How to Succeed in Business in Rural Alaska

By: Staff Mar 4, 2008

Business do’s, don’ts emerge from ISER report, profiles of success, failure

ANCHORAGE, AK – The Alaska Tribal Cache has done it right. The Seldovia maker of wild-berry products that are sold throughout Alaska and around the country could be the poster child for a successful rural-Alaska business. The company, founded by the local tribal council in 1995, sells a boutique product combining elements of traditional culture with a quality food item. It smartly uses the Internet to broaden its market.

By contrast, a small logging company in Thorne Bay in Southeast Alaska was not so successful. Started by five partners who devoted their lives to the logging business, the company employed 30 people at its peak but closed after some 10 years of operations and a mountain of debt. The owners knew little about managing a business, according to a new report by UAA’s Institute of Social and Economic Research (ISER). They planned poorly, could not make reliable financial projections or manage their employees, and did not know how to provide for insurance. More than $120,000 in personal start-up funds and years of hard work for little or no pay went out with the sawdust.

These two stories are among 23 case studies published in a unusual study about what it takes to succeed in business in the rural villages of Alaska, and what is likely not to work. The report, “Viable Business Enterprises for Rural Alaska: What Works” (ViBEs), presents lots of statistics, including pie charts and bar graphs chock with data collected by a team of researchers over some 18 months. The crux of any business, of course, is the people who run it and their decisions. And a lot of the research in ViBEs was conducted through interviews of 196 business owners in 19 randomly selected communities.

“These were the villages, not the regional centers, not Kotzebue, not Nome,” says Jane Angvik, who visited the sites and spoke to those involved. For purposes of the study, a rural Alaska village was defined as having 200 or more full-time residents and no more than 1,400.

The biggest share, almost one-third, of businesses meeting the severe challenges of a rural location are retail stores that sell groceries, fuel and general merchandise. Arts and recreation businesses, including Native artists, were next, accounting for 15 percent of the total. Transportation businesses amounted to 11 percent, as did B&Bs, hotels, lodges and restaurants.

The study identifies several keys to success that are so basic as to be often overlooked. “Do what you love,” say the authors of the ViBEs report, Sharman Haley, Ginny Fay, Cami Woolam and Angvik. “Do what you know.”

Hard work, support of a family, training, technical assistance, and the need to start small – all are critical. And perhaps especially in rural Alaska, so is “community cohesion.” If the inhabitants of a town or village are engaged in a battle royale over some issue, the business environment, by definition, is poorer, according to the study. Community support is essential. “The owners of a remote lodge reported that they had stopped booking guided hunts in the fall, even though they lost income, because local people said these outside hunters were taking food from local hunters,” the report’s executive summary states.

It’s also true, however, that location plays an important role. The study found that habitations close to national parks or which have strong commercials fisheries and/or lower travel costs from Anchorage “are likely to have a larger, more diverse group of businesses. Places with larger populations are also more likely to draw businesses, but location is even more important than size.”

“Establishing businesses in rural Alaska is hard but not impossible,” the report states. “Hundreds of businesses exist in rural communities around the state, and business owners have found ways to deal with the barriers created by small markets, remote location, high costs, and harsh climate.”

But, of course, many others failed. And they are the cautionary tales.

The ViBEs report is essential reading for anyone involved in running a business in rural Alaska, or wanting to do so. It can be found online at http://ced.uaa.alaska.edu -- the Web site of ISER’s Center for Economic Development, a university-based partnership of the U.S. Department of Commerce’s Economic Development Administration and the University of Alaska.

The study was supported by the Economic Development Administration, the Rasmuson Foundation, BP Exploration (Alaska), Wells Fargo Bank and the University of Alaska Foundation.

For more information about the ViBEs case studies and their summary and analysis, please contact Jane Angvik in Anchorage at janeangvik@alaska.com or 277-6903.

For questions related to the report’s research methodology, contact Prof. Sharman Haley at ISER, afsh@uaa.alaska.edu or 786-5429.

For general questions, please contact Christi Bell at ISER, ancab5@uaa.alaska.edu or 786-5444.