Developing a Business Plan for a Permaculture Design Consultancy

FACHHOCHSCHULE MÜNSTER -Fachbereich Betriebswirtschaft-

Developing a Business Plan for a Permaculture Design Consultancy Bachelor-Thesis

vorgelegt von: Luiz Eduardo Piá de Andrade Fresnostrasse 155 48159 Münster

Matrikel-Nr. 811748

Referent: Ulrich Balz

Koreferentin: Nina Michaeli

Abgabedatum: 3 Juli 2015

EIDESSTATTLICHE ERKLÄRUNG Hiermit erkläre ich, Luiz Eduardo Piá de Andrade, an Eides statt, dass ich die vorliegende Bachelorarbeit selbständig verfasst und keine anderen als die angegebenen Quellen und Hilfsmittel benutzt habe.

Datum:

Unterschrift____________________

I

ABSTRACT This paper’s main section details the business model for a permaculture design consultancy in Curitiba, Brazil and, despite a lack of reliable data, attempts to evaluate its financial feasibility, reaching the conclusion that it is feasible in all but the most pessimistic scenarios – and even in such cases the flexible cost structure and lack of ambitious financial goals may allow for limited operation.

II

LIST OF CONTENT 1

INTRODUCTION ......................................................................................................................................... 1 1.1

2

3

General ................................................................................................................................................. 1

1.1.1

Atmosphere ......................................................................................................................................1

1.1.2

Land use ...........................................................................................................................................2

1.1.3

Water .................................................................................................................................................3

1.1.4

Biodiversity .......................................................................................................................................4

1.1.5

Permaculture’s regenerative potential ..........................................................................................4

1.2

Objectives............................................................................................................................................. 5

1.3

Outline .................................................................................................................................................. 5

ON PERMACULTURE ................................................................................................................................ 5 2.1

Introduction .......................................................................................................................................... 5

2.2

The Design Process ........................................................................................................................... 8

2.2.1

Survey ...............................................................................................................................................8

2.2.2

Analyze ..............................................................................................................................................8

2.2.3

Design ...............................................................................................................................................8

2.2.4

Implement .........................................................................................................................................9

2.2.5

Maintain, Evaluate and Tweak.......................................................................................................9

ON BRAZILIAN DEMOGRAPHICS ............................................................................................................... 9 3.1

Demographics ..................................................................................................................................... 9

3.1.1 3.2 4

Income Distribution ........................................................................................................................10

Brief Economic History ..................................................................................................................... 12

BUSINESS MODEL .................................................................................................................................. 12 4.1

Introduction ........................................................................................................................................ 12

4.2

Canvas ................................................................................................................................................ 13

4.2.1

Value Proposition ...........................................................................................................................13

4.2.2

Customer Segments......................................................................................................................14

4.2.3

Key Activities ..................................................................................................................................15

4.2.4

Key Resources ...............................................................................................................................15

4.2.5

Customer Relationships ................................................................................................................16

4.2.6

Channels .........................................................................................................................................16

4.2.7

Key Partners ...................................................................................................................................17

4.2.8

Cost and Revenue .........................................................................................................................17

4.3

Strategy .............................................................................................................................................. 18

4.3.1

Vision ...............................................................................................................................................18

4.3.2

Mission ............................................................................................................................................18

4.3.3

Strategy Map ..................................................................................................................................19

4.4

Marketing Plan................................................................................................................................... 20

4.4.1

Name ...............................................................................................................................................20

4.4.2

Pricing Strategy ..............................................................................................................................21

4.4.3

Communication ..............................................................................................................................21

4.4.4

Website and Social Media ............................................................................................................22

4.4.5

Digital Marketing ............................................................................................................................23

III 4.5

4.5.1

Pestel ...............................................................................................................................................23

4.5.2

Five Forces .....................................................................................................................................26

4.5.3

SWOT ..............................................................................................................................................27

4.6

5

Analysis .............................................................................................................................................. 23

Legal and Taxes ................................................................................................................................ 28

4.6.1

Legal Aspects .................................................................................................................................28

4.6.2

Taxation Regime ............................................................................................................................28

FINANCES .............................................................................................................................................. 29 5.1

Revenue ............................................................................................................................................. 29

5.1.1

Market Size .....................................................................................................................................29

5.1.2

Demand ...........................................................................................................................................30

5.1.3

Price .................................................................................................................................................31

5.2

Costs ................................................................................................................................................... 32

5.2.1 5.3

6

Marketing and Advertising Costs .................................................................................................33

Forecasts ............................................................................................................................................ 34

5.3.1

Low Price Pessimistic Prognosis .................................................................................................34

5.3.2

Low Price Neutral Prognosis ........................................................................................................36

5.3.3

High Price Prognosis .....................................................................................................................37

CONCLUSION ......................................................................................................................................... 38 6.1

Methodological Limitations .............................................................................................................. 38

6.1.1 6.2

Unconsidered Elements................................................................................................................38

Summary of Results ......................................................................................................................... 39

IV

LIST OF PICTURES Figure 1 Per Capita Income - Brazil ............................................................................................ 10 Figure 2 Per Capita Income - Paraná ......................................................................................... 11 Figure 3 Per Capita Income - Curitiba ........................................................................................ 11 Figure 4 Business Model Canvas (modified from Osterwalder, Pigneur, 2010.) ........................ 13 Figure 5 Strategy Map ................................................................................................................. 19 Figure 6 Low Price Pessimistic - First Year ................................................................................ 34 Figure 7 Low Price Pessimistic - Four Years .............................................................................. 35 Figure 8 Low Price Neutral - First Year ....................................................................................... 36 Figure 9 Low Price Neutral - Four Years ................................................................................... 36 Figure 10 High Price - First year ................................................................................................. 37 Figure 11 High Price - Four Years ............................................................................................. 37

1

1

INTRODUCTION

The biosphere stands on the brink of a collapse sufficiently massive to be compared to mass extinctions of the past (Pearce, 2010). Human exploitation of air, land, and water is arguably the greatest existential threat our civilization has ever faced. To give a sense of the severity of these issues, this first section will present some recent research – of a very ominous character –, but also how even small-scale, urban permaculture can bring about positive change.

1.1

GENERAL

In 1972, the think tank The Club of Rome published the seminal book “The Limits to Growth”, in which computer models examined the development five variables: world population, industrialization, pollution, food production, and resource depletion. Three different scenarios featured different growth trends for each variable. The scenario named “Standard Run” foresees societal and economic collapse in mid-21st century (Meadows et al., 1972). Additional studies in 2008 (Graham), 2009 (Hall, Day), 2011 (Heinberg) and 2012 (Bardi) concluded that current trends match the predictions of the standard run. Knowing the impacts of human civilization makes it easier to fathom such a collapse. Indeed, the state of the biosphere has been anthropogenetically worsening at such an alarming rate that there are discussions about officially inaugurating a new geological epoch: the anthropocene (Subcommission on Quaternary Stratigraphy, n.d.). 1.1.1

ATMOSPHERE

Not a stranger to the spotlight, climate change has repeatedly been scrutinized by the Intergovernmental Panel on Climate Change (IPCC), most recently in its fifth report, released in 2014. In it, the organization asserts that the emission of greenhouse gases will cause “long-lasting changes in all components of the climate system, increasing the likelihood of severe, pervasive, and irreversible impacts for people and ecosystems” (2014). Severe, pervasive, and irreversible: the scarcity of these words in official scientific reports only serves to lend weight to their ominousness. Climate change is no threat to disregard; it “[will harm] biodiversity, ecosystem services, and economic development and amplify risks for livelihoods and for food and

2 human security” (IPCC, 2014). Should the business-as-usual inaction continue, elevated sea levels, diminished food security and higher incidence of extreme weather events, including droughts and floods, (IPCC, 2014) will be very likely. 1.1.2

LAND USE

Despite not being very notorious, soil degradation is possibly more urgent than any other issue to human survival: productive arable land per capita is bound to be by 2050 a mere quarter of the 1960 level (FAO, 2014). Agriculture that employs “unsustainable management practices” – such as deforestation, overgrazing, tillage and lack of mulch– are a major direct cause of soil degradation (Hegde, et al., 2011), and so resembles rather an extractive activity than agriculture – literally, the cultivation of soil –, so much so that “in Asia, Africa, and South America, soil losses due to erosion average 30 to 40 tonnes per year for every hectare […]— which is thirty to forty times greater than the rate at which soil naturally forms.” (Cribb, 2010)

However, while food production accounts greatly for deforestation, loss of biodiversity, habitat degradation, greenhouse gases emissions, soil and water degradation among others (Ramankutty et al., 2008); proper organic techniques could reduce markedly many of these negative impacts. The oft-repeated mantra that industrialization of farming is necessary to feed the world is belied by a plethora of studies showing the viability of organic farming in terms of yield (World Watch Institute, 2006). Most notably, The Rodale Institute, in the 30-year anniversary report of its ongoing trial comparing organic and conventional systems, announced the superiority of organic systems in regards to drought performance, soil building (as opposed to depletion), energy efficiency (45% better), greenhouse gases emission (40% lower) and profitability. Furthermore, despite those benefits, yields were equal (Rodale Institute, 2011). Another report, this time from the U.N. Commission on Trade and Development (UNCTAD, n.d.), concludes that, for the sake of food security, it is urgently necessary to have “[…] a rapid and significant shift from conventional, monoculture-based and high-externalinput-dependent industrial production toward mosaics of sustainable, regenerative production systems that also considerably improve the productivity of small-scale farmers.”

3 Excessive fertilizer use in conventional agriculture also collaborates to the current soil bleeding by reducing soil carbon content, thus making the ground prone to compaction, reducing permeability and increasing erosion and irrigation requirement (Khan et al., 2007). This systematic dependence on synthetic fertilizers is unsustainable not only due to its deleterious effects on soil, air, and water, but also in a very literal sense, in that their raw material is finite: natural gas and minerals. Phosphorus’ case – an essential plant nutrient industrially produced from rocks – is especially disquieting, as in 2007 it has been calculated that peak phosphorus (maximum historical production) had already taken place – back in 1989 (Cribb, 2010). 1.1.3

WATER

A part of CO2 emissions is absorbed by the oceans, where it is converted into carbonic acid, which, in turn, reduce the pH of the water (Stockholm Resilience Centre, 2009; IPCC, 2014). By reducing the availability of carbonate ions, higher acidity makes it difficult for many organisms, ranging from corals to plankton, to form their shell or skeleton structure (Stockholm Resilience Centre, 2009). By mid-century, the water in some oceans will be acidic enough to dissolve the shells of creature such as corals and plankton (Pearce, 2010; Stockholm Resilience Centre, 2009). Should these species’ population reduce, all ocean ecosystems would be affected (Stockholm Resilience Centre, 2009; IPCC, 2014). Another serious water issue are dead zones. Only about half of applied fertilizer is effectively taken by the target crop (Cribb, 2010), much of the other half leaches form the soil, contaminating underwater aquifers, rivers, lakes, and eventually, the oceans, thereby generating eutrophic, anaerobic dead zones. The 15.000-km² large Gulf of Mexico dead zone at the Mississippi delta, for example, is fed overwhelmingly by agricultural runoff (US Geological Survey, n.d.). Such excessive and unnatural supply of nutrients into the biosphere is throwing the natural cycles out of balance and may result in oceanic oxygen loss and a mass extinction (Cribb, 2010).

4 1.1.4

BIODIVERSITY

Of course, such extensive intervention in the natural world could not be harmless. The result is an extinction rate 1000 times higher than the natural background rate. (Pimm et al, 2014). In another estimate, the Stockholm Resilience Centre places current biodiversity loss at 100 per million per year, while the boundary level is a yearly loss of 10 species per million (2009). According to another study, this time by the WWF, in the last four decades of human industriousness the worldwide population of (non-human) vertebrate species has plummeted 52% (2014). Humanity may well be leading the biosphere to a mass extinction capable of rivaling the “big five”, which includes the infamous meteorite-triggered dinosaur wipeout (Pearce, 2010). Indeed, despite using assumptions that “would tend to minimize evidence of an incipient mass extinction”, a new study came to the conclusion that such an extinction may be already under way (Ceballos, et al., 2015). This is no threat to be taken lightly. 1.1.5

PERMACULTURE’S REGENERATIVE POTENTIAL

Most of these issues have a direct relation with food production. However, with sound and ethical management those same destructive agricultural landscapes can be forces of regeneration – potentially offsetting all human carbon emissions, without sacrificing yields (Rodale Institute, 2014, 2011). While permaculture has great potential for rural environments – and not only w regards to agriculture –, this paper’s focus is not broad, but small-scale: urban and suburban permaculture – whose potential benefits are hardly lesser. With proper design, the sustainability and resiliency of houses and hence whole cities can be much improved. Bringing the production of food to organic backyard systems, instead of trucking chemical-laden produce through hundreds or thousands of miles, greatly reduces the pollution associated with the production of conventional food and their transport, besides transforming barren monocultures of lawn into productive, carbon-negative, urban wildlife sanctuaries. To help bring about this vision is the mission of the company this paper will portray.

5

1.2 

OBJECTIVES Develop the business model of a permaculture design consultancy based in Curitiba, Brazil.



1.3

Evaluate the feasibility of the business model and point limitations.

OUTLINE

The second section will explain the concept of permaculture, the tools, and the techniques to be used for the design. Afterwards, the economy and the demographics of Brazil will be briefly explained. Finally, the business plan will be detailed, with the Business Model Canvas, a strategic outline, marketing plan, macro- and microenvironment analyses, and a Swot analysis. The fifth section will forecast the financial feasibility and the conclusion will evaluate the constraints of the model presented. Additional information can be found on the Annexes section.

2

ON PERMACULTURE

2.1

INTRODUCTION

In post-war Japan, Masanobu Fukuoka had the insight that all human labor is ultimately useless and started experimenting with what he termed as “do-nothing farming” or “natural farming”. Acknowledging the complex interrelations between the plethora of organisms in ecosystems, Fukuoka managed to “outsource” most human effort to nature, thus obviating the need to weed, fertilize, control pests and, often, even water. In his farm he grew mostly rice and winter grains, and its productivity matched and often surpassed the regional average despite using little to no external inputs (Fukuoka, 1975). Fukuoka’s approach served as a stepping-stone for the Australians David Holmgren and Bill Mollison to develop in the early 1970s a design methodology that came to be known as permaculture. Today, it is taught around the world in independent 72-hour

6 courses called Permaculture Design Courses (PDC, for short), whose curriculum is largely based upon the 1988 book Permaculture: Designer’s Manual.

1

There are three important aspects to understand about permaculture. Firstly, everything about it revolves around learning from and mimicking nature. Practitioners strive to work with nature, creating environments favorable to natural processes, instead of fighting against it and forcing plants and animals to adapt to industrial environments with the products of modern science (e.g. create fertile soil and cooperative interactions instead of genetically altering a plant to withstand poor soil and pesticides). That is the cornerstone of the discipline. Secondly, permaculture is a design methodology. Systems are designed, that is, consciously assembled by intervening in usually artificially hampered natural processes to steer them in the desired direction. It is a methodology that reduces input requirement and human work load – for instance, fertility is increased by interplanting nitrogen-fixing plants, organic debris is left as mulch (controlling weeds and erosion, maintaining moisture, and enriching the soil), chicken tractors productively integrate animals into food forests, wetlands clean graywater that then flows to gardens, etc. It is striven for every element to have multiple yields: for example, chickens produce eggs and meat while breaking the life cycle of pests by eating fallen fruit. A good analogy is that the permaculture designer is a conductor who, knowing the natural melody of each element (animals, plants, structures, technologies), assembles them to create the best music possible for the audience (wildlife, humans) also taking the stage into consideration (soil, climate). This results in healthy environments that sustain both human and wildlife and remain productive with little inputs (material, money and work), and output no pollutants thanks to a closed-circuit design, where elements support each other.

Most of the permaculture-related knowledge contained in this paper comes from Mollison’s 1988 book, Toensmeier’s 2005 book, Hemenway’s 2009 book many articles and, especially, the PDC that took place at the intentional community of Ecodharma in Catalunya for two weeks in July 2014 and tutored by Alfred Decker, Caspar Brown and Grace McKeown. 1

7 There are many methods the designer may use for creating functional relationships in the design, such as Analysis, Observation, Options and decisions, Data overlay, Random Assembly and Flow diagrams (Mollison, 1988). The third aspect are the ethics and principles that underlie the design process. The Ethics (Holmgren, 2011) 1.

Earth Care ”The Earth is a living, breathing entity. Without ongoing care and nurturing there will be consequences too big to ignore.”

2. People Care “If people’s needs are met in compassionate and simple ways, the environment surrounding them will prosper.”

3. Fair Share ”By governing our own needs, we can set resources aside to further the above principles”.

The ethics come from the understanding that sustainable human societies require healthy ecosystems, healthy communities and just distribution of resources – be they monetary, physical, knowledge or ecological space (one of the many contact points between degrowth and permaculture). The principles serve to assist and steer the design process, but are too numerous to detail here– Holmgren lists about a dozen and Mollison thrice that much. Even though in these introductory paragraphs permaculture’s most relevant aspects (for the purposes of this paper) have been properly, if briefly, provided, it has still not been clearly defined, indeed, it is a notoriously difficult discipline to precisely delimitate. According to Toby Hemenway, this difficulty derives from permaculture’s wide interest radius: it is an umbrella term for many disciplines, ideas, and issues; it puts in a larger context many unrelated topics such as "ecology, appropriate technology, economics, gardening, evolution, construction, energy systems, social justice, [etc.]” (2015). Meanwhile, in an even wider context, permaculture itself is just “the design arm of a paradigm shift” (2015). In this perspective, it is not only a methodology for designing sustainable gardens, farms and houses, but also communities and even one’s own life.

8

2.2

THE DESIGN PROCESS

The permaculture design process usually follows the SADIMET framework: Survey, Analyze, Design, Implement, Maintain, Evaluate, and Tweak. Only the higher service level will implement and provide longer-term maintenance (IMET). 2.2.1

SURVEY

The first task for the designer is to gather information about the site, both by in-loco observation and research. When observing, one of the most important aspect to take note of is the site’s weather. For instance, in temperate climates, the focus will be on regulating annual temperature fluctuations, hardy plants, extending the growing season, etc., while in hot dry areas water harvesting, retention and recycling in both homes and landscapes takes the lead. Other important physical factors to heed are soil, water bodies, structures, fauna and flora, sectors (the relative direction of elements such as the sun, wind, rains, traffic noise, artificial lights, sun-blocking constructs, etc.), and aspect of the terrain (elevation, slope). Most of this information can be obtained by filling the questionnaire annexed in the last section of this paper, the rest is collected by observation and secondary research. 2.2.2

ANALYZE

This phase has three main tasks: inquiring the clients about their needs and preferences – which define the objectives of the design –, listing limitations and available resources, and, finally, studying the collected data. 2.2.3

DESIGN

With an understanding of the landscape, the needs of the client and resources available, it is possible to start the design work, which roughly consists of assembling design elements (annual garden, food forest, chicken coop, aquaculture, water harvesting, etc.): placing them coherently to create interconnections, which requires a great deal of research and previous experience. Once the ideas are well defined, they are put to paper, which can be done either purely with software such as SketchUp or with trace paper over a base map and then digitized

9 to ease iterative work. To ensure client satisfaction, many variation on a same theme may be created. 2.2.4

IMPLEMENT

In case the client decides the designer should assist in the implementation process, there will be two possibilities: hiring workforce or organizing a “permablitz” – a collective task force of volunteers called to install projects. Resorting to volunteers has the meaningful benefits of a) being free, b) building community and c) increasing awareness of permaculture and the consultancy, but a hired workforce is usually necessary for larger projects, especially if earthworks are necessary – though that should only be the case for eventual rural contracts. 2.2.5

MAINTAIN, EVALUATE AND TWEAK

All along the evolution of the system, its status is measured and compared to plans and expectations. The results are analyzed to evaluate the need for interventions, which are then designed and implemented, closing the design cycle.

3

ON BRAZILIAN DEMOGRAPHICS

3.1

DEMOGRAPHICS

Brazil is the fifth largest country in the world in both land mass and population size, with 202 million people (IBGE, 2014) living in 8,5 million km² (IBGE, n.d.). It is also the seventh largest economy, with a GDP (PPP) of $3,1 trillion and $15.518 per capita (IMF, 2014). However, the high Gini coefficient – 51,9 (CIA, 2012)– indicates that this wealth is very irregularly distributed. The country has a high and rising urbanization level of 84% (IBGE, 2010) and most of the population is concentrated in the coastal states – with 80 million people only in the southeastern region. As of 2013, almost three quarters (74,5%) of the population were homeowners (BraEquity, 2013), birth rate is diminishing and as of 2015 stands at 1,72 children per women (Brasil em Síntese, 2015); life expectancy is of 75,4 years (Brasil em Síntese, 2015). Almost 8% of the population is graduated (Exame, 2012) but on the other hand 8,3% is illiterate (Época, 2014).

10 3.1.1

INCOME DISTRIBUTION

The following charts shows data from the latest census (IBGE, 2010) for monthly per capita income of people older than 10 in number of minimum wages. Of the 180 million people, about one third had no income, and since these represented most likely students and dependents – official unemployment was low at the time – those people have been removed from the calculation, and it thus represents only working people. More than 80% of the working population earns less than 2 minimum wages – which, despite increases, is still relatively low (R$510, US$300 as of 2010) – and 10% less than half a minimum wage. Only 16% of the working population has an income higher than 3 minimum wages. 10 to 15 15 to 20 0,9% 1,1%

Brazil 5 o 10 6%

20 to 30 0,4% 30+ 0,3%

Up to 1/4 5% 1/4 to 1/2 5%

3 to 5 8% 2 to 3 10%

1/2 to 1 34% 1 to 2 30%

Figure 1 Per Capita Income – Brazil (Data from IBGE, 2010 – Chart made by the author)

In the southern state of Paraná, where the consultancy will be based, the situation is slightly better. Very low incomes (less than ½ minimum wage) are half as prevalent in the state as in the rest of the country and the class between 1 and 3 wages is significantly larger, but regarding workers who earn more than 3 minimum wages the situation over national average is only modestly better: 17,7%

11

Paraná

15 to 20 20 to 30 30+ 0,4% 0,8% 10 to 15 0,2% 1%

Up to 1/4 2% 1/4 to 1/2 3%

5 o 10 6% 3 to 5 9% 1/2 to 1 28%

2 to 3 12%

1 to 2 37%

Figure 2 Per Capita Income – Paraná (Data from IBGE, 2010 – Chart made by the author)

Focusing in on the capital, Curitiba, reveals once again relatively better conditions. While in the whole country 10% earn less than R$255, in Curitiba these are 2,5%. Those earning between ½ and one minimum wage are also much fewer in the city than in the state and the country. Likewise, while in Paraná 29,8% earn more than 2 minimum wages, in Curitiba, the number in Curitiba is 40,9%. Unfortunately, there is no data distinguishing between “2 to 3” and “3 to 5” minimum wages, but it is clear that the city of Curitiba enjoys a relatively better income distribution than the rest of the country.

Curitiba

10 to 20 20+ 3,1% 1,1% 5 to 10 9%

Up to 1/2 2,5%

1/2 to 1 19%

2 to 5 27% 1 to 2 38%

Figure 3 Per Capita Income – Curitiba (Data from IBGE, 2010 – Chart made by the author)

12

3.2

BRIEF ECONOMIC HISTORY

Largely due to its abundant resources and wide land area, the country has historically been focused on agriculture and extraction. Over the course of the 20 th century, especially after the Second World War, the country underwent swift socioeconomic changes, including rapid population growth (from 41 to 146 million in 50 years) (IBGE, n.d.), urbanization (from 31% to 75%) (IBGE, n.d.), and industrialization. After struggling almost one and a half decade with hyperinflation, in 1994 the so-called Plano Real, the last of a series of failed economic plans, succeeded in tackling inflation by addressing the deeper problem: inertia inflation (Bresser-Pereira, 2009). Within two years it plummeted from 2.708% to 14%, and by 1998, it stood at 1,7% (Época Negócios, 2014). With currency devaluation under control, the newfound economic stability allowed for a new cycle of investment and growth. The second half of the 00 decade and early 2010s have been marked by relatively stable (apart from 2009), above-average growth, but it decelerated in 2013, stagnated in 2014 and the prognosis 2015 is a 1% contraction (Trading Economics, n.d.).

4

BUSINESS MODEL

4.1

INTRODUCTION

Briefly, this company will provide custom design projects that abide to the permaculture ethics and principles. It requires little initial investment and costs are likewise low. Barring future expansion, only one employee is necessary: the designer. The business model is planned with urban dwellers in mind, as designs for this segment are more profitable per area, but rural designs can also be done, should the demand exist.

13

4.2

CANVAS

Figure 4 Business Model Canvas (modified by the author, original from Osterwalder, Pigneur, 2010.)

4.2.1

VALUE PROPOSITION

The design will always seek to improve the ecological footprint of the landscape, with benefits to the local wildlife, all the while providing sustenance to the people, according to their design and dietary preferences. Some of the possible benefits range from easy production of nutrient dense organic food using no polluting and expensive poisons and fertilizers and increased presence of wildlife, to recycling of organic garbage with composting, and possibly better real estate value with multifunctional, productive, and attractive landscape.

Furthermore,

in light of the recent water crisis in São Paulo (BBC, 2015), increasing independence from the central water supply with rooftop water harvesting and storage is very important. These benefits are achieved with elements such as multilayered food forests, chicken coops, natural swimming pools (where it is possible to practice aquaculture and aqua-

14 ponics), beekeeping, mushroom cultivation on logs, graywater and water storage systems, dry toilets, and composting systems. It is also possible to grow medicinal herbs in the understory according to the needs of the clients. In a complete design, these seemingly disconnected elements are made to work together and develop meaningful and productive interconnections. 4.2.2

CUSTOMER SEGMENTS

Demographically, the target audience will belong to middle and upper classes (salary of at least 3 minimum wages), own a piece of land (e.g. a small garden), and live in the metropolitan area of Curitiba, Brazil. The most limiting segmentation, however, is of a psychographic sort. There are four main profiles: I.

People interested in sustainability with a high motivation to do something to mitigate their footprint.

II.

Organic gardening enthusiasts who wish to go beyond traditional methods.

III.

People worried about water and food security who wish to increase their autonomy from the current system, in which people are thoroughly dependent on third parties.

IV.

Homeowners who wish to have a yard that serves more than mere visual interest but with low maintenance workload.

Besides households, also companies, edifices with green areas and gated communities can be catered to. Especially the latter two are a very important segment as costs are less of an issue since they are divided among residents, allowing for higher revenues and more stable income in the case of an economic downturn. Furthermore, despite the lack of substantial advances in the last decades, the city of Curitiba is still known internationally for being a green city. Should the prefecture wish to further capitalize on that fame (and accomplish something that actually justifies it), it may be possible to enter a partnership with it, providing designs for parks, streets and governmental buildings. Usually, when the government procures services or goods, a public tender is necessary, but according to Law 8.666/93, such a procurement is not required when the

15 service costs up to R$8.000 (Art 24), and is unenforceable if the service is “singular and notoriously specialized” (Art 25). Article 24 will apply to all but the most complex of design jobs, and as such, there should be no problem getting contracts from the prefecture without a procurement. Article 25 may apply for as long as there is no competition in the niche. However, such a partnership, though legally feasible, is unlikely, for it hinges on either having political connections or the existence of public projects the company has no influence on. Therefore, will not be included as a part of the business plan or the financial forecasts, but once the company is established, it should be pursued nonetheless. 4.2.3

KEY ACTIVITIES

The main activity will be designing, which includes in-loco observation, research, and communication with the client, followed by the design work itself, as described in a previous section. A second important activity is coordinating the implementation efforts, including eventually organizing it as a public event to gather volunteers, should the client so desire. As priority will be given to design jobs, if demand for designs is too high, the designer may deny or postpone implementation assistance. Note that the actual implementation is not listed as an activity, but only the coordination thereof, as a single person working alone can only install very small projects. The clients will have to either hire gardeners on their own expense or host a permablitz. To avoid dependency on the designer, a manual with general instructions, tips, and plant details, including medicinal uses, will be written and given to clients, alongside a link to a constantly updated digital copy. For marketing purposes, articles will be written or translated, posted on the website and shared on social media. 4.2.4

KEY RESOURCES

The design work itself is not resource-intensive. The main requirements are knowledge, research databases, and tools for drawing, all of which are easily acquired

16 with computers and the internet. The main needs are thus an averagely powerful computer, an internet connection for research and communication and Adobe Illustrator, Google Sketchup or similar free, open-source alternatives. In addition, since contact with the client will be taken up online and followed by a site visit, a simple home office is sufficient, also implicating that the computer, internet connection, and vehicle can be the designer’s personal ones, and not company assets. 4.2.5

CUSTOMER RELATIONSHIPS

Closeness to the client is paramount in this branch: the needs of the client are the guidelines and the design is a co-creation. During the design process and its final presentation and explanation, instructing the clients on the benefits, workings, needs and maintenance of the design is also important for their future independence as stewards of their land. If necessary, additional information will be available for the clients at the manual. Post-implementation the client may keep in touch with the consultant for additional support on the maintenance of the system, but depending on the demands – e.g., a site visit to plant, prune, treat diseased trees, etc. – it may be charged. In addition, should they be able and willing, clients are incentivized to take part in future permablitze, contributing to the growth of the local permaculture community. 4.2.6

CHANNELS

Communication will be kept chiefly through online media, be it email, the website or social media. After the initial contact, however, the main talks have to be carried out face-to-face at the site to be designed. Marketing will be mainly word-of-mouth or online with targeted ads and promotion on targeted groups. A digital marketing company will be hired to optimize the reach of online marketing. By tracking statistics of web activities, it is possible to tweak the content produced to cater to the largest or most profitable groups available. The main online interfaces will be the website and social media pages. Content – either original, translated or republished with authorization – will be posted periodically on the website and shared on the pages.

17 In wealthy neighborhoods predominantly settled with large houses, brochures may be mailed. In order to prevent the occurrence of unproductive initial site visits and increase the likelihood of obtaining a signed contract after the first meeting, as much information as possible will be provided on the website and exchanged messages, including price, timeline for conclusion, design possibilities, etc. 4.2.7

KEY PARTNERS

The main design activity will often require no partners. Only eventually, in case of larger projects, an engineer may be required for earthworks and dam projects. Some possible suppliers for the implementation are nurseries, gardeners, sellers of soil, compost and soil amendments, and animal breeders (should animals be included in the design). These suppliers are only necessary when implementing the project and therefore are not essential for the whole company’s activity. Furthermore, their cost is wholly at the client’s expense. Should the client prefer, instead of hiring the gardeners to implement the design, it is possible to turn the its installation into a social event and call volunteers, people willing to take up shovels and help, learning about permaculture and building community in the process. Using permablitze for the implementation of projects also increases awareness of permaculture and related topics, potentially serving also as word-ofmouth marketing. Also important is the digital marketing partner that helps manage the online platforms to reach more people more effectively. 4.2.8

COST AND REVENUE

Since this venture requires no employees – only the designer him/herself – or special equipment and location, there are few recurrent costs to contend with: transport, electricity, advertising, digital marketing, and website hosting. The opening cost will also be relatively low, comprising mostly of website design. The price for the designs will be set in a per-job basis according the area and a fluctuating price guideline that follows demand. Two pricing models (described in more detail in another section) will be evaluated, a low price, high demand, and a high price one.

18 The guideline should rise over the months and years as the portfolio grows and the brand name settles as a local reference for permaculture design or edible gardens. The price for implementations and follow-ups will follow demand and time availability: the more limited the designer’s time, the higher the cost. A possible formula is: if there were less than 7 jobs in the previous month, this month’s price will be 50% of the design’s, while if there were more than 7, it will be 75%, and if more than 9, 100%. In practice, this adjustment can also be made weekly and published online (e.g. high demand one week, prices increase the next one). Nine jobs per month is, at least in the early stages of the learning curve, close to the maximum the designer can take, considering that a contract would require around 3 work days – half a day for the initial visit, 1,5 to 2 days for the design and 0,5 for the presentation of the project. The cost of spending yet another day implementing the project should reflect the growing scarceness of work time. However, the threshold has been set to 7 so that, once it is crossed, demand for implementation start decreasing, and thus prevent overworking of the designer, which would reduce the quality of the work.

4.3

STRATEGY

4.3.1

VISION

To be a recognized permaculture consultancy with a regular flow of clients. 4.3.2

MISSION

To develop more resilient and sustainable households through permaculture design.

19 4.3.3

STRATEGY MAP

Figure 5 Strategy Map (Made by the author)

4.3.3.1 FINANCIAL DIMENSION It is important to note that the main criterion for economic success is not growth, but having a regular and moderately sized cash flow for the designer to make a living with – i.e. at least two minimum wages (Salário Mínimo, n.d.), around R$1500 per month. High profitability is not among the main goals; instead, the mission is to provide a meaningful service that improves the environment for both people and wildlife. Thankfully, costs and expenses are expected to be low, so margins will be high. Likewise, initial investment will be low and, therefore, ROI high. Once marketing strategies are successful, and demand is regularly satisfying, revenue growth will mostly be achieved by increasing service value (as opposed to obtaining more clients) with an established brand name and an attractive portfolio. 4.3.3.2 CUSTOMER DIMENSION The crucial aspect of the whole company’s strategy is to communicate the service and develop the market, creating demand and showcasing the value proposal. One way to do this is by producing excellent design that exceeds expectations and stimulates word-of-mouth advertising. 4.3.3.3 INTERNAL PROCESSES DIMENSION

20 Another way to help develop the market is by asserting the brand image, which will be done over time as the portfolio grows but mostly by having a strong presence in the social media feed of potential clients with original or translated articles, news and, marketing-wise most importantly, reports about recent design jobs. Establishing a strong foothold in the market will also safeguard the consultancy against the likely entrance of competitors in the future. Tailoring this online content to attract as most people as possible is therefore a very important task, one that will be assisted by the digital marketing partners. All this marketing work will support the continuation of the main design activity, which will have to be under continuous improvement, both in quality and speed (as the consultant advances in the learning curve), to properly satisfy a hopefully growing list of potential clients. 4.3.3.4 DEVELOPMENT DIMENSION To support the marketing sector, it is important to continually fine-tune communications, both online and personally. Because this is a new, largely unknown niche, communication is crucial to the existence of the company. On the design side of operations, expanding theoretical knowledge, expertise and practical experience will assure the regular improvement of design jobs.

4.4

MARKETING PLAN

4.4.1

NAME

Defining a proper name is a balancing act between mainstream appeal and leveraging the existing communities: using the term “permaculture” may repel many potential clients who have no knowledge of it (or even negative biases), but would more easily spread on social media, where there are quite active groups of enthusiasts and practitioners. A blander name such as “edible gardens” would appeal more to a psychographically broader market, but there is no community behind the term, so marketing would have to be predominantly on local, offline media. Another point to pay heed to is that while online permaculture groups may help increase the reach of the company’s online posts, it is likely that their members will not be very interested in spending money on a consultancy, as they can (or are willing to

21 learn to) design their own spaces by themselves. The point is to use the groups as a tool to widen the reach of the company on social media. Overall, using a permaculture-related name provides more benefits than avoiding an open association with it. On the other hand, for the very wide segment that is not acquainted with permaculture, a clear and concise subtitle will be required. Some possibilities are Forest gardening, Urban abundance, Productive gardens, Integrated gardens, etc. The name Permacultar is simple, makes the connection with permaculture clear while unmistakably being recognizable as a brand name, not a niche concept – thus being more welcoming to newcomers, creating interest, not intimidation –, and is has a verb ending – so it is more easily recalled and can be used in social media communications. The subtitle will be Jardins Comestíveis (Edible Gardens) to better appeal to the segment unacquainted with permaculture, but nonetheless potentially interested in its ideas. 4.4.2

PRICING S TRATEGY

Early in the company’s life, when its brand and portfolio are not well developed, the price elasticity will be higher and therefore a lower price will be necessary to have a satisfactory demand level: the pricing strategy will initially be one of penetration, due not to competition, but to the very lack thereof and the newness of the niche, which can repel some potential clients. Once the benefits of the service are being better communicated (through portfolio, website, experience, renown, etc.), the price can increase (or change the method for price definition, from per job to per hour). 4.4.3

COMMUNICATION

While the service provided is innovative, useful, and valuable, it may not be perceived as such: yards are culturally seen as the realm of lawns or, at best, aesthetic landscaping. Permaculture shifts this paradigm, and it may be that many potential clients are not ready to make such a shift themselves. Therein lies the challenge of marketing this service.

22 The main communication channel will be the website and social media pages. Using already established permaculture groups and networks to spread awareness of the company will give a big initial boost in followers. The flow of quality content, mainly articles, should stimulate followers to share and spread posts, increasing their reach. This strategy, however, has the drawback that its effectiveness is somewhat limited to the permaculture community. To address this issue, one possible strategy is to get in contact with architects and garden supplies stores to negotiate partnerships where discounted permaculture consultancies are offered to their clients, actively reaching a psychographically different segment, and one that is likely more willing to invest in garden design. That would require a convincing portfolio and some reduced margins, but may allow exploitation of a segment that otherwise would not show great interest in permaculture. It will be heavily invested on online advertisement, both on social media or search engines. Text on the adverts should emphasize the benefits of such a service according to the public addressed (keyword used), e.g. long-term cost savings and real estate value increase for families with little interest in environmental benefits. Another suitable strategy is mailing brochures to high-value, houses-only neighborhoods. When dealing with clients with no knowledge of permaculture, the language and appearance of posts, portfolios, brochures, and the even designer they must be carefully considered. The most important point is to convey an image of professionalism and empiricism, focusing on the benefits of the service so as to distance oneself from the inevitable associations and biases of permaculture with hippie movements. 4.4.4

W EBSITE AND SOCIAL MEDIA

The website in an essential element of the marketing strategy. In order to attract traffic to it, as there is yet no site in Portuguese dedicated to permaculture news and articles, many such texts will be posted. The vision is to become one of the main sources for permaculture-related information available in Portuguese. Translating English articles should not prove too difficult (albeit time-consuming), but will greatly boost traffic, increasing awareness of the company and the reach of reports of recent designs. In addition, once there is a moderately diverse library of articles, it will be possible to statistically track which topic most interest readers, and with this knowledge fine-tune

23 postings and further boost traffic. This is the task of the digital marketing partner, as detailed in the following topic. The website will have as objectives both the spreading of knowledge about permaculture, thus advancing the third Ethic – share of surplus –, and the attraction of clients: postings of reports and photos of recent designs, displays of the growing portfolio will get more front-page exposure, just like they will be often posted on social media. 4.4.5

DIGITAL MARKETING

The concept of digital marketing includes techniques such as SEO (Search Engine Optimization) – webpage adjustments for higher rankings in search engines –, SEM (Search Engine Marketing) – management of paid search results, such as AdWords – , and SMM (Social Media Marketing) –tailor online content to generate electronic word of mouth. Other tasks delegated to the digital marketing specialist are segmentation, identifying and reaching for influencers – prominent online community members –, and tracking traffic and individual users’ activities to provide better content. Thanks to this wide array of tools, partnering with a digital marketing specialist should greatly improve the effectiveness and reach of online marketing activities.

4.5

ANALYSIS

4.5.1

PESTEL

4.5.1.1 POLITICAL Brazil’s current political instability – culminating at calls for a military coup d’état (Business Insider, 2015) –, though worrisome, should not directly affect the financial performance of the consultancy. On a positive note, the government has done some recent advances to stimulate the creation of small businesses, such as a simplified and cheaper tax system. 4.5.1.2 ECONOMIC With a mere 0.1% GDP growth in 2014 (BBC, 2015) and a bleak outlook for the coming years (NASDAQ, 2015), Brazil’s economy languishes. Inflation is estimated to reach 8,8% in 2015, 5,5% in 2016, 5% in 2017, and 4,5% afterwards (Itaú, 2015). The financial prognoses consider operations begin in 2016.

24 Unlike many businesses, however, it is hard to affirm that a permaculture consultancy’s financial performance is directly proportional to GDP growth, since it is a medium/longterm investment that increases resilience, self-reliance, and reduces the cost of living, which may be more attractive in tough times. Furthermore, for some costumer segments economic fluctuations will not greatly impact the decision of having a plot of land designed as a) it will increase value and revenue and reduce costs or b) costs may be divided among a number of people. As the consultancy will not require great investments, the currently high interest rate is irrelevant to its performance. Likewise, the recent devaluation of the Real will have little direct impact, since no financial transaction in foreign currencies will be necessary. For these reasons, it is fair to say that the proposed business model is fit to perform well even in financially unstable times. 4.5.1.3 SOCIAL Many contemporary trends foretell a positive future for permaculture design. Interest in health and environmentalism has been on the rise for many years and this should continue and even accelerate into the future, as indicated by periodical researches undertaken by the federal government, last published in 2012 for the Rio+20 conference, which show a an increase in interest und knowledge about the environment over the years, especially in questions regarding its importance (Ministério do Meio Ambiente, 2012). Permaculture shows practical solutions to people with this “eco-conscious” psychographic profile: ways to take action, to “mak[e] a better world […] rather than being angry at bad guys”, as Paul Wheaton (2015) put it. It may even be said permaculture is a kind of applied ecology. With proper communication strategies, it is even fair to predict that permaculture will grow super-proportionally to these trends, as many people already worry about these issues but do not know how to take action about it. 4.5.1.4 TECHNOLOGICAL There are many useful technologies that aid permaculture design – such as graphic editors, satellite imagery, CAD, and plant databases –, but it is nonetheless not a very

25 technology-heavy branch. It is said that applied permaculture is “high-science, lowtech”, and the same is true for the design process: technology can simplify it, but it is not essential. This means financial barriers against new entrants are nigh non-existent, as the initial investment is very low. In the design, the kind of technology that is usually included is so-called appropriate technology, that is, environment-friendly, decentralized, and high-efficiency apparatuses that require no polluting inputs. For instance, the design of a natural swimming pool will try to reduce the need for artificial aeration, but if need be, a solar pump may be used to supplement natural aeration methods. Many of these technologies rely on solar energy, and thankfully, photovoltaic panels and batteries are constantly improving in efficiency and price. In addition, there is a growing tendency for innovative new technologies to be as efficient and non-polluting as possible, widening the possible applications for the category of appropriate technologies. 4.5.1.5 ENVIRONMENTAL As the unsustainability of the status quo (as described in the first section) becomes increasingly clear, it can be expected that, among other things: 1) high environmental standards begin to be legally enforced, and 2) people seek to a) increase their food security, b) reduce their ecological footprint, and c) reduce their dependency on a likely ever more unstable water and electricity grid (as seen recently in São Paulo and California). Once again, permaculture design offers solutions to these concerns, this presents a big market for consultants, and one that is bound to expand vastly in the mid to longterm. 4.5.1.6 LEGAL France’s passing of a bill requiring new commercial buildings to have either green or solar-panel-fitted roofs (Aljazeera, 2015) is an example that is bound to expand both in reach and scope as environmental issues become more dire. Not long after the French law, the northeastern Brazilian city of Recife passed a similar one requiring buildings higher than four stories to have green roofs (Ecodesenvolvimento, 2015). These legislations will expand the market for permaculture designers.

26 4.5.2

FIVE FORCES

4.5.2.1 COMPETITION There is presently no competition in this niche at city-level. In the whole country, there are less than a dozen actors in the market, mostly in the rural environment and working only in their respective region. The market for urban permaculture design in Brazil is therefore essentially a blue ocean, it still untapped and harbors great potential. The downside is that the market is undeveloped: permaculture and even the concept of urban farming is still little known. Proper communication strategies will therefore be vital in order to successfully exploit this new market. The upside of being a pioneer does however greatly offset this drawback. 4.5.2.2 SUPPLIERS The design work, which is the main income source, requires no material input, suppliers are only necessary when implementing the design, and their cost is wholly at the client’s expense, therefore, they have little influence on the performance of the business. Some of them, however, have high bargaining power due to the high specificity (and lack of substitutes) of the orders, such a given variety of fruit grafted on a distinct rootstock. 4.5.2.3 SUBSTITUTES There are no direct substitutes for urban permaculture design. The closest there is to it is landscaping, which focuses on aesthetics, on creating visually appealing gardens. Permaculture gardens, on the other hand, focus on productivity and ecological functions, often (but not necessarily) to the detriment of orthodox aesthetics. Agroforestry and agroecology are in many ways akin to permaculture, but are almost exclusively applied in rural environments. Experienced permaculture students may be in conditions of designing and implementing such a system themselves, but they still few in number and do not rank among the main customer segments.

27 4.5.2.4 CUSTOMERS The lack of adequate alternative services reduces buyer bargaining power, but their price sensitivity is significant enough for prices to have to be set low, at least in the early days of the company, when demand is still increasing and attracting clients is crucial to building up a portfolio and creating awareness. Once more established, a price hike is possible, thereby skimming the market and working only for higher-end clients. 4.5.2.5 NEW ENTRANTS The threat of new entrants is great, especially considering the quick growth in interest in permaculture courses. In others countries, especially English speaking ones, permaculture design is a much more developed market, with many well-established consultants. Everything indicates Brazil is treading the same path, with many new permaculture-oriented rural sites opening in the last few years and a growing urban gardening movement. Entry barriers are nigh inexistent due to the negligible initial investment and absolute lack of competition. 4.5.3

SWOT

4.5.3.1 STRENGTHS AND THREATS The most important strength is the uniqueness of the service, which has no local competition or direct substitutes. That upside, however, has the downside that the market is very undeveloped, so that marketing becomes a centrally crucial activity. Communicating the value proposition in a way that appeals to as broad an audience as possible in a way that clearly shows the value for money the service provides will be the main success factor for this company. The costs, both running and initial, are low. While that allows for very high margins and low risk, it eases the appearance of new entrants in the market. Financially, the company is very flexible. The only important expenses, online advertising and digital marketing, can either be canceled anytime (former) or after three months (latter). Also, as explained in a later section, there will be two possible price

28 models. Should one not provide the profitability expected, the other may be experimented with. 4.5.3.2 OPPORTUNITIES AND W EAKNESSES As mentioned in the Pestel analysis, future prospects for the niche look very positive. While there is no competition in this market as of 2015, in the coming years, especially should a successful communication strategy increase awareness of permaculture and show the viability of a consultancy, new entrants are bound to appear. It is therefore important to surmount the weakness of lack of experience and firmly establish a brand image before that happens.

4.6

LEGAL AND TAXES

4.6.1

LEGAL ASPECTS

In the case of this consultancy, the most suitable legal kind of company is a sociedade limitada, a private company limited by shares. There is also an option called EIRELI, empresa individual de responsabilidade limitada, a limited individual company, but that requires a social capital greater than 100 minimum wages, much more than is operationally necessary in this case, where costs and investments are very low. A limited society, while having no minimal social capital, does requires more than one member, so that an additional partner will be necessary – but their quota may be as low as 1%. 4.6.2

TAXATION REGIME

Micro and small companies are given the option to choose their tax regimen before each fiscal year. The most beneficial ones for this company may be the SIMPLES or Presumed Profit, both of which apply a presumed profit margin on revenues and then apply taxes. With a revenue of up to R$360.000, in the SIMPLES, which aggregates all taxes and contributions to circumvent bureaucracy, 17,72% of gross revenue would be paid as taxes, while in the Presumed regimen, it would be 7,68% plus 3,65%. Both regimens presume a profit margin of 32% for all services providers. That value is significantly lower than the margin expected for this company after the first months. If taxes were calculated from the real profit, they would be much higher.

29 Therefore, choosing the Presumed Tax will result in notably lower taxes than other possible tax regimens, despite the downside of having no tax refund for losses.

5

FINANCES

5.1

REVENUE

5.1.1

MARKET SIZE

5.1.1.1 DEMOGRAPHIC To roughly predict the market size, the following starting premises will be taken into account when doing a Fermi estimation for the number of houses in the city: 

Main income will come from the city proper of Curitiba.



Only houses, not apartments.



Clients earn at least 3 minimum wages (R$1830 as of 2010).

The city proper of Curitiba had in 2010 a population of 1.751.000 people living in 576.00 residences, 293.000 of which have an income greater than 2 minimum wages. However, there is no data available differentiating houses and apartments, thus it is impossible to predict accurately how many of these residences would be potential clients. To circumvent this, data about the land cost in each individual neighborhood was used as an ersatz for the percentage of houses in these neighborhoods, considering that high land cost areas tend to have more apartment buildings to the detriment of singlefamily houses (some neighborhoods notoriously deviate from this and these discrepancies were taken into account). That estimation was then multiplied by the number of residences in the neighborhood that earn more than 2 minimum wages. The result is that there are around 100.000 houses in that income range. The calculations can be seen in the Annexes section. 5.1.1.2 PSYCHOGRAPHIC The Akatu Institute released in 2012 its latest research on responsible consumption where respondents were asked about their behaviors regarding sustainability, especially their buying habits. Their replies were then used to calculate their ecological “responsibility level”; 5% were ranked highest, as “conscious”, and 22% as “engaged”, the other 73% ranked as either “beginners” or “indifferent” (Akatu, 2012).

30 Owing to the lack of better data, this 27% may be used as a rough estimate of potential clients. The research does not distinguish between income levels, so it is not known whether the value still holds true for the targeted demographics. However, even if speculating that only a much smaller segment than 27% of those 100.000 households that fit the targeted demographic segment will also fit the psychographic segmentation, the market is large enough for a single company operating in this niche. The prognostic profit and loss statement shows that satisfying profits can be obtained with as few as 6 monthly medium-value consultancies, indicating that even small markets would not be quickly saturated. If the market is indeed as large as around 27.000 households, it is fair to assert it is sufficiently large for the consultancy to be financially feasible. 5.1.2

DEMAND

The ideal way to estimate demand in this case, when there is no reliable data on market size and customer behavior, would be by comparing with an existing company in a similar market, but since this is a new niche in the country, this cannot be done. To circumvent his, prognoses have been made with differing level of optimism: a pessimistic forecast evaluates the performance of the company in worst-case scenarios; a more optimistic one, where demand and price increase faster, serves to estimate maximum profitability in a positive scenario; and a high-price one with low demand and low growth. The demand for implementation has been defined according to a formula that uses the aforementioned price thresholds (e.g. demand below 7, price is 50% of the design price, above it, it is 75%). The higher the price, the lower the percentage of clients who pay for implementation assistance. Also, if demand for the designs is too high, the designer may deny or postpone implementations, and that is reflected on the formula used for defining implementation demand. On a different note, this company will not partake in the mentality that growth is inherently positive: not only would that oppose the third ethic – Fair share, or Setting limits to consumption –, but would also be impractical for the designer, who would sacrifice quality for higher yields. Growth will thus not be sought indefinitely, but only to the limit the designer feels comfortable working with: around 8 monthly early on, and 10 or more

31 with higher experience. Besides, the nature of the work precludes expanding the workforce to share the workload, save the possibility of entering a partnership with another designer if demand is high enough, in which case demand and profits would be shared – with the benefit of expanding the company’s potential reach. 5.1.3

PRICE

Early in the company’s life, when its brand and portfolio are not well developed, the price elasticity will be higher and therefore a lower price will be necessary to have a satisfactory demand level: the pricing strategy will initially be one of penetration, due not to competition, but to the very lack thereof and the newness of the niche, which can repel some potential clients. Once the benefits of the service are being better communicated (through portfolio, website, experience, renown, etc.), the price can increase (or change the method for price definition, from per job to per hour). Many permaculture designers define their prices in an hourly basis, usually ranging from $50 to $150, depending on demand and experience. The US-American permaculture designer Nicholas Burtner estimates an average rural consultancy takes him 3 days of 4 hours on-site work (including implementation) and costs $1.800 USD (Burtner, 2015). Today, he charges $150 per hour, but early on his prices were perday, and rose from $850 to $1500 in a single year (i.e., 75% growth). Instead of using time-based pricing models, especially in the beginning, when demand should not be overwhelming, experience is low and creating high-quality, impressive designs is essential, a per-consultancy price will be negotiated after the initial visit according with to a pre-established guideline which changes according to demand and prices negotiated in previous contracts. The goal is to have a slowly rising price guideline. With this approach, as opposed to a per-hour one, the designer will be able to dedicate more time to the job, both in loco and at the drawing table, and thus come up with a higher quality final product without incurring in high costs for the client. Furthermore, since many urban clients will have little knowledge about tending to such a system, it is important to deliver a detailed design map and manual for future reference. In the case of rural projects, since the implementation is more complex and the client more knowledgeable, having a detailed blueprint is not as essential. Therefore, another reason why a per-job pricing model is more adequate for this business model is because it gives the designer time to deliver high quality maps and manuals.

32 Even though Burtner’s experience does not directly translate to the business model and socio-economic reality of this paper’s company, it serves to show permaculture design can be a high-value market – and that unconsolidated markets harbor great potential. When he began, there were few consultants in his area, which allowed him to “set the standard for what a permaculture consultant charges and what is expected.” (Burtner, 2015). By setting initial prices high, he created market value for permaculture design in his region. Today, even the students of his Texas based institution, the School of Permaculture, earn around $500 per day working as consultants. Despite having initially had low demand due to high prices, he claims it was “an economically good decision”. Drawing from his experience, one of the prognoses will feature initially high, but slowgrowing prices and low demand. This model results in lower workload, may help lift permaculture from anonymity or negative associations into a premium service, with higher inferred quality, and better improve the portfolio by having larger areas and bigger budgets to work with. This model is consequently preferable over low-prices-highdemand, but should it not prove profitable, it may be changed in favor of the other at any time. The initial price for the high-pricing model has been defined at R$650, which represents roughly 2% of Curitiba’s per capita income of R$33.291 (IBGE, 2012) – around the same percentage that $850 (Burtner’s initial daily rate) represents of Texas’ $43.271 per capita income as of 2012 (Bureau of Economic Analysis, n.d.). The initial low price is an arbitrary, more accessible value: R$200. The pricing for implementations and follow-ups has already been described previously, in the business model canvas section: it will be set in proportion to the previous accorded design price and will be inversely proportional to the time available for the designer.

5.2

COSTS

Since there is only one person employed – the entrepreneur himself –, the only recurrent costs are transport, electricity, website hosting, online advertising and digital marketing.

33 As for opening costs, the only necessary acquisitions will be website design (around R$500). For software, there are numerous free or open source option. A vehicle, computer hardware, and an office will be provided by personal assets that need not be included in the accounting. For transportation, since most visits will be in the city of Curitiba, it should often be possible to use public transport instead of a car, reducing costs (and being more coherent with the first ethics – Care for the Earth), which will be two tickets per visit – usually two per design plus one per implementation –, amounting to R$6,60. The electricity cost of running a single computer is quite low, around R$30 for a 200 Watt desktop running 8 hours per day. The website hosting cost hovers around R$15 per month. 5.2.1

MARKETING AND ADVERTISING COSTS

Most search engines and social media offer a variety of bidding mechanisms for advertisements, the most appropriate for this company is called CPC, where the cost of an advert is calculated according to the number of clicks generated and the maximum bid placed by the advertiser. A daily budget is set and an appropriate number of ads will be shown according to these three variables. In highly competitive markets, the cost of getting exposure is higher due to the number of bidders. In this consultancy’s case, however, the lack of competition drives the price down. The digital marketing partner will manage the advertising campaigns, including finding the most appropriate keywords that maximize reach and useful clicks for the average monthly cost of R$500 (TAG5, 2015). The keyword “Permacultura”, for example, has around 35.000 monthly searches on Google, whose budget planner shows that a bid of up to R$1,80 per click may render up to 9,92 daily clicks, resulting in a maximum daily budget of R$13,00. Above this value, diminishing returns takes effect. To reduce the cost of unproductive clicks, it is possible to limit the clicks to the region of Curitiba and nearby cities by clearly stating the regional aspect of the company in the advert. Thus, setting a maximum daily budget of R$15 for both search engines and social networks should provide the company a good exposure. Also, with appropriate

34 management, the budget ceiling should only seldom be reached, thus a lower but rising value will be used in the forecast.

5.3

FORECASTS

There are three prognosis, two for the low-price model (with differing optimism levels), and one for the high-price. Two profit and loss statement chart are attached to each prognosis, one for every month of the first year, and a yearly one that continues the previous chart for three years. (Demand and prices for the second year grow based on M12, not the whole first year – which is why Y1 cells are grayed out). No balance sheet has been produced as the business model is not capital intensive – there are barely assets and liabilities to account for. Likewise, the lack of non-cash items makes cash flow charts redundant, as they would barely differ from the profit and loss statements. 5.3.1

LOW PRICE PESSIMISTIC PROGNOSIS

Figure 6 Low Price Pessimistic - First Year

35

Figure 7 Low Price Pessimistic - Four Years

In this scenario, demand grows relatively slowly, from 2 initially to 3 contracts per month during the first year. Afterwards it increases 8% every year. During the first year, price start growing at 8% monthly minus 1 pp. every month until stability at 2%, and grows around 2 pp. above inflation yearly afterwards. The first year has a negative result and net profits remain low throughout the years, averaging R$1.163 in the fourth year, with a net margin of 46%. In this scenario, profits do not justify full-time dedication to the consultancy, though operations may continue as a part-time job if expenses (advertising and digital marketing) are cut.

36 5.3.2

LOW PRICE NEUTRAL PROGNOSIS

Figure 8 Low Price Neutral - First Year

Figure 9 Low Price Neutral - Four Years

Demand increases quickly during the first year: from 2 initially to 5 at the twelfth month. Later on, growth stays at 10% per year. Price grows 5% monthly for the first year and 3 pp. above inflation annually afterwards. The higher demand and prices result in significant profitability, with margins consistently above 50% and an average monthly net profit of R$2.540 in the fourth year.

37 5.3.3

HIGH PRICE PROGNOSIS

Figure 10 High Price - First year

Figure 11 High Price - Four Years

This scenario starts with a high price of R$650 but a low demand of a single monthly contract, which by mid-year increases to 2, and by 8% per year afterwards. Due to higher prices, demand for implementation is lower.

38 Due to significantly lower demand, the portfolio will develop more slowly, hence the price guideline increases at a slower pace of 5% and then 2% per month, followed 1 pp. above inflation afterwards, resulting in a 65% growth over 4 years. Considering Burtner had higher price increases in a single year, this prognosis may be considered conservative. Still, profits are higher than the low-price optimistic prognosis. Despite the substantially lower demand, the profitability is higher in this scenario than in the previous one. Net margin reaches 61% in the fourth year, when monthly profit is R$2.687.

6

CONCLUSION

6.1

METHODOLOGICAL LIMITATIONS

Due to lack of available information, the calculation of quantity of houses in the city was a very gross estimate. The premise of higher land cost being proportional to greater presence of edifices does not always hold true. In addition, the percentage of houses used in each different land cost level was based on nothing more than the writer’s experience living in the city. Furthermore, the results of the research on responsible consumption from Akatu do not directly translate that 27% of the calculated 100.000 households would be interested in permaculture design, but no newer or more relevant published data for psychographic segmentation in either country, state, or city-wide level was available. Ideally, such a research should show the “responsibility levels” in different income levels. Also, these 27% do not encompass all four identified psychographic profiles, but only roughly measures the first one: people who take some action regarding sustainability. The other 3 remain unquantified. Thus, the assumptions regarding market size and demand behavior are based mostly on suppositions, even if grounded on knowledge and personal experience of the local society, especially of the demographics in question. 6.1.1

UNCONSIDERED ELEMENTS

While individual households are the most important market segment, companies, edifices and gated communities are also possible segments. However, no estimation of

39 these markets has been done, as the most basic necessary information – the number of edifices and communities – was not available. When inquired about it, the municipal authority on urban planning (Ippuc) claimed no such data is collected. Due to this oversight, an important possible source of income could not be included in the prognoses. Even if this information was available, estimating what percentage of this market would be interested in implementing a permaculture design would be difficult without executing a comprehensive primary research, which itself would be complicated by the fact that any investment must be agreed by the community. Since the prognoses consider that all demand stems from household and disregards these other segments, earning may be significantly higher than projected if the company is successful in stimulating this demand.

6.2

SUMMARY OF RESULTS

In the low demand scenario the first year closes with significant losses (for a company of this size). The break-even point is reached at the eleventh month of operations and the payback period of the small opening investment is only achieved after 15 months. The optimistic and high-price scenarios, on the other hand, are positive throughout the years and yield decent monthly profits, ranging from two to four thousand after the first year. It is worth noting these results do not account for demand from gated communities and companies. Regardless of the realism of the forecasts, especially in regards to demand and pricing, the capital result is that the company’s activity is very scalable. The only relevant expenses are online advertising (whose budget can be changed at any time) and digital marketing (which has a three-month contract). Since this project has the sole financial objective of earning enough for the designer to make a living, it is possible to assert the consultancy is feasible in all but the most pessimistic scenarios. Also, in case the actual financial outcomes do not satisfy the unambitious financial requirements, it is possible to cut expenses and operate close to zero cost, and thus the company would serve more as an additional, albeit small, income flow, than a full-time job for the designer.

I

7

BIBLIOGRAPHY

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V IBGE, n.d.. Área Territorial Brasileira. [Online] Available at: http://www.ibge.gov.br/home/geociencias/cartografia/default_territ_area.shtm [Access 05 2015]. IBGE, s.d. características gerais da população » População presente e residente. [Online] Available at: http://seriesestatisticas.ibge.gov.br/series.aspx?no=10&op=0&vcodigo=CD90&t=pop ulacao-presente-residente [Access 06 2015]. IMF, 2014. World Economic Outlook. [Online] Available at: http://www.imf.org/external/pubs/ft/weo/2014/02/weodata/weorept.aspx?pr.x=89&pr.y =7&sy=2012&ey=2019&scsm=1&ssd=1&sort=country&ds=.&br=1&c=223&s=NGDP D%2CNGDPDPC%2CPPPGDP%2CPPPPC&grp=0&a= [Access 05 2015]. Insider, B., 2015. Brazilian protesters are calling for something downright scary. [Online] Available at: http://uk.businessinsider.com/brazil-protesters-call-for-militaryintervention-2015-3?r=US IPCC, 2014. Fifth Assessment Synthesis Report, s.l.: s.n. IPPUC, 2010. Domicílios P.P. por Classes de Rendimento Domicíliar Per Capita. [Online] Available at: http://curitibaemdados.ippuc.org.br/ [Access 04 2015]. IPPUC, 2010. Domicílios Particulares Permanentes Urbanos de Tipo Apartamento, no Município de Curitiba. [Online] Available at: http://curitibaemdados.ippuc.org.br/ [Access 04 2015].

VI IPPUC, 2010. Edifícios por Número de Pavimentos, Bairros e Zoneamentos de Curitiba. [Online] Available at: http://curitibaemdados.ippuc.org.br/ [Access 04 2015]. Itaú, 2015. Longo Prazo - Junho 2015. [Online] Available at: https://www.itau.com.br/itaubba-pt/analiseseconomicas/projecoes/cenario-longo-prazo [Access 06 2015]. Khan, S., Mulvaney, R., Ellsworth, T. & Boast, C., 2007. The Myth of Nitrogen Fertilization for Soil Carbon Sequestration. Issue Novermber/December. Meadows, D. H., Meadows, G., Randers, J. & III, W. W. B., 1972. The Limits to Growth. New York: Universe Books. Ministério do Meio Ambiente, 2012. O que o Brasileiro Pensa do Meio Ambiente e do Consumo Sustentável, s.l.: s.n. Mollison, B., 1988. Permaculture: A Designers' Manual. s.l.:Tagari Publications. NASDAQ, 2015. Economists Cut Brazil Growth Outlook for 2015, 2016, Survey Says. [Online] Available at: http://www.nasdaq.com/article/economists-cut-brazil-growth-outlook-for2015-2016-survey-says-20150126-00133 Pearce, F., 2010. Earth's nine life-support systems. New Scientist, Issue 2749. Ramankutty, N., Evan, A. T., Monfreda, C. & Foley, J. A., 2008. Farming the planet: 1. Geographic distribution of global agricultural lands in the year 2000. Global Biogeochemical Cycles, 22(1). Rodale Institute, 2011. The Farming Systems Trial - Celebrating 30 years, s.l.: s.n. Rodale Institute, 2014. Regenerative Organic Agriculture and Climate Change , s.l.: s.n.

VII S. L. Pimm, C. N. J. R. A. T. M. B. J. L. G. L. N. J. P. H. R. C. M. R. J. O. S., 2014. The biodiversity of species and their rates of extinction, distribution, and protection. 344(6187). Salario Mínimo, s.d. Salario Mínimo. [Online] Available at: http://www.salariominimo.net.br/ [Access 06 2015]. Stockholm Resilience Centre, 2009. The nine planetary boundaries. [Online] Available at: http://www.stockholmresilience.org/research/researchnews/tippingtowardstheunknow n/thenineplanetaryboundaries.4.1fe8f33123572b59ab80007039.html [Access 11 2014]. TAG5, 2015. Proposta Marketing Digital [Entrevista] (06 2015). Toensmeier, E. & Jacke, D., 2005. Edible Forest Gardens Vol. 1 & 2. s.l.:Chelsea Green Publishing. Trading Economics, s.d. Brazil GDP Annual Growth Rate. [Online] Available at: http://www.tradingeconomics.com/brazil/gdp-growth-annual [Access 06 2015]. UNCTAD, s.d. Trade and Environment Review 2013: Wake Up Before it is Too Late,, s.l.: s.n. US Geological Survey, s.d. Differences in Phosphorus and Nitrogen Delivery to the Gulf of Mexico from the Mississippi River Basin. [Online] Available at: http://water.usgs.gov/nawqa/sparrow/gulf_findings/primary_sources.html [Access 11 2014]. Wheaton, P., 2015. what is the daily-ish email?. [Online] Available at: http://richsoil.com/email.jsp [Access 05 2015]. World Watch Institute, 2006. Can Organic Farming Feed Us All?. World Watch Magazine, 19(3). WWF, 2014. Living Planet Report, s.l.: s.n.

1-I

8

ANNEXES

8.1

QUESTIONNAIRE

Name Address Contact Goal priorities scale Important

Not at all

Sustainability

|––––––––––––––––––––––––––––––––|

Food production

|––––––––––––––––––––––––––––––––|

Aesthetics

|––––––––––––––––––––––––––––––––|

Entertainment

|––––––––––––––––––––––––––––––––|

Real Estate increase

value |––––––––––––––––––––––––––––––––|

Home Comfort

|––––––––––––––––––––––––––––––––|

Others

|––––––––––––––––––––––––––––––––| |––––––––––––––––––––––––––––––––| |––––––––––––––––––––––––––––––––| |––––––––––––––––––––––––––––––––|

The Property Size Historical uses Drainage problems Seasonal microclimates Undergound pipes/cables

Don't know

1-II House Too hot/cold rooms Interest in solar energy Interest in water harvesting Interest in water recycling Residents Time for garden maintenance Pets Future permanence in the property Interest in growing food Short or long-term implementation? Gardening experience Design Considerations

Importance of aesthetics vs. productivity Desired type of food production (Fruits, nuts, eggs, fish, milk, meats, etc.)

Favorite edible plants Required lawn area Garden theme (Rustic, modern, curves, angles, natural, tamed, etc.)

Landscape material (Stone, wood, concrete, brick, gravel, metal, etc.)

1-III Implementation Independent or assisted implementation Permablitz or contractors Budget Timeframe Other remarks

2-I

8.2

ESTIMATION OF HOUSEHOLDS

Neighborhood

3-5 Min. Wages

+5 Min. Wages

Total Residences

Land Cost Level

Est. % Houses

Total Houses

Abranches Água Verde Ahu Alto Boqueirão Alto da Glória Alto da Rua XV Atuba Augusta Bacacheri Bairro Alto Barreirinha Batel Bigorrilho Boa Vista Bom Retiro Boqueirão Botiatuvinha Cabral Cachoeira Cajuru Campina do Siqueira Campo Comprido Campo de Santana Capão da Imbuia Capão Raso Cascatinha Caximba Centro Centro Cívico Cidade Industrial Cristo Rei Fanny Fazendinha Ganchinho Guabirotuba Guaíra Hauer Hugo Lange Jardim Botânico Jardim das Américas Jardim Social Juveve Lamenha Pequena Lindóia Mercês Mossungue Novo Mundo Orleans

439 4.477 921 1.344 560 802 660 72 1.988 1.764 751 645 2.445 1.924 342 2.882 351 1.061 173 2.338 486 1.358 185 965 1.574 114 9 3.737 492 2.881 1.425 433 973 78 713 670 726 254 473 1.170 385 980 12 271 919 503 2.190 349

336 8.417 1.710 414 1.080 1.380 424 42 2.274 1.019 463 2.330 5.961 1.741 458 1.470 383 2.633 74 1.143 764 1.637 40 588 837 175 7 5.787 975 1.048 2.447 205 375 18 732 447 506 483 538 1.256 845 2.212 6 133 1.342 1.435 1.382 277

775 12.894 2.631 1.758 1.640 2.182 1.084 114 4.262 2.783 1.214 2.975 8.406 3.665 800 4.352 734 3.694 247 3.481 1.250 2.995 225 1.553 2.411 289 16 9.524 1.467 3.929 3.872 638 1.348 96 1.445 1.117 1.232 737 1.011 2.426 1.230 3.192 18 404 2.261 1.938 3.572 626

4 3 4 4 2 3 4 4 3 4 4 1 2 4 3 4 4 3 4 4 3 4 4 4 4 4 4 1 2 4 4 4 4 4 4 4 4 3 4 4 4 2 4 4 2 3 4 4

80% 60% 80% 80% 30% 60% 80% 80% 60% 80% 80% 5% 30% 80% 60% 80% 80% 60% 80% 80% 60% 80% 80% 80% 80% 80% 80% 5% 30% 80% 80% 80% 80% 80% 80% 80% 80% 60% 80% 80% 80% 30% 80% 80% 30% 60% 80% 80%

620 7.736 2.105 1.406 492 1.309 867 91 2.557 2.226 971 149 2.522 2.932 480 3.482 587 2.216 198 2.785 750 2.396 180 1.242 1.929 231 13 476 440 3.143 3.098 510 1.078 77 1.156 894 986 442 809 1.941 984 958 14 323 678 1.163 2.858 501

2-II Parolin Pilarzinho Pinheirinho Portão Prado Velho Rebouças Riviera Santa Cândida Santa Felicidade Santa Quitéria Santo Inácio São Braz São Francisco São João São Lourenço São Miguel Seminário Sítio Cercado Taboão Tarumã Tatuquara Tinguí Uberaba Umbará Vila Izabel Vista Alegre Xaxim

426 1.137 1.118 3.426 111 1.355 5 1.123 1.487 612 290 867 541 89 411 28 479 1.482 145 546 270 736 2.251 225 1.037 623 1.821

424 962 431 3.415 63 1.771 1 619 1.586 524 357 812 695 147 625 10 939 395 155 668 68 488 1.740 100 1.567 820 883

850 2.099 1.549 6.841 174 3.126 6 1.742 3.073 1.136 647 1.679 1.236 236 1.036 38 1.418 1.877 300 1.214 338 1.224 3.991 325 2.604 1.443 2.704

4 4 4 3 4 3 4 4 4 4 4 4 2 4 4 4 2 4 4 4 4 4 4 4 4 4 4

80% 80% 80% 60% 80% 60% 80% 80% 80% 80% 80% 80% 30% 80% 80% 80% 30% 80% 80% 80% 80% 80% 80% 80% 80% 80% 80%

680 1.679 1.239 4.105 139 1.876 5 1.394 2.458 909 518 1.343 371 189 829 30 425 1.502 240 971 270 979 3.193 260 2.083 1.154 2.163

96.006

Chart created by the author with data from IPPUC, 2010