Breaking Down All the Costs
As SOIL works to expand and continually improve our household toilet service, EkoLakay, we are constantly evaluating and reassessing our costs. To do this successfully, we need to have a detailed breakdown of what our costs are –how much we’re spending, what we’re spending money on, and what each facet of our program costs. Last year I started researching and analyzing EkoLakay service costs at the household level, meaning breaking down our cost analysis further to examine how much each piece of the program costs per household. We believed that by breaking down the costs this way we could better examine what fraction of our costs we were covering with revenue from the household service fee and sale of compost, and where there could be opportunities for operational optimization (meaning cost reduction!). In the long run, we hope to turn EkoLakay into a profitable social business that can dramatically increase access to sanitation in Haiti while also creating jobs and producing an ever-increasing amount of compost.
Through our research partners at the Institute for Transformative Technologies, I was lucky enough to be connected with (my now friend) Ravi Agarwal, a consultant at Ernst & Young with a specialty in public policy and economic analysis. Ravi supported our research by developing a tool to consolidate the collected EkoLakay cost information in a functional and comprehensible way (i.e. it’s a big and beautiful Excel sheet).
Ravi and I first categorized all of the activities that make up the EkoLakay service. Below is what this categorization looks like now. The categories in the blue boxes correspond with the steps in the fecal sludge management (FSM) chain, and the sub-categories are activities specific to SOIL’s EkoLakay service.
Next, we needed to analyze, calculate, and summarize all of the individual costs that make up each activity (some costs are divided out across multiple activities). Costs include gas used when driving to install a toilet, material to construct toilets, and staff time, among many others. To figure out some of the more complex costs, like gas, and how much we were using for each activity, I had to do my research “in the field,” doing things like following our collection team along with a GPS to understand how many kilometers we were going and how much time it takes to fill up a truck with sugarcane bagasse, in addition to more traditional research like reviewing budget reports to determine our average cost per kilometer by vehicle and the average cost of a block of EkoLakay payment receipts.
Given the immense complexity of this research inquiry, at several points we found ourselves wondering whether it was truly necessary to examine our costs at such a granular level. And although it would be possible to approximate our costs by simply looking at expense reports and cash flow documents, this approach doesn’t allow you to get at the “why”. Why we have several staff members participating in toilet installations (as opposed to one staff member per installations), why we provide toilet paper and trash cans to our new clients. This information is best understood and absorbed by observation, rather than a simple review of our expenses.
Additionally, by contrasting the budgets with field observation and examining any areas for potential cost reduction or increased efficiency, you either 1) justify why things are the way they are, or 2) begin to imagine what could be done or changed to increase efficiency or cost-effectiveness while maintaining our high quality of service.
The best part about doing research at SOIL is working with a team who can transform data and ideas into a challenging discussion, proposals for implementation, and even more follow-up research.
At SOIL we are encouraged that EkoLakay’s model is already one of the lowest cost methods globally to provide dignified, in-home, ecological sanitation in expanding urban communities, but as you can see from this exhaustive research, we will not rest until our revenues are exceeding our costs and we have a clear pathway to sustainably addressing the sanitation crisis.
So stay tuned as we transform this work into something ready to be shared with the rest of the world. My hope is to lay the foundation for future comparative research and analysis at SOIL, and to share methodology and results with other FSM practitioners worldwide in support of SOIL’s commitment to transparency and open source solutions.