LabourNet – Making a people-centred business profitable
LabourNet is an Indian social enterprise that focuses on formalising informal labour. The organization improves the socioeconomic status of workers and looks at how skilling, reskilling, or upskilling can improve people’s chances of remaining relevant in the labour market. The company has certified about 700,000 people since 2012. In this interview, founder Gayathri Vasuvedan explains how the right pricing structure helped LabourNet to build a profitable and people focused business.
Who do you see as your customers and how did you determine your customer base?
In a sense, we have two customers. Customer type one is the person who pays for the work that we do, which is normally the company. The other customer is the candidate himself or herself, who undergoes various forms of certification.
We’ve worked with what we call shared value business. Every company needs a skilled workforce, right? If it's for example a beauty company, not only the customer is important but the skills of the beautician as well. We enhance the skilling for companies. This could be a short certification or it could be a three year training for the employees, depending on the needs for a particular job.
Are both customer bases paying for your services?
Normally the companies pay for our services. The candidates have started paying very recently. At this point the workers are paying far less. About 1% of our revenues come from candidates, and the remainder comes from companies.
When and how did you realize that your product fulfilled a need or was desired by your customers?
We realised that the very large number of workers in India who are not employed on a full-time basis were an opportunity. In 2007 we said that's something that we could work with, because companies could work with us to ensure that they are able to reach this space. Since then it has evolved, and we now have many more products we are able to define.
Can you outline the main challenges of developing your business model?
Our main challenge has been to scale in a profitable manner, because at the end of the day we are providing a service that is very people-intensive. It requires a human touch. This has been one of our big challenges because as we scale, we need to have better methods of standardisation. This is more problematic, the more people-dependent the processes are. We're looking at technology to help us solve that problem.
The second challenge is that given it's not an established model, oftentimes we end up being confused with the not-for-profit community work. Delineating our product as a unique product has taken time and effort. The third challenge is the social enterprise space itself; funding is very limited.
What were the key ingredients to make your business model profitable and what distinguishes you from nonprofits?
One of the things that we did to make it profitable was to focus on the unit costs for different products. We started distinguishing what could be the elements which actually make up the cost and therefore cause either direct or indirect costs to go up. How do you minimise that? I think that we were able to articulate this reasonably well.
Then, the difference between a nonprofit and a for-profit is the fact that we're not project-led. We're more mission-led. Often nonprofits’ work is determined by the grant amount and the grant period of time. We don't have that limitation and therefore we can continue to work on what we are working. I think that is the biggest distinguishing factor.
Do you feel that serving multiple types of customers can be challenging?
Frankly, it is challenging because of the range that we have. For example, the expectation of the company’s Marketing Head who says, "You know what? My cream should be used by all beauticians," vis-a-vis what you have to teach in order for a beautician to be good is different. How we define our ROI (return on investment) for both customers, the companies and workers, in a valid manner is always a tightrope walk for us as we get into a new sector. The second challenge is that lack of determination in India of what the social interface is in that service.
What are the specific requirements when a company caters to businesses versus individuals?
Our company is largely B2B. Businesses pay us and therefore we are in that sense a B2B company. And we have to deliver to ensure that the company's objectives are met, as well as the individual's objectives. I think in a B2B environment the biggest problem is price. Year after year you can get beaten down on your price unless you're adding more value. The second issue is that the acquisition of B2B customers is a lot slower if you're not a tech-driven company.
How do you acquire B2B customers?
Today we have a field force that goes to the companies and then looks at acquiring customers. We also do a sort of silent digital campaign around it. We use LinkedIn quite extensively to reach out to the marketing heads, to the R&D heads, to see whether they have interest in this kind of work that we do.
What was the biggest lesson learned when you structured your business model around various customers?
The B2B customer is a very discerning customer. You must be very, very clear in the value that you provide to a B2B customer. Their sensitivity to lack of transparency in terms of what is the value of your product or service is very high. I think that's my biggest lesson in the last few years.
And what advice would you give to other businesses if they are structuring their B2B or B2C customer model?
I think one of the very important lessons for me has been that you shouldn't be dependent on very few customers. Both sector diversification and customer base diversification in the same sector are very, very important in the B2B world. But when it is a B2B2C - that's really how I would put ourselves – it is very important to keep the engagement level high with the workers or candidates. And for that it has to be again the immediate value that the B2C customer would see. B2B customers have a longer term vision, but as a B2C it is immediate gratification. There is no time for a rethink or failure.