The role of small businesses in your community

Historically, the Navajo Nation has placed a lot of importance on tribal enterprises as the driver of economic growth and job creation. While tribal enterprises do create some job opportunities in our communities, America’s small businesses – some 25 million strong – are the true strength of the U.S. economy. They create between 60% and 80% of net new jobs. Despite the demonstrated importance of small businesses in a healthy and diverse local economy, the growth rate of Navajo small businesses is less than half the growth rate for the U.S.

Reasons for stagnant growth of the Navajo small business community include the lack of infrastructure, limited small business financing, lack of support networks and mentors, and a long history of exclusion from national and global economies, which is exacerbated by broadband connectivity in our communities. Operating a formal business on the Navajo Nation means dealing with the complexity of tribal regulations. These processes are opaque, time consuming, and onerous for business owners, which often results in business owners, entrepreneurs, artisans, and vendors choosing not to formally register their business with the Navajo Nation. This decision ultimately limits their ability to grow and shortchanges Navajo communities from benefiting from the products and services they have to offer. 

Creating an environment that enables entrepreneurship and business growth is an important tool for creating sustainable economic growth at the Chapter level and alleviating poverty within our families. Poverty rates within communities on the Navajo Nation (38%) are more than twice as high as poverty rates in the state of Arizona (15%). The unemployment rate on the Navajo Nation is reportedly as high as 50% in 2016, compared to a national rate of 4.7%  that same year. 

Despite these obstacles, our community members persevere and continue to maintain their livelihoods, earn money, and buy the goods and services necessary to support their families. But we need to transition from the “survive” mindset to a “thrive” mindset. And to do that requires a significant investment in the success of our greatest asset:  our own Navajo businesses, vendors, and artisans.

Does your Chapter have the necessary components for creating community wealth and growth?

How can a Chapter House approach and work to generate wealth and foster growth in the community? An economic development strategy or plan is an important tool for chapter house leaders to plan and track progress towards goals to retain wealth within the community and build community assets. While there are many aspects to economic development, we’re focusing specifically on what Chapters can do to enable the startup and growth of Navajo small businesses. 

There are multiple economic factors that affect the business environment and influence the attractiveness and sustainability of businesses that set up operations in the economy. An economic environment is “healthy” when it provides opportunity for all business types and is welcoming to entrepreneurs and small businesses.  A local economy is necessary so individuals can improve the economic stability, health, and well-being of themselves and the entire communities. 

The factors affecting the local economy include, but are not limited to:

• Tax rates 

• Inflation

• Labor

• Supply and demand

• Wages

• Policies

Seven reasons why every Chapter should have an economic development plan

Here’s seven reasons every Chapter should draft a plan for local economic development. The plan is your opportunity to: 

Many Chapters conduct similar planning efforts for their community land use plans (CLUP). Similar to the CLUP, your plan for community economic development should set clear and attainable goals that reflect a vision for the community, address community challenges, and outline clear, measurable, and attainable goals for economic development. Assembling your strategic plan for economic development will guide your journey towards achieving a sustainable local economy for the community.

A framework for Chapter economic development planning

Sa’ah Naaghai Bik’eh Hozho

The principles of Diné philosophy can inform the framework of your economic development plan, particularly the roadmap for achieving your plan. As we seek to develop this map or path, we do so in acknowledgement of Diné traditions that teach our people how we can go forward in life in harmony with those around us. 

“Sa’ah Naaghai Bik’eh Hozho” is the Diné traditional living system which illustrates the Diné way of life and philosophy that embodies our harmonious existence within the universe. This framework has four principles placed at the four sacred directions: Nitsáhákees (Critical Thinking), Nahat’á (Planning), Iiná (Living) and Sihasin (Assuring or Reflection). 

Sourced from Diné College

Taking the first step: Nitsáhákees

Our plan starts with Nitsáhákees, or examining the current economic environment. There is no need to start from scratch. A variety of economic “indicators” for your community exist online and can be gathered with input from your community. An “indicator” is a measure we use to gauge the state of something. In the same way that a blood pressure is an indicator of your heart health, the number of businesses operating in your community is an indicator of your economic health. 

Economic indicators provide you data for your community developers, planners, and also aid your decision making. Typical indicators of economic health may include the gross domestic product (GDP) of your community,  which is the total market value of the sales of goods and services sold in your community over a defined period of time. For example, let’s say that in 2019, vendors in Chinle sold 800 Navajo Tacos at $6 each (or $4,800 in Navajo taco sales); roadside vendors generated $25,000 in jewelry and craft sales; and local retail stores generated $2,300,000 in sales. Then the GDP of Chinle in 2019 was $4,800 + $25,000 + $2,300,000 = $2,329,800. 

Since GDP can be challenging to quantify, there are a number of other indicators you might use to measure the economic health of your community. We’ve put together a list to help you get started. We recommend starting with indicators that you have on hand, and setting goals to increase the number of indicators you track to improve your understanding of the economic health of your community. 

Once you’ve taken stock of the economic health of your community, you will begin to get a handle on what can be improved in the community. This is the basis of informed and measurable goals for your economic plan. You progress to Nahat’á. 

How our Navajo Nation Government uses Nitsáhákees

The Navajo Nation Division of Economic Development utilizes a growth center strategy to economic development. This approach drives investment into designated primary and secondary growth areas. For example, the Navajo Nation’s Long Range Comprehensive Transportation Plan designates growth areas based on community population. The Western Agency has two designated growth areas: the Tuba City Chapter and Kayenta Chapter. 

 Source: American Community Survey 5-Year Estimates 

Looking at the chart above, Tuba City and Kayenta’s population has hovered around 9,000 and 5,000, respectively, over the last ten years and has not demonstrated prominent or significant growth. Tuba City and Kayenta are primary designated growth areas in Navajo Western Agency, while Shiprock is a designated primary growth area for the Navajo Northern Agency. In comparison, Shiprock is similar to Tuba City in that the population temporarily rose, and then declined. What might population growth, or lack thereof,  indicate about the current economic environment in these communities?  

In 2021, Change Labs and Causal Design conducted an analysis of the business environment on the Navajo Nation. Specifically they used standardized indicators to measure the ease of conducting business on the Navajo Nation and compared the data to an off-reservation community (Cortez, CO) as well as data for the United States and 190 countries around the globe. Based on the data, the Navajo Nation ranks amongst the lowest 15% of countries in the world in three components of conducting business: accessing land, getting electricity, and enforcing contracts. While the outcomes are discouraging, the data paints a clear picture of what the Navajo Nation and its community should prioritize in order to ease its business environment. 

How Does Running a Business on the Navajo Nation Compared to Others? 

Source: Doing Business on the Navajo Nation, Change Labs 

Interpreting the Data to Drive Change

Collecting and analyzing data is simply a form of storytelling. It’s the driver of a narrative we can share with community members, leaders, and stakeholders to educate and to motivate. However, many Indigenous communities have had a negative experience with data collection and there is a healthy skepticism of those who collect data as a result. The Navajo Nation on the whole collects and analyzes very little data. For example, the government has no idea how many artisans and vendors sell on the reservation – which means we cannot accurately measure GDP. The government also does not actively track or analyze contract spending of Navajo tribal enterprises – which means we have no way of quantifying how much Navajo money is invested in non-Native contractors and businesses, and therefore no way of knowing if legislation like the Navajo Business Opportunity Act are effective. 

We cannot change what we cannot measure. In order to drive economic change in our community, we have to start with Nitsáhákees. We must participate in and steward our own data collection in order to realize our economic sovereignty. 

Here are examples of visualization of data and indicators that help us appreciate the economic health of Western Navajo Agency. 

Visualizing the data, like in the examples above, helps us understand the issue and make informed decision to improve the issue. For example, the Navajo Western Agency chapters share an average “labor participation rate” of approximately 46.6%. This means that 46.6% of the population is either working or actively looking for work. We could visualize how the Navajo Nation data compares to the median labor participation rate of Arizona and the U.S., 80.1% and 82.4%, respectively. The Western Navajo region’s labor force is within the upper 50th percentile of the State of Arizona and the U.S. This is considered very low. If we wanted to increase the labor participation rate in our communities, what support, resources, or programs might we offer? 

Recommendations for Getting Started on your community economic development plan

1. Build a Community Brand 

Just like a company consciously develops its brand to market its assets (its products or services), a community can develop a brand to market its community assets. Think of your favorite city or town to visit. What makes it unique? Nearly 60 million tourists visit “The Big Apple” each year to experience life in “the city that never sleeps.” New York City has been featured in countless films and books and has developed a strong brand over time that make it a popular worldwide destination. Similarly, the small community of Santa Fe attracts 1.5 million tourists each year who are drawn to its unique adobe architecture, its many galleries, and celebration of art culture. 

Just as New York and Santa Fe have deliberately architected a brand, Navajo communities can too. Ask yourself and your community members: What are my community's best assets? What attracts, or could attract, people to our community? What will keep people in our community or coming back to our community? The answers to these questions are the essence of your community brand. 

2. Improve the factors affecting business climate

As previously mentioned, the small business community is the backbone of any economy. Too often we assume that Walmart or big box stores will solve our economic problems. While big box stores might increase sales tax revenue in a community, key studies show that they frequently shutter local businesses. While big box stores can create jobs in the community, studies have found that big-box retailers, particularly Wal-Mart, are depressing wages and benefits for retail employees. In fact, counties that have gained Wal-Mart stores have fared worse in terms of family poverty rates. 

An alternative to an investment in big box retailers is to invest in what makes your community unique – its local entrepreneurs and business owners. Here are known strategies for improving the business climate in your community. 

3. Create a Welcoming Small Town Life 

Focus on the quality of life that will attract and retain a workforce. Given the fact that many Navajo communities are remote, address lifestyle challenges by providing community and family amenities, community facilities, shopping opportunities, ways to access quality education, and accessible childcare. 

Ask yourself and your community: What career opportunities and paths are available in our community? Can community members access reliable transit to major hubs? Is internet connectivity strong enough to foster online retail and professional service businesses?

4. Coordinate your economic plans and goals with nearby Chapters or work together at the Agency level 

While your community may be too small to attract specific industries to your town, a group of Chapters working together could. As an example, the National Park Service has conducted focus groups that reveal cyclists desire a trail system on the Navajo Nation. A group of Chapters could collaborate to develop a trail system that links their communities, which would increase the exposure for each town along the trail system and create local opportunities for bike repair, bike retail, lodging, and food services. 

Similarly, many communities possess buildings and structures in disrepair. Many of the buildings are inaccessible to Chapters due to jurisdiction. To redevelop or remediate these buildings and structures into community assets or commercial opportunities requires coordination at a regional, or even State level. Chapters will have a greater chance of success if they coordinate and work together. 

Coordinate and align your goals and metrics for job growth or sales tax revenue with nearby Chapters. To’Nanees’Dizi Local Government and Kayenta Township currently set their own sales tax rate, which doesn’t necessarily align with the Navajo Nation sales tax rate. This creates an enormous burden on Navajo business owners, who must now collect different sales tax rates for the different communities they operate in. Similarly, Kayenta Township has a business license specific to Kayenta, but the license isn’t valid in Tuba City or on the Navajo Nation. This creates a compliance burden on business owners who want to do business in multiple communities. Coordinating your regulatory activity with Chapters to design an environment that supports business owners, instead of increasing the burden on them, will attract business to your community. 

5. Build capacity to access funding to improve economic development

Improving economic development in your community will likely require a financial investment. Chapters can often run into a chicken and egg problem. Since businesses drive sales tax revenue that support community development, how can a community develop if it doesn’t derive much sales tax revenue? Chapters should anticipate that additional funds will need to be raised to achieve goals. EDA, USDA, the National Endowment of the Arts, and other federal agencies provide a number of grants each year to rural communities who seek to improve economic development. Grant amounts range from $10,000 to millions of dollars. Building your Chapter’s ability to apply for grant funding and successfully manage a grant is an imperative skill. Not only do you need a person who can write a successful grant proposal, you also need people who know how to use Grants.gov, how to complete an SF-424, and how to comply with quarterly grant reporting requirements. These are not difficult skills to learn, but it requires Chapters to make the commitment to build that capacity.