Our Services
There are approximately 31,000 microenterprises in Jalisco with average annual revenues of $100,000 that employ an average of 10 people. These microenterprises struggle to manage suppliers and customers (retailers) because companies are spread out over a large geographical area, and as a result microenterprises pay large premiums to local agents for raw materials and incur high transportation costs to market and delivery of product to retailers.
Prospera reduces the complexity of operations and drives lower costs and higher revenues for these microenterprises by aggregating activities throughout the value chain, primarily in procurement and distribution. With raw materials representing 50% of revenues on average and local agents charging a 60% markup on inputs, the market in Jalisco is worth approximately $360MM in purchase aggregation alone. Our immediate goal is to become the most trusted partner of microenterprises in Jalisco. By partnering with farmers, suppliers, logistics providers, retailers, universities, investors and local governments to help microenterprises grow and become sustainable sources of employment, our vision is to become the most trusted and mission-driven microenterprise-centric supply chain management company in Latin America.
The largest barrier to entry by far is trust. Microentrepreneurs have become conditioned to distrust their suppliers, retailers and fellow entrepreneurs, a result of a history of business exploitation. Secondarily, the complexity of operating such a comprehensive solution requires multidisciplinary capabilities, thus making it prohibitive for most small organizations to attempt on their own. In the Market Solution section, we discuss the implementation of customer acquisition strategies we will implement to overcome the trust barrier and provide further detail into our operations.
Business Overview
Prospera is a one-stop shop for microenterprises, an end-to-end service provider that 1) reduces the complexity of operations, 2) drives lower costs and 3) increases revenues for microenterprises via aggregation throughout the value chain. Prospera puts the trust of our customers above all else. To ensure that we earn and maintains this trust, the company is guided by the principles of customer obsession, frugality, innovation and a high hiring bar. In addition, Prospera´s partnerships with local governments universities and Micro Finance Institutions (MFIs), allows the venture to leverage partners´ reputation and track record working with microenterprises to gain credibility among customers.
Phase 1: Market entry
In interviews with microenterprises’ in Mexico, the challenges stated repeatedly are the high costs of getting in front of retailers (merchandising headcount) and physical distribution. Our solution is to serve as a distributor that employs 1) merchandisers to handle sales for multiple microenterprises and 2) a 3rd party logistics provider that receives product in a central location and delivers to the network of retailers throughout Mexico, where the scale driven by aggregation results in lower unit costs for our clients.
The distributor model reduces the number of vendors retailers’ have to interface with and improves the consistency of supply (Prospera will hold buffer inventory and work with retailers to provide demand forecasts to the microenterprises), which are in turn the two obstacles retailers face in bringing on smaller suppliers.
The second most viable opportunity is aggregate sourcing, because 1) the incumbents’ prices are high, 2) the investment and associated risks are low and 3) the operation is relatively simple. For instance, Prospera buys the glass jars that are most commonly used by food producers and passes on a portion of the approximately 60% in savings versus the local reseller’s prices.
Phase 2: Service and geographical expansion
The beginning of Phase 2 will be marked by the successful replication of our model outside of Jalisco, namely the Bajio region, and the expansion of Prospera’s suite of services. Opportunities to reduce cost via aggregation exist throughout the microenterprise’s value chain, so with a significant base of microenterprises the next step will be to identify partners that can provide ancillary services such as insurance, accounting, and legal. In exchange for driving business to these partners, Prospera will negotiate a percentage of the first year’s fees.
This phase will also be highlighted by the beginning of Prospera’s continuous improvement program, in which Prospera connects microenterprises with mentors from industry and consultants from universities to find ways to improve. We have already been successful in engaging mentors and universities, but will defer more focused efforts until core business operations are stable.
Phase 3: Community Development
Phases 1 and 2 will drive increased selection, lower prices and more employment, so Prospera’s 3rd phase focuses on helping to improve education levels in local communities by continuing to leverage its partnerships with international, government and business organizations. In the long-run, we expect that the benefits of improving the well-being of a community will be microenterprises that transition into organizations that are competitive on regional and national levels, with Prospera as a partner in their growth.
