More than two-thirds of the water suppliers in Cambodia are unlicensed, unregulated private businesses that often provide untreated water at substandard quality. One of the foremost challenges in converting informal water suppliers in Cambodia to formal, licensed suppliers is capacity building. The World Bank Cambodia Water and Sanitation Program (WSP) have designed an innovative project to combat this problem. This smart lesson describes our capacity-building program for domestic private water supply providers to help them develop the right skills and competencies. The program includes some useful tools, such as the Enterprise Resource Management System (ERMS), a special integrated software application created by collecting all the lessons learned from water supply utilities in capacity-building projects funded by the WSP, and also a performance improvement toolkit that will function not only as a road map for the capacity development of new and existing water providers but also as a tool for the government to use in developing official standard operating procedures (SOPs).