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SANERGY BUSINESS MODEL

SUSTAINABLE SANITATION IN KENYA

If you missed the first part of Sanergy case study, click here 👈

Social Impact Mission

As discussed in a previous article, a social enterprise’s goal is to solve a certain social issue. In this specific case, Sanergy primary mission is to make hygienic sanitation accessible and affordable in urban slums and impoverished areas in Kenya. But the firm also has a second higher goal: fostering sustainable agricultural production in the country.

Core interventions

How does Sanergy turn its higher causes into practical, tangible interventions? First, the company created a sustainable sanitation cycle, built through a franchise network of “Fresh Life Toilets” as well as a set of support services (provided to each franchisee). Thanks to this cycle, the company addresses the sanitation matter. Conversely, byproducts allow the company to meet the demand for farm inputs and to support agricultural production.

Beneficiaries + Value for beneficiaries

As a rule of thumb, “beneficiaries” are those people who are mostly affected and harmed by a certain social problem. Here, the same logic applies. As a matter of fact, Sanergy’s main beneficiaries are the urban poor: marginalized families and individuals, often living in informal settlements across Kenyan cities. For them, FLTs are tremendous sources of value, as these toilets ensure improved and more affordable (sometimes even free) access to clean sanitation facilities, as well as reduced chances of contracting diseases.

Customers + Value for customers

Encrypting Sanergy business model wasn’t an easy task. Yet, we dag into it for a while and came to a conclusion: the firm has (at least) 2 customer segments.

On one side you have franchisees, usually micro-entrepreneurs or business partners installing FLTs in public spaces/areas, schools or residential compounds. What’s in it for them is a better alternative to existing sanitation solutions, as well as a potential additional source of income (when FLTs are turned into pay-per-use toilets).

On the other side you have farmers and horticultural companies. Byproducts produced by Sanergy are indeed meant for them. Such products provide this target with “reliable, affordable, high quality farm inputs” able to increase animal weight and crop yields.

Key Activities + Key Resources

When it comes to Sanergy’s key activities, we can take a closer look directly at the company website. Here, the firm describes its approach as consisting in four main activities: building toilets, supporting (and expanding) the franchise network, collecting waste and treating/converting it into agricultural end-products. All this is made possible thanks to key resources such as staff, facilities and machines, (access to) capital and brand reputation.

Key Partners

Now, what about partners? Among the extensive network that supports Sanergy, we narrowed it down and identified few fundamental partners. To begin with, foundations and organizations like Acumen invested patient capital in the firm: although some exited their equity stakes, they keep providing strategic counseling and support. Furthermore, local authorities and governments work together with Sanergy and secures land access for FLTs, supportive policies, and pretty much everything that is needed to scale the impact. Finally, the firm also partners with Kiva to ensure micro-entrepreneurs interested in joining the franchise network with accessible credit.

Cost Structure + Revenue Engines

Last but not least: viability. In order to assess Sanergy under a financial perspective, we have to understand its costs as well as its sources of revenue. Labor costs is surely the main cost driver for the company, as Sanergy strongly relies on personnel to rollout its different services (i.e. waste collection, transportation, etc.). Moreover, we can include facilities and business development (growing the franchise network + promoting/selling byproducts) as additional major costs.

In terms of income, we identified three main revenue engines used by Sanergy. These are: 1) franchising fees; 2) sales of animal feed/fertilizers; 3) external funding (subsidies and private donations). Surplus could not be considered and discussed at the time we are writing the article.

Conclusion

Sanergy is comprised of a suite of nonprofit and for-profit branches, working as one in Kenyan poorest areas to ensure accessible, affordable hygienic sanitation to all. In this article, we considered this suite as a unique entity and analyzed what kind of value is provided the different parties involved.

In fact, thanks to its “franchise model“, Sanergy first distributes and services its low-cost, high-quality sanitation units in different locations. After that, the company empties and collects once/twice a day excreta. From there, the waste is then transported to a specific facilities, where finally it gets turned into organic fertilizer and animal feed. Although Sanergy is on its way to become fully financially sustainable, its sanitation service chain can already build upon franchise fees, sales and external funding/donations.

In conclusion, we believe Sanergy is a great example of how multisided business models might help companies create and deliver diverse value propositions to different segments. As co-founder David Auerbach once said, “we believe it’s possible turning sh*t into gold while fostering positive change“. We agree with this fascinating idea.. what about you?

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