. Another line-at-the-bottom is that the enterprise produces local community financial gains from the presence of public lands.

Depending on inventory, adopted accounting procedures and policies, and the planning horizon, the estimated costs of system development can be paid over six years, with difficulty, exclusively from funds derived from the office-based groups. This estimate is exclusive of recruited Pivotal Tracts. With Pivotal Tracts in the conglomerate, profits are more assured. Profits from invested annual income from the Tracts can likely far exceed the value of any managed wood harvested at the end of a long investment period on that tract. We are not asking for "charitable contributions from landowners" as someone suggested.

The estimated returns are about $2.4 million annually after year 6.

Link here to Table 1, Budget Estimates.

Planned Distribution of Funds

First efforts will be to develop cooperative work, commissions on sales, for example, with existing enterprises. Simultaneously we shall seek a specialized grant, one for a revolving loan or line of credit and later payback. We'll seek additional funding sources (donations, grants, contracts, bequeaths) and develop fully the concepts here and in a book being developed for sale, including expansions into other areas such as Nelson, Giles, Montgomery, and Alleghany County, Virginia, throughout the coalfield to include the Clairfield region of eastern Tennessee and Kentucky.

The following thought on distribution of funds are very preliminary and were based on early thoughts about the enterprise having a not-for-profit corporate status. A for-profit status is perceived to be satisfactory if funds are allocated for land and resource enhancement as costs of maintaining the system.

These gains include carefully calibrated timber logging returns from Tracts described above. The owners of Pivotal Tracts receive about 50 percent of the profits of the entire enterprise. Based on the acres (a potential-production-weighted acreage based on an index (including site index, ponds, streams, roads, etc.)) within the participating land ownership, the owner shares in a proportion of the annual profits. The more money made, the more both enterprise and tract owners benefit, all subject to the constraints of sustained profitability and those imposed by the land and climate.

Assuming the last option, initially, 10% will go to an enterprise-building fund for five years. Afterwards, 40 percent remaining ...after disposition of the 50 percent of profits to the owners of tracts ...will be distributed by System Central. (This is tentative and based on the description herein.) Percentages of this 40% will be distributed as follows:

The advantages of the unusual organization also create problems. All groups have a common accounting service within System Central. There are real dangers characteristic of the "Tragedy of the Commons." Each group is independently managed and very distinctive. General leadership is offered; there is group process, but each manager is autonomous. Rather than building an enterprise as structure and staff, as in many other businesses, each manager is building profits since these bring group and personal rewards. The costs of System Central (for the entire enterprise including repayments, described later) are large. After a few years, all groups within the enterprise share these proportionally (above a fixed amount). An additional 20% of that amount is charged as cost and spent on approved costs of group enhancement and growth for each of the first six years. Salaries and benefits are high and represent the major costs within each group. Salary incentives are from proportions of the profits as outlined above.) Each group pays direct costs for supplies, raw materials, and special services. The gross income minus these costs is the fund distributed by System Central (as indicated above).

A Request

Several people have told me that this proposal is "hard to wrap your mind around it." I have tried to be clear, brief, and to provide supplementary information on each proposed group or enterprise.

I can make available a paper copy of a detailed description of the entire system. I hope that you will:

  1. Study the project and ask questions and give me advice
  2. After clarifications, write a letter approving the concept and authorizing me to seek additional contacts and developments
  3. Back a line of credit of $500,000 for formal start-up
  4. Consider asking for advice in corporate start-up in Appalachian and related rural programs from the staff of Congressman Boucher and or Delegate Schuler
  5. Arrange for office rentals or use of space
  6. Suggest individuals, groups, and businesses that may be interested and that may find work with us mutually beneficial
  7. Suggest landowners who may be interested in their lands being in Pivotal Tracts
...or, later, pass along these ideas. They'll be good for future citizens.

See the Appendix for an abbreviated system, a possible startup with ~34% less cost.

Contact me at RHGiles@RuralSystem.com


An Enterprise Example

Several people have suggested including an example. The business sounds, at first hand, like logging and making hunting and fishing land leases. While it may include that, it treats land as a platform from which enterprises work together to make money to improve the land for the future. An example is one activity proposed for The Owls Group:

After a fine meal at the Baylee's Restaurant, 30 participants entered the comfortable bus and were driven to a site on a Pivotal Tract developed by The Owls Group. While on the brief trip, the pleasant group leader talked of owls, their requirements, their role in the forest, and their competitors. She explained some of the studies underway and finished just before the bus stopped in a forest road turnaround. It was now dark and the group walked with lantern light to an open area. The leader turned out all lights; eyes adjusted to the darkness, a recording was played, and an owl appeared from the forest! It was the first sighting of the species for most people there and exciting for all. The group then learned more of the night-time forest from an assistant and experimented with night-vision glasses, then walked with lanterns to a nearby campfire circle where they heard music and humor, had a catered desert and drinks, and went back to the bus, tired but with memories for a lifetime. Literature introduced them to contributing to wildland studies, the Memorials Group, and the forest practices upon which stable populations of the four species of owls in the area depended. A similar nighttime trip with Coyote, a group conducting fox-related excursions, was advertised. Conducted during 150 nights a year, the potential income from this unique catered business -- without cutting a tree or eating an owl -- is over $600,000 with a high proportion being "profits."

Appendix

A Simplified Start-up

The large sums, the novelty, the doubts about coordination and cooperation, and the doubts about whether the people are available to do the work, all together required caution and for many, a decision not to participate. Past small successes, challenge, and work for the right reasons suggested that the system will work and profits can be made. Reluctantly, knowing some major economies will be lost, I have selected and deleted many enterprises for start-up work. I've done so on the basis of their cost, difficulty and risk of success, and links to other enterprises. I'll not list the deletions; they will be delayed and are being further planned and designed. The remaining enterprises and their estimated budgets (most unchanged) are shown in Appendix Table 1. About 25% of the 57 groups have been deleted.

The descriptions and concepts are the same. The suggested initial groups and their moderate budget estimate are in Appendix Table 1. Appendix Table 1 - Estimates for a Start-Up Operation with only Selected Groups (with adjusted estimates).

for more details of Rural System and descriptions of units, see the Contents or begin studying the entie Design document.
Robert H. Giles, Jr., Ph.D. 504 Rose Avenue Blacksburg, Virginia, USA 24060 RHGiles@RuralSystem.com 540-552-8672




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Last revision: August 8, 2005