Project 16 : Team operational costs 2014: closing report

This project was to establish our basic infrastructure for the six months from September 2013 to February 2014. The plan was to:

  • Extend contracts of certain team members (marketing team salaries are covered in project pitch 17)
  • Provide for another sales team member and another intern
  • Cover various operational costs including rent, hosting, and others detailed in the budget below.

General report-back

We are closing this project early because it is not achieving what we set out to achieve.

This project was the base on which we hoped to get Paperight further along the road to self-sustainability after a third year of funding.

We planned in detail how we’d work as a team to generate revenue, mainly by supporting our marketing efforts, and each taking an active role in sales. Based on progress and our experience with publishers, outlets and end customers to date, we decided that we were most likely to be successful in focusing on the university textbook market.

By the end of this project, and despite our best efforts and our concept being well received by students and the public, our original business model did not work out. The key reasons were:

  • Publishers not signing on or taking far too long in their ongoing discussions with us
  • Poor customer service in most copy shops, meaning we could not get enough return customers.

We were not able to reach our targets and realised that we needed to change our core model, while remaining true to our mission to use a rights marketplace to help put every book within walking distance of every home.

Objectives achieved and not achieved

Our main objective was to generate more sales, achieving our sales targets and becoming self sustainable by early 2015. We did not achieve this. (See project 17 closing report for more detail on sales.)

Notes

We shifted our focus to marketing as far as possible. To varying degrees all of the Paperight team were involved in marketing and trying to create sales opportunities during the course of this pitch. The core marketing and sales team now consisted of:

  • Marie, our marketing co-ordinator (paid from project 17), created a marketing plan and strategy for Paperight going forward. Her drive was endless and she really did generate volumes of media recognition and public support. Despite her best efforts to generate public interest in purchasing our Paperight products and getting involved, she was limited by the available product offering and the lack of decent content being received from publishers.
  • Nick, our creative head (also paid from project 17), created outstanding design work. He assisted with grant applications, create guides for schools and sponsors on how to work with us, generated all our fliers, newsletters, book covers. Anything design related had Nick’s stamp on it.
  • Yazeed, our business development manager, enabled two large bulk sales and focused on schools and outlets and trying to encourage relationships and potential sales. He walked outlets through the purchasing process, followed and tracked all our sales.
  • Philippa, our content manager, focused on public-domain content, face-to-face outlet support, and on-campus marketing.
  • Oscar, our reading-communities manager, focused on content curation and creating relationships with lecturers at UCT, trying to encourage them to participate and use Paperight products as far as possible.
  • Shaun, our video-production intern, created great footage and finished video for Paperight during the three months that he worked for Paperight.
  • Tarryn, our COO and head of content, continued to build relationships with publishers, most importantly bringing in a range of matric study guides form SA’s top publishers. She also travelled to the Frankfurt Book Fair and won us the CONTEC startup award, which generated PR and industry credibility.

We facilitated bulk sales for:

  • Pelican Park High School
  • Minuteman Press, who sponsored books for Silverstream Secondary School
  • Mduduzi Ngidi Kwamakutha High School

Both of the schools that we sold books to or enabled sponsorships, improved their matric results. They were highly appreciative of having had access to textbooks in their time of need.

Additional achievements:

  • We won the FNB Innovation Index Award
  • We won the Contec Startup Showcase at the Frankfurt Book Fair.
  • We achieved a wide range of media coverage, in print, online, over the radio and in magazines
  • We signed up some major publishers (although not always their best content)
  • We finally registered as a vendor with Unisa, which took over a year.
  • Paperight is now trademarked in South Africa. We are almost complete in our US trademarking process and only need to prove that the mark is in use to complete the final part of our trademarking application.

Measures of success

 

Aim Result
We are hitting our revenue targets (i.e. our existing revenue targets as of end Feb) Not achieved.
We’ve reached 5000 students in 50 schools with books worth R500 000 Not achieved. We did not manage to build sales on the relationships we started with the Young Writers Anthology. We delivered books to approximately 600 students worth about R150 000.
2000 copies downloaded outside of CBDs We barely managed a fraction of this: after we started charging for exam packs, our sales outside of cities plummeted and did not grow again. We’ve recently made these documents free again, but it’s too early to say whether that will have an impact.
R2m in turnover contributed to South African businesses (including licenses to publishers and turnover at copyshops) Not achieved. We created about R75000 in copy shop turnover (including licence fees; R42000 excluding licence fees), and about R31000 (USD3100) in licence fees.
10 outlets are a pleasure to by a book at (customers want to come back and would tell their friends about it) We can confidently say four outlets are great to buy from: Sagittarius Printworks in PMB, The Office Crew in Strand, Aloe X in Grahamstown, and 3@1 Cavendish. We are reasonably certain that another dozen are good. The common factor is always an owner manager who runs the front desk personally. At the most disappointing outlets, managers seem to be in a back office or not present every day.
We expect to see that we’re over a quarter of the way to these targets. Not achieved.
We would like to be halfway to these targets. Not achieved.
We would love to see that we’re well over halfway to these targets. Not achieved.

 

Budget

Original budget: R 1 000 000.00
Actual spend: R 723 797.13
Returned to pool: R 276 202.87

Item Budget Actual Return to pool Comments
Laptop Marie 6500 6500 0
Laptop Philippa 6500 6500 0
External hardrive 2000 900 1100
Laptop sales manager 7000 0 7000
Laptop intern 7000 0 7000
Travel Yazeed 9000 0 9000
Travel sales manager 6000 0 6000
Data bundles Yazeed 1800 0 1800
Data bundles sales manager 1800 0 1800
3g dongle sales manager 500 0 500
Telephone telkom expense 10200 8342.45 1857.55
Telephone skype expense 1200 0 1200
Afrihost expense 7800 4185 3615
Mobile phone expense 600 0 600
Rent expense 120000 128958.39 -8958.39 Spent three additional months, March, April and May
Insurance 14940 5117 9823
Groceries and cleaning material 7860 7224.41 635.59
Paper for printing 1500 0 1500
Toner and ink 3570 750.12 2819.88
Binding machine 1000 0 1000
Rexel rotary trimmer 3000 0 3000
Domain registrations 5400 2404 2996
Freeagent subscriptions 1200 1951.46 -751.46 Spent three additional months, March, April and May
Dropbox subscription 2880 4120.77 -1240.77 Spent three additional months, March, April and May
Google apps subscription 4500 0 4500
PASA membership 6500 5931 569
SABA membership 3500 3300 200
Trovebox subscription 600 0 600
BEE annual certificate fees 3400 0 3400
COIDA 17825 13824.98 4000.02
Google email subscription 9000 0 9000
General accounting fees 36000 6919 29081
VAT returns 5400 0 5400
Year end accounting fees 20000 9633 10367
Provision for legal expense 7000 0 7000
Provision for trademarking expense 16000 0 16000
Fnb bank charges 6000 3599.04 2400.96
Paperight banners 1500 0 1500
Extra chairs for the office 3000 0 3000
Extra table for the office 5000 3800 1200
Bookshelf for accounts filing 500 3790 -3290 There was a desperate need for shelving for filing.
Router for the office 2200 2199 1
Staff workshops 3500 930 2570
Entertainment and meals 2000 3659.88 -1659.88 Spent three additional months, March, April and May
Docraptor monthly subscription 4800 1210.70 3589.30
Paperight monthly winner 4000 0 4000
Tarryn’s screen 1500 1500 0
Nick’s screen 700 700 0
Arthur’s screen 1500 1500 0
Philippa’s screen 700 700 0
Software hosting Paperight 51300 25650 25650
Business cards for employees 2250 0 2250
Dezre – Financial Manager 102000 143567.29 -41567.29 Spent three additional months, March, April and May. See note below.
Tarryn – Content manager 102000 153000 -51000 Spent three additional months, March, April and May. See note below.
Philippa – Content manager 60000 75238.10 -15328.10 Spent one month extra, see note below.
Intern 12000 0 12000
Intern audiovisual 15000 0 15000
Payroll expense 67590 9144.14 58445.86
Recruitment ads 1000 0 1000
Travel local 60000 0 60000
Travel international 25000 0 25000
Bank charges 4485 0 4485
Paperight.com bug fixes 16000 570 15430
Software development 75600 69027 6573
Courier expenses 900 488.22 411.78
Monthly meetings 3000 4500 -1500 Spent three additional months, March, April and May
TOTAL 1000000 723797.13 276202.87

 

Note: We overspent on some salaries and on some subscription items in this project by up to three months. Towards the end of the project period, I knew we’d be letting most of our team go and restructuring others. Rather than creating a new, separate project to cover their notice periods, we used our underspending in other areas to offset the overspending here.

 

Outputs and deliverables

 

IP Author Owner
New content (mostly reformatted public domain content) Paperight team Paperight
Market data (including textbook prescriptions database) Paperight team Paperight
Internal process documents (e.g. wiki and documents) Paperight team Paperight
Improvements to and new features on paperight.com Paperight team Paperight

 

Learnings

We and our many champions all firmly believe that distributed print-on-demand is a crucial part of putting every book within walking distance of every home.

We believe that there were three key challenges we didn’t overcome in the time we had. In no particular order:

  • We made some decisions about strategy and focus that didn’t work out.
  • Copy shop service wasn’t good enough, in general, to draw customers and keep them coming back.
  • Where publishers joined, they almost never gave us the books that mattered.

And the result was that we didn’t sell enough books to hit our targets. Here is more detail.

1. Strategy and focus

Our strategy and focus changed during the course this project.

Our initial focus for September, October and November:

Our main metric was turnover from sales in dollars. We maintained our growing targets till October last year, but slipped dramatically since November. At the end of January, for the first time, we slipped below our cumulative ‘Mort’ figure, the minimum target for staying on track to self-sustainability.

Focus for December, January and February:

Our sales were very low over this period. We decided to shift our focus to our February/March 2014 university-centred promotional campaign, headlined #textbookrevolution. All available resources and staff were now focused on this campaign. The shift in focus was also part of our planning for the year ahead and to encourage social change in the publishing industry.

The focus of the #textbookrevolution campaign was to (a) highlight the fact that 70% of the cost of a textbook is the supply chain (printing, shipping, warehousing, wastage and retail), and that (b) print-on-demand on university campuses could save students and South Africa as much as a billion rand a year.

Our campaign involved creating detailed messaging and plans: one liners, elevator pitches, detailed back stories, a manifesto, a petition, outlet advertising posters and marketing briefs, novelty coasters, and videos; campaign website; doing lots of PR work; and organising a Twitter debate on the high price of textbooks. This is all outlined in more detail in the marketing closing report 17A and 17B.

The campaign itself was a great success. The response from students at Stellenbosch and UCT was great. We collected over 1000 signatures on our #textbookrevolution petition. In addition to the paper petition, students have left great comments on our online petition.

We established that students are highly sensitised to the issue of high textbook prices. We reached more students in the 20 hours we spent on campuses than we would have in months online. The lesson that we learnt here was that we’ve long underestimated the importance of putting people on the ground talking to potential customers (even if we don’t have the books they need yet).

Focus for March, April and May:

We finally concluded, under the weight of years of anecdotal evidence and topped off with a full day in a top Stellenbosch copy shop, that customer service in most copy shops is atrocious. This is a major blow to our business model. I’d long worked on the assumption that 80% of stores would offer good service (or care about offering good service and aim for that actively), and 20% would be bad. I’ve now come to believe the opposite is true. As a result, under our current model we will never consistently create return customers. And without return customers, we could never hit the growth rates we need in order to sustain our current overheads.

We tried hard to train outlets, but managers consistently gatekeep or just did not work with us. We would only be able to tackle this problem in the long term by owning or franchising the outlets ourselves, which is beyond the scope of the project.

As a result, I decided to cut my team, and drastically cut costs. We decided to see whether there are new licencing opportunities for Paperight to explore during the last months of my fellowship.

Before the team went their separate ways, they each contributed to the Paperight story at http://story.paperight.com. This has greatly helped us to find a clearer understanding of why Paperight did not succeed in the way that we wanted to and when we wanted it to.

We realise that we need to accept that the industry is not ready for our model just yet and that it is going to take time to initiate change.  Even establishing a relationship with Unisa took a full year before we could even become a supplier on their database. We still believe that there is a need for Paperight, and it would be ideal if we could keep Paperight alive while this gradual change is taking place.

Adding our stories to story.paperight.com allowed us to also reflect on not only our difficulties that we experienced, but all our achievements, the obstacles that we did overcome in the industry, the contributions that we made to schools in the form of sponsorships and our small contribution towards literacy and inspirtng young writers in our Anthology project.

The team was reduced by the end of March 2014 to three core team members: our COO Tarryn, Financial Manager Dezre and myself. Between the three of us we plan to guide Paperight through its next phase of publishing our Paperight story.

  1. Copy shop service levels

We focused on outlets in Stellenbosch and near UCT and many hours were spent training them both in person and over the phone. Despite this, we still found that we needed to assist them with their purchases. Despite much introspection, know that the difficulties were not related to bad UX on our site, because many other outlets had used the service flawlessly without training.

We also found out that many customers had cancelled their orders due to the length of time that the copy shops took to get back to them. (We ourselves waited almost two weeks on two occasions for books we ordered from Top Copy, a leading copy shop near our office.) We also had a number of phone calls where customers were upset because they had gone to a copy shop only to be turned away because the copy shop didn’t sell books. There were misunderstandings and lack of communication between staff. Strangely, copy shops often behaved as though Paperight was an inconvenience to their business model. They did not like to make changes, and were not always enthusiastic about being able to offer a new service.

We also sent some mystery shoppers to outlets in Stellenbosch and from their experience we don’t think that they would become return customers.

Types of problems that we have experienced with outlets include

  • Needing extensive training before being able to use Paperight
  • Needing repeated training due to inexperience, staff changes, long intervals between initial training and real time sales, and a lack of tech savvy staff.
  • Outlets not being motivated to advertise or actively sell Paperight books.
  • Some outlets were not motivated to even assist Paperight customers which was strange considering that they signed up as outlets.
  • Outlets were confused as to how to identify a Paperight customer.
  • Outlets battled to find the products that they wanted on our website when choosing among a range of similarly-named titles like exam packs. (We are aware that this is a problem we could probably do more to solve.)
  • If a customer ordered more than one book or even a series of exam papers, outlets often panicked and it became a struggle to assist them with the order.
  • They often battled with the book downloading process. For any of a number of reasons not limited but including:
    • viruses on their computer,
    • not knowing where their downloaded documents save to,
    • not understanding whether to select A4 or A5 one-up or two-up layouts (something we have been actively simplifying),
    • changing their internet security settings
    • slow internet speeds
    • mistakenly downloading the sample version and not the full book
    • not scrolling down the screen to click on the download now button and waiting for something to happen
    • using download-accelerator plugins that break when attempting secure downloads like ours.
  • Some outlets wanted full catalogues in order to know what books were on offer for their customers, others said that the catalogue was dense and not user friendly. (We have since produced a better catalogue.)
  • Some outlets allowed customers to view the books online and other outlets expected the customers to know beforehand what they wanted.
  • Many outlet owners and managers are nervous to hand over the use of the Paperight site to their employees. Some have said they are worried about staff abusing the site by using the same .pdf more than once. Others feel that staff can’t be trusted with the store’s Paperight credit balance. We have tried to find ways of reassuring them, but this is ultimately an issue of trust in their businesses that we can’t address.
  • Some outlets were reluctant to top-up until they had a sale. They then needed to top-up while making their sale and this added extra time pressure. We also assume some customers were not prepared to wait.
  • Some outlets after months of training and explanations still make a top up by simply depositing cash into our bank account and assuming that this will turn into credits. They do not phone, or even send an email that they have made a deposit. We can usually identify the outlet from the payment reference.
  • Some of our larger outlets who are more experienced printers, and we think are more likely to offer a great Paperight service, have incredibly fast staff turnover among shopfloor managers.
  • There is a general problem with staff not being aware that their outlet is signed up with Paperight.
  • Not reading our newsletter that we send out showing off new and valuable content.
  • Some managers tend to be disappointed in the lack of customers who just walk in and ask for Paperight. There is a sense of entitlement that Paperight should ensure they have the customers and that they should not have to do promotional work in store.
  • A few outlets have complained that they have been unable to contact us when they need us. They claim that our phone is mostly engaged. We addressed this by installing two extra lines (which since gone back to one line to save costs).
  • Copy shops are not consistent in the printing delivery time, even from the same copy shop. We know of orders that have taken from a 20 minutes to 2 weeks to complete from start to finish.
  • There were one or two copy shops who were not sure whether the download licence purchase was once off or for every book printed. This came up in training with Wizardz, where we discovered that they had reprinted the same PDF (we know because these were orders we placed with them ourselves).

These were common problems, but there were bright spots, outlets who are really engaged and love working with us. Our favourite is Sagittarius Print Works in Pietermaritzburg, where the owner Shahana Maharaj works hard to promote her Paperight-related services at local schools and in her area (e.g. putting flyers in all the post boxes at her post office, and taking order forms to schools).

Exit/Sustainability/Viability

The core business model that this project supported is not sustainable. It might be sustainable if we can keep all the costs and the team as low as possible, until revenue picks up, content is increased and the public becomes more aware of our products. Until then we are also looking to new business models, particularly around copy licensing, which is a much closer fit to existing publisher and institutional activities.

Conclusion

We did not achieve our big audacious goals, but we have made a noticeable impact on the publishing industry, and opened minds around greater access to books. We have inspired businesses to become more openness-minded, too. For instance, we’re a featured company in a new book published by Palgrave Macmillan. We have positively affected the lives of at least 300 children, many of whose matric exam results we know were improved over those in the prior year. We encouraged literacy and discussions about literacy in South Africa.

Paperight will continue in a new fashion, certainly much leaner. This is only the end of a chapter, not the book.

Next steps

As a step to reducing running costs, Paperight will be managed by Electric Book Works as one of its flagships projects and our focus over the next couple of months will be on photocopy licensing and testing reception to an open prescribed-textbooks database, starting with a full catalogue of prescribed texts at UCT.

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