SunnyMoney is a social enterprise that was spun off from the NGO, Solar Aid, in 2011. While Solar Aid focuses on installing solar systems into schools across several countries in Africa, SunnyMoney focuses on selling solar lanterns. In just a few years since its launch, SunnyMoney is already reaching sales levels of tens of thousands each month, growing very quickly in Kenya, Tanzania, Malawi and Zambia. The company employs a unique sales and marketing approach called “The SunnyMoney Way,” which works closely with education authorities, incentivizing head teachers in geographically defined regions to promote the benefits of solar lanterns to their students and families. Orders are then collected and the lights delivered in follow-up sales visits by SunnyMoney team members, during which thousands of lights can be sold in a single event.

SunnyMoney’s Managing Director, John Keane, talks to us about the excitement and hard work of the transformation of SunnyMoney from an NGO program into a social enterprise, and now the daily challenge of supporting its growing success.

Arc Finance: We were among the many who saw the impressive presentation of SunnyMoney’s growth at the recent Lighting Africa conference. We would love to hear more – your emergence as a social enterprise, the challenges of growth, etc. – but let’s start with those sales numbers to set the scene.

JK: Thanks. Well, I can give you ball-park figures now. Three years ago, we sold less than 10,000 products across all four countries [Kenya, Tanzania, Malawi and Zambia]. Last year, the number was about 60,000. This year, we’re going to exceed 300,000. The last two quarters of the current financial year [i.e. to March 2013] is when the majority of that 300,000 will have been sold. At the moment, it’s probably not exponential, but it feels like it. I was in Tanzania last week and we had three sales teams operating and one of those sales teams sold 1,600 lights just in one morning. That used to be headline stuff for us, but now it’s almost not exciting anymore!

Arc Finance: Please give us a little background about the decision to spin off from SolarAid to launch SunnyMoney.

JK: SolarAid was set up to eradicate the kerosene light from Africa, and it’s important to say that SolarAid still exists as an NGO. We basically used to have two programs at SolarAid: one program was focused on the installation of heavily subsidized solar systems in schools and clinics; the other program, our micro solar program, trained entrepreneurs to act as door-to-door salesman and set up small shops through which to sell solar lanterns, to try to get the micro solar market moving (or pico solar – I use both terms interchangeably). Well, we quickly saw that SolarAid is not a good name for entrepreneurs – trying to sell lights with the name ‘Aid’ on our t-shirt was not so effective – so we came up with the name “SunnyMoney” as a program within SolarAid.

When we first started, we were operating as a charity, and not with a business perspective. We were more interested in just trying to crack a distribution method for selling solar products and seeing how it would work. If you’re only selling a couple of hundred products a month, you know you’re running at a loss every day that you operate. At that time, in one year, we’d sell around 10,000 lights across 4 countries. But then, in 2010 in Tanzania, in partnership with d.light on Mafia Island, we sold around 3,000 lights on that island in just a week. That was a breakthrough moment for us. It was obvious; it was staring us in the face. With our new CEO, Steve Andrews, visiting our work at the time, we thought, “Right - what happened there? And: let’s do more of that!”

So we started developing the concept of SunnyMoney as its own social enterprise to sell pico-solar systems on a profitable basis. Developing a profitable business model is essential in order to achieve scale. And that’s the direction we’ve taken.

As a social enterprise, SunnyMoney is far more commercially minded than an NGO, but it’s still very much about the social impact of our work. It is all about eradicating kerosene lights.

As a social enterprise, I feel we’re actually being far more responsible in how we use donor money than we were before, and having a greater impact. To be honest, we probably had more impact in the last six months than in the previous five years. And that’s saying something, as someone who has put in a lot of long hours over the last five years!

I remember Willem Nolens, SolarNow’s Managing Director (see here for Arc’s case study on SolarNow), being challenged on this topic in a conference. He was saying it had cost SolarNow €3 to get a watt of power into peoples’ hands, but that SolarNow wanted to turn that around and make €3 for every watt. When he was asked whether that was that ethical, or moral, he in turn asked: was it moral to do it the other way? So we’re going through the same sort of thing at the moment, and it’s leading to lots of interesting internal discussions.

Arc Finance: Can you shed some light on how the organization is adapting to the new business model?

JK: We’ve been working hard on changing the culture of the organization so that we’re not just jumping up and down about hitting sales numbers. We’re reminding our staff to keep a focus on the bottom line: the costs of operations and our revenues.

It has been a real cultural shift for many in the organization. Over the last 18 to 25 months, we have seen certain staff leave the organization (such as solar installation technicians who are not needed to sell pico-solar lights) and we’re bringing in people with more business experience – who are used to operating in the commercial world or at other social enterprises. So we’ve been seeing a shift in the skill set of our teams through a combination of bringing in new staff and retraining existing ones. We’ve always prided ourselves on ensuring that our staff are well-trained. Our rapid growth has definitely stretched us in this area, however, and we ask a lot of our staff to do what they can themselves to get up to speed on the new way of doing things. That is easier for some to achieve than others, however, and we have to recognize that.

Arc Finance: We understand you initially faced some challenges in terms of order fulfillment; please share some lessons-learned on that topic.

JK: There is a lot to say on this topic. For instance, the logistics alone are a challenge. We’re talking about container loads coming in with 30,000 lights in each. We work with the suppliers, but we have found that sometimes even they struggle with those order sizes because their operations are not necessarily that big themselves, and they are also quickly developing their own systems to be able to meet our needs.

Accurate sales forecasting is a key challenge. With the rapid growth we have been experiencing recently, we are trying to learn as quickly as possible to make more accurate forecasts and to share those forecasts with the suppliers well ahead of time so that they, in turn, can deliver the lights to us.

Cash flow is another big issue – a huge, huge issue – in our organization. The bottom line is that we’re not selling as many lights as we could because of it. For example, in Tanzania, we’ve being doing a lot of air freight purely because cash flow will not allow us to put cash on water transport for two to three months at a time. So that erodes our margins, of course. It’s a good problem to have; we’re working hard to solve it.

Finally, we are becoming increasingly certain and increasingly expert at determining the quantities we can ship. If we get a container load into Tanzania, I just know it will go within a couple of months, maximum. It can actually be a lot quicker than that. In Tanzania, for example, our team sold over 45,000 lights in February alone – so that’s 1.5 containers right there, in just a few weeks.

We know the busy and slow periods throughout the year. Our teams are putting the systems in place so that everyone is getting to the point where they just know what to do now. In that sense, it’s been learning by doing – and that is an ongoing process with some of our country teams more advanced than others.

Arc Finance: You are clearly developing a large customer base very quickly. Tell us a little about your customers and the product mix SunnyMoney is offering.

JK: The majority of the lights we sell are entry level lights. We are working on developing our marketing capacity directly so that we can sell lights in a more profitable way in the future, using our growing customer database and our new CRM system, which is being finalized at the moment.

We very much believe in the “energy ladder.” So: I have said to some of the solar companies that supply us with larger systems, but do not have systems in the smaller range, that they may not expect many purchases from us of the larger systems for the next 12 months because we are focusing on the lower end systems at the moment. This is how we are strategically building our customer base. Once we have around 20,000 customers in, for example, the Bomet area in Kenya, we’ll start going back to these customers with offers for slightly larger systems. So I think we’ll see SunnyMoney’s product mix evolving from being dominated by entry level lights this year, with the proportion of larger systems being sold increasing over time.

Arc Finance: How are you addressing service issues with your products?

JK: We are trying to build SunnyMoney as a brand and a service that people trust by working through the school networks and delivering a good service. We are developing call centers to allow us to engage with our customers etc., but there’s a lot of work to do. It’s actually a sector-wide thing, in terms of ensuring that warranties can be honored. I think the whole industry is struggling with the fact that if it takes 6 months to get from the factory in China into the customers hands, what happens to the first 6 months of the warranty? The nice thing is that the products are getting better in terms of their quality and longevity, so that is in part reducing the pressure. A couple of years ago, many lights would only last 6 months and then you had a headache – the battery needed replacing. Whereas now, the lifespan is many years and leading product suppliers are today enabling us to provide our customers with two-year warranties.

In Kenya, dealing with warranties is made easier as we have a relationship with Wells Fargo, the courier service, so that we can just switch the light. So, there, we are able to just replace lights as they fail – although the challenge we have is making sure it is a warranty issue, as opposed to product misuse, before we replace a light. We are developing our learning and feedback systems to ensure we gather customer insights. We have started calling samples of customers in order to learn more about their experiences in dealing with us and using the products we sell. We will be publishing our findings in this area fairly soon, actually, with the different things we are learning. It is clear, however, that we still have work to do in bringing customer service closer to the customer. The gap there is more localized personnel to be able to handle face-to-face customer service. This is a very live issue in our organization. Indeed, setting up dealers who can serve local markets alongside our school sales is a key part of the SunnyMoney Way, which we are working hard on developing at the moment.

Arc Finance: As a cash sales business, how are you managing the risk of handling such large amounts of cash on a daily basis?

JK: Yes, as we scale, we find that our teams are handling a lot of cash. Our policy is that cash taken on one day is put into the bank on the same day, so it minimizes the risk in that respect. We are doing an internal review of this, though, because, as you said, a lot of cash brings a lot of risk. It is tempting, in a low-income environment, and we don’t want to put our staff in any danger. On the other hand, we have to recognize that we are in a cash-based system, because most people in Kenya, Malawi, Zambia and Tanzania do not have bank accounts. Of course, there is mobile money, which is something we are exploring as a way to reduce the cash burden. One short-term change we have made is that we no longer travel in branded vehicles when we are carrying cash, so that we are not an obvious target.

Arc Finance: What are you focused on now as SunnyMoney continues to grow?

JK: Our whole model is based on scale and creating a tipping point in the market. We go into areas, run sales campaigns, and essentially inject thousands of pico-solar lights into that area in a matter of weeks. The idea is that we create a lot of momentum in the market as a result. We are now developing ways to keep this momentum going and ensure the ongoing availability of products to serve the market.

We have to reach a certain size for it to make sense, both in terms of profitability and achieving our social mission, which is to work with SolarAid and the wider sector to eradicate the kerosene light from Africa by the end of this decade. Broadly speaking, by achieving volume, our work becomes profitable and therefore scaleable, so we’re working very hard on that at the moment – making sure the theory all stacks up in practice.

Arc Finance: Any final thoughts for us?

JK: Yes. There are a lot of factors converging, enabling us to do what we do. It is not just how you do it - there are so many things that drive success.

Our thanks to John for taking the time to share his insights into the SunnyMoney way.

Update June 2013: Congratulations to Sunny Money/Solar Aid for becoming the Ashden Gold Award Winner. For more information see the Ashden Case Study on Sunny Money/Solar Aid. Also, see our blog on the 2013 Ashden Awards and Ashden Winners.