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Ecotourism Financing Making it Happen: Securing your Funding

a workshop presented at the North American Ecotourism Conference Madison, Wisconsin September 26 to 28, 2007

by

Making it Happen: Securing your Funding

September 2007

contents Presenter Background.............................................................................................1 Top Ten Guidelines .................................................................................................2 Types of Ecolodge Funding ....................................................................................4 Feasibility Study .....................................................................................................5 Business Planning ...................................................................................................6 Strategic Planning ..................................................................................................7 Industry Norms .......................................................................................................8 Telling Your Story ...................................................................................................9

© copyright 2007 MacLeod Farley & Associates.

All Rights Reserved.

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making chan g e h a p p e n . . . t o g e t h e r

Making it Happen: Securing your Funding

September 2007

Presenter Background Rick MacLeod Farley is a development economist with more than 17 years experience in ecotourism, heritage tourism and community economic development.

From 1990 through 1994 he worked as a regional economic coordinator for a Cree tribal council called Mushkegowuk Council. Since then, he has operated his consulting firm, MacLeod Farley & Associates, which specializes in Aboriginal ecotourism and heritage tourism. Rick is a Canadian with Irish and French ancestry.

Rick has a solid project development track record - having helped his clients access over $30 million in funding in the last ten years, with a 95% plus funding application approval rate.

Our Track Record Funding Approvals

Approval Rate

Clients’ Rate Of Return

over $30 million in grant funding accessed for our clients in the last ten years

more than 95% on funding submissions for our clients in the last eight years

greater than 10 to 1 We’ve generated over $100,000 in project funding for every $10,000 spent on our services

Rick had an extensive role with MoCreebec Council of the Cree Nation on their award winning $6 million Cree Village Ecolodge (“http://www.creevillage. com” www.creevillage.com). Other major assignments have included the Washow James Bay Wilderness Centre (opening 2008), Kamestastin Lodge (proposed) in Labrador, and Timiskaming Cultural Lodge (planning stages) in Quebec. In addition to his work in Canada, Rick has a long-standing interest in Indigenous communities in South and Central America.

The information in this presentation reflects many years of ecotourism and heritage project development work by Rick, members of his consulting teams, and most importantly with his client communities. Rick would like to particularly acknowledge MoCreebec Council of the Cree Nation, Moose Cree First Nation, the Innu communities of Labrador, and Sandra White of the

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Making it Happen: Securing your Funding

September 2007

Top Ten Guidelines for Accessing your Grants and other Funding for your Ecotourism Project 1. Inventory your potential funders • including basic research such as deadlines, focus, funding amount range, guidelines, eligible costs, ineligible costs, process, ...

2. Short-list your target funders • select funders that may be suitable for your project

3. Seek first to understand • each funder is different and each has their own objectives • research each target funders objectives, criteria • “learn their language” and “learn their culture” • find out as much as possible about them, if possible, before providing many details about your own project (keep it a little vague for now) • talk to others who have accessed funding from them to gain a better understanding of what they will be like to work with

4. Develop supporters and allies • build positive, respectful relationships with people in the funding organization (starting with whoever answers your incoming phone calls!)

• ask for help!

• identify allies and champions for your project

5. Seek second to understand • gather further details on your target funders including information on past projects approved, and how approvals really happen (officially and unofficially) • study in details the target funders objectives and criteria

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making chan g e h a p p e n . . . t o g e t h e r

Making it Happen: Securing your Funding

September 2007

6. “Speak their language” • develop or fine-tune your business plan, including your financing plan, with each target funder’s information and other needs in mind • for each application for funding you need to develop a custom proposal to address the funders criteria, showing how your project addresses their objectives, possibly even tailoring your business plan to further support this effort • keep the story simple, positive and exciting • give them every reason to say ‘yes’ to your proposal, based on their own rules and criteria • don’t give them any excuse to say ‘no’

7. Be politely persistent • once your application is in their system, you need to ‘babysit’ it, politely checking in on it at appropriate intervals (not too much, not too little!) and offering to provide any additional information required

8. Strategically support your funding applications • if questions arise, or clarification is required, respond fully and rapidly • anticipate “curve balls” or surprises and consider contingency plans • if roadblocks come up, work with your allies and champions to develop and implement strategies to remove them

9. Consider whether or not you should ‘hire a guide’ • the “funding game” is challenging and time-consuming with a lot of grant money at stake – money that can help make your project financially viable • consider hiring a professional project development consultant to assist with the funding process • select one carefully, based on a combination of factors (i.e. demonstrated track-record at securing funding, ability to effectively listen to you and work with you and your team to achieve your vision, successful work on similar projects, experience working with your target funders) • a project development consultant should also be able to assist with finding developmental funding – and should thus be able to help “pay for her or himself” in great part

10. Expect success, expect delays • be patient!

• be persistent!

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Making it Happen: Securing your Funding

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Types of Ecolodge Funding There are three types of project funding: i. Equity – ownership stake ii. Grants – non-repayable investments iii. Loans – repayable over time In general, community ecolodge projects should endeavour to maximize grants (non-repayable investments), and minimize loans.

On-going financial impacts of loans can be minimized by striving for zero or low interest rates, grace periods, and lengthy terms.

Equity funding is usually required by project funding agencies. It is often advantageous to minimize equity as well. Owner’s may be grateful for an ‘equity reserve’ during the early operational years as income projections may be difficult to attain.

There are two forms of project equity; Cash and In-kind. ‘In-kind’ (non-cash) contributions usually play a key role in developing an ecolodge. Explicit recognition of in-kind contributions can be used strategically to make your ecolodge financing more attractive for the project.

In-kind contributions can be used to reduce the amount of cash equity that the project owners will invest. Not all funding sources will recognize in-kind contributions as part of their financing analysis.

The owners’ objectives in terms of financing (i.e. minimizing equity and loans) is often in conflict with funding agencies project financing objectives (i.e. to maximize equity). In developing your project financing, you need to strive for the optimal balance of your needs and wants and the funding agencies needs and wants. At times, this balance is not achievable, and a decision may be made to look for a different target funder.

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making chan g e h a p p e n . . . t o g e t h e r

Making it Happen: Securing your Funding

September 2007

Feasibility Study A feasibility study considers whether or not the project concept is financially viable, and worthy of further detailed business planning. Identification of targets markets is key to the feasibility study, as markets are central to the preliminary revenue projections.

A feasibility study is often undertaken as preliminary to a full business plan.

Financial viability of an ecolodge needs to be determined, and then demonstrated in the feasibility study. Financial viability also needs to be demonstrated in the business plan.

Financial viability depends on three inter-related factors: total capital costs composition and nature of the ecolodge project financing projected net income

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Making it Happen: Securing your Funding

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Business Planning A business plan is written with two key audiences in mind: 1. target project funders 2. the ecotourism business operator(s) To enhance the success of project implementation, the business plan should provide all key information to successfully guide the operation, and the business plan should be updated on a regular basis.

The following is a list of key sections of a sample ecolodge business plan.

Overview Community Market Research Site & Services Management Plan Marketing Plan Costs & Financial Projections

Your business plan can be strengthened by focusing in part on two key elements covered in the following pages: (1) strategic planning, and (2) industry norms.

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making chan g e h a p p e n . . . t o g e t h e r

Making it Happen: Securing your Funding

September 2007

Strategic Planning We advocate that a strategic planning approach be central to your business planning.

Strategic planning is often used by groups (activists, developers, business, government) as an organizing tool. It can be used very effectively to develop a community ecolodge project. Strategic planning can be carried out at various times in the process of developing your community ecolodge.

A strategic planning process can be established for your community ecolodge project as a way of generating consensus on the overall project direction through to detailed action plans.

Strategic planning often leads to the development of the following; • overall vision for the community

(the dream to strive towards)

• project or company mission

(the scheme or focus of your project)

• identification of critical issues

(the big questions affecting your project)

• key objectives or goals

(what you must do)

• key strategies

(how you will do it)

• action plans

(steps to take – who, what, when – to implement each key strategy)

Strategic planning processes often include a situation analysis (history, strengths, weaknesses, threats, opportunities). For ecolodge projects, opportunities would include two key areas: markets and funding sources.

Strategic planning processes should be customized to meet the needs of your community or group.

For example, the MoCreebec Council of the Cree Nation community modified the strategic planning process to include a focus on clarifying the Community Values, and establishing Community Guidelines as a starting point in developing their Cree Village Ecolodge project. This approach is now being used by other groups as well.

The inclusion of key results from project strategic planning within the business plan will greatly improve the quality and value, and thus the impact, of the document.

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Industry Norms

A critically important aspect Industry ‘norms’ are compiled for mainstream industry, based on research of existing business operations. For example, in Ontario, Canada, the provincial government publishes ‘Norms for the Tourism Industry’ which covers sectors such as hotels, motels, resorts, lodges and attractions. Norms focus on two key elements: • capital costs • operational revenues and expenses.

For each of these elements, the norms describe the range and average of costs and other figures, and analyze them in terms of ‘# of rooms’, size and other factors.

These norms documents are of great strategic importance for two reasons: 1. they enable you to build on, and learn from, the experience of others 2. they are used as by your target funding agencies as a benchmark to compare your community ecolodge initiative against Until recently, only mainstream norms were available which was a challenge for community ecolodge developers and operators. In 2000, the International Ecotourism Society (TIES) published a document called “The Business of Ecolodges: A Survey of Ecolodge Economics and Finance”.

This document by Elizabeth Halpenny and Edward Sanders is the first of its kind, and is an invaluable guide which we endorse and recommend.

In terms of strategic business planning and financing, there are two key aspects of this document which should be studied and utilized extensively; 1. Chapter Four: Ecolodge Financing 2. Improving the Consistency of Financial Reporting 3. Operating Costs With regards to operating costs, for example, the document shows that the norm for existing ecolodges is that the payroll for employees is about 22% of gross revenues. This is a key figure to keep in mind for business planning, and for financially sustainable operations.

Finally, it is often of strategic advantage to ensure that your target funders have access to this document. If they don’t have it, purchase it and provide them with it! This will reinforce that you have carried out your research, and allow them to increase their own knowledge so that they can judge your proposal effectively.

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making chan g e h a p p e n . . . t o g e t h e r

Making it Happen: Securing your Funding

September 2007

Telling Your Story When pursuing financing for your project, everything that you do should support your objective of securing appropriate financial support.

You need to build positive relationships with your target funders.

To successfully attract your target project funders, your business plan should: • tell your ‘project story’ effectively and powerfully; • convey your ecotourism project’s excitement and importance; • be clear, concise, complete and achievable; • demonstrate financial viability; • address the funder’s needs; • motivate the target funder to take action and say “yes!”

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R.R. #7, 223177 Grey Road 17B Owen Sound, Ontario, Canada N4K 6V5 phone: 519-370-2332 fax: 1-866-409-8633 (toll free) e-mail: info@macfar.ca web: www.macfar.ca

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