Sanitation as a Business

Lower-income countries have traditionally supported their public water and sanitation providers through budgetary grants (from taxes) and low-cost loans (supported via transfers), not expecting or requiring full cost recovery. The result has usually been a poor quality of service, accessed mainly by higher-income households with governmental support nearly always less than anticipated leading to weaknesses in operations and maintenance (WPP 2010).

Sanitation has become a global issue and the private sector has the responsibility to be part of the solution (WBCSD 2008). Sanitation is regarded to be a very profitable business with an estimated economic return of about 10 USD for every 1 USD invested (WBCSD 2008). Therefore, improved sanitation is both a contribution to sustainability and good for business.

Generally, the private sector consists of:

1. Individual entrepreneurs that usually engage in offering simple products and services that do not require high investments. For instance, repairing and installation of water pipes, toilets and bathrooms. They can act as masons, plumbers and traders and thus generate income.
2. Small and Medium size Enterprises (SMEs) differ from individual entrepreneurs in the number of employees and turnover, which is much bigger than that of individual entrepreneurs.
3. Large companies are bigger than SMEs and also differ in the number of employees and turnover. They engage in offering more sophisticated sanitation products and services.

Like every business, building up a business in the sanitation sector requires 3 main steps:

1. Generation of Business Idea

Any idea that includes provision of products and services that is associated with the collection, transport, treatment, recycling and safe disposal of human waste, wastewater, storm water and garbage is considered to be a business idea for sanitation business (WBCSD 2008).

2. Collecting Data

This step helps to develop a business plan, which can afterwards be implemented.

• Market research:Like any other kind of business, sanitation business starts with a market analysis. Sanitation market analysis is about collecting information on potential customers' preferences regarding sanitation services and products in particular and the sanitation market in general. Such kind of analysis helps to identify customers' behaviour, location, purchasing power and also specific preferences about sanitation products or services. It does also help to identify competitors and partners, suppliers and distributors, future market trends, etc.
• Business legislation analysis:This information helps to identify the legal form of the business, business registration, procedures of taxation and customs procedures (see also policies and legal framework).
• Business management:In this stage you should consider different questions of business management such as “do I have the necessary business management skills to start and run a new business?”, “what form of business should I register?”, “do I have the capacity to manage human resources?”, “which kind of human resources do I need?”
• Financial planning:Financial planning helps to determine the preliminary costs of investments and future benefits of the sanitation business. It is also important for calculating the price of your product or service. Financial planning usually prevents to offer the products and services at a price below the operating margin and helps to control the financial resources (see also microfinance and donor agencies).

3. Implementation Stage

(Adapted from EBDSN 2004)

After gathering information about the intended business it is time to implement your business, which includes the following activities:

• Business planning: Business planning includes information about sales and marketing, production of products and services (cost calculation, infrastructure, and equipment), management of the business and financial plan.
• Financing: This is about generating own funds, and applying for loan funds from family, friends, and banks.
• Administrative procedures:This step includes choosing the legal form of business, hiring staff, and taxation.
• Infrastructure: This step is about choosing a location, making contracts about renting premises or leasing equipment, arranging electricity and transport facilities.
• Making partnerships with suppliers:Find suppliers and compare prices of their products such as equipment, raw material, transport facilities and make contracts with suppliers.
• Product and service development: This is about developing product ranges, packaging and pricing and improving the quality of your products and services.
• Business management: It is about implementing accounting, human resources management, capacity building of the employees and the owner, stock management and management of services.
• Marketing: Sanitation marketing refers to social marketing efforts that affect a behavioural change at individual and household levels. It also assures the awareness of people about the benefits of sanitation products and services. Consequently, this stimulates demand and ensures that people can get what they want at a price they are willing to pay (JENKINS & SCOTT 2010). For promoting sanitation business it is also important to take the marketing mix into consideration and position the business accordingly. The marketing mix consists of the 4 P's: Product, Prize, Place and Promotion.

The success of business also depends on whether the country provides an enabling environment. An enabling environment is about infrastructure, access to finance and business development services as well as provision of effective business regulations. In developing countries it is often very hard to do business because of difficult business environments.

Another challenge with big companies is the issue of privatisation. Usually, privatisation of former publicly owned sectors or utilities raises concerns. Privatisation of the water and sanitation sector of a town, community or even a whole country, causes more than only concerns – it raises fierce protests and sometimes even violent opposition (QUEHENBERGER 2008).

Lower-income countries have traditionally supported their public water and sanitation providers through budgetary grants (from taxes) and low-cost loans (supported via transfers), not expecting or requiring full cost recovery. The result has usually been a poor quality of service, accessed mainly by higher-income households with governmental support nearly always less than anticipated leading to weaknesses in operations and maintenance (WPP 2010).

Sanitation has become a global issue and the private sector has the responsibility to be part of the solution (WBCSD 2008). Sanitation is regarded to be a very profitable business with an estimated economic return of about 10 USD for every 1 USD invested (WBCSD 2008). Therefore, improved sanitation is both a contribution to sustainability and good for business.