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Paper Chase The Story of Pay-per-Shred

Background

It was late April 1992 when Memorial University of Newfoundland business students Tom Cooper and
Ken Jerrett finished their exams for the term. Like thousands of high school and post secondary
students across the province, Tom and Ken were looking forward to getting worthwhile summer jobs to
earn some money for the upcoming school year. A summer job would also satisfy the work term
component of the business co-operative programme in which they were enrolled at university.
However, in the weeks leading up to the summer term, they both realized that good jobs, actually any
jobs, were scarce. With the summer rapidly approaching, Ken and Tom looked at their options. They
could either continue looking for suitable jobs or they could consider starting a summer business and as
Tom said, "Make our own fate." Being entrepreneurs at heart, the pair seriously began to consider
forming their own business venture in St. John's.

Coming up with the idea was not a problem. In previous office jobs Tom saw a large amount of paper
being shredded by staff. Despite being a time-consuming task, shredding of discarded documents was
necessary because many of the papers, files and notes were confidential. From his experience, Tom saw
three problems that companies had with disposing of confidential documents. First of all, having
regular employees shredding documents cost the employer time and money. Secondly, Tom felt that
offices

This case was prepared by Roger Power for the Atlantic Entrepreneurial Institute as a basis for classroom discussion, and is not meant to
illustrate either effective or ineffective management.

Copyright � 1993, the Atlantic Entrepreneurial Institute. Reproduction of this teaching note is allowed without permission for
educational purposes, but all such reproduction must acknowledge the copyright. This permission does not include publication.

were reluctant to send documents to the three other document disposal companies in the city because
they could be lost or stolen on transit to the disposal site. Finally, offices which had their own shredding
machine often required access to additional machines during peak periods. Based on these three issues,
Tom saw an opportunity for a paper shredding company to do things better.

After discussing the idea between themselves, Tom and Ken felt that a mobile document shredding
service would solve these problems. Having an outfit come in to the office would enable a company to
avoid using its employees to handle shredding work. By offering on-site shredding, a more secure
service could be given because documents never left the office (the paper shredding company could
also complete the shredding off-site if the company wished). As well, a mobile shredding service would
be able to quickly assist offices during busy periods by supplying additional shredding capacity.
Overall, Tom and Ken believed that a mobile shredding service would be successful.

Recognizing that providing a mobile paper shredding service had potential, they both became very
interested in pursuing the idea. After naming the company "Pay-Per-Shred," they still felt that the
opportunity needed further investigation. Thus, they decided that it was time to do some research into
the paper shredding business before making a final decision.

The Business Plan

Realizing that time was short, Tom and Ken formed a partnership and began to work on their business
plan. They first had to decide on the main questions that they wanted the business plan to answer. As
Tom remarked, "Asking the right questions is just as important as finding the right answers." After
some discussion, they agreed that they needed to find answers to the following questions before they
could decide if they should start the business:
 1. What exactly is the service which we are offering?
2. Who are our potential customers? Do they need our service?
3. How do we let people know about the service?
4. What equipment do we need to offer our service?
5. What level of sales can we expect? What are our expenses?

Armed with a basic outline of a business plan (see Exhibit 1), they set out to answer these questions.
After three days they had gathered the following information:

1. The typical office employee in Newfoundland produces 35 kilograms of paper per year. A
substantial percentage of this paper is considered confidential.
2. The cost of theft of sensitive documents from businesses and government in the United States is
estimated at $5 billion annually.
3. A heavy-duty industrial mobile shredder costs $2,700. This machine can shred standard paper,
computer paper, blueprints, spreadsheets and file folders at a rate of 9,000 sheets per hour.
Weighing 40 pounds or 18 kilograms, the shredder can be easily carried in a van or in the trunk
of a car.
4. The only direct competitor in the shredding business in St. John's is Nova Recycling. Two other
companies, Storall Limited and Sanicare Limited, provide general document destruction
services.

While it was a start, they knew that these facts only scratched the surface. "We need more, a lot more!"
lamented Ken. Tom agreed and wondered where they would get more information. Going into their first
official planning meeting each hoped that they could find the answers.

Questions for Discussion

1. Discuss the advantages and disadvantages of being a student with a summer business.
2. Can you think of other questions which the entrepreneurs will need answered to complete their
business plan?
3. What are some information sources which Tom and Ken can use to complete their business
plan?
4. Should Tom and Ken ask for advice from others in preparing their business plan?
Why or why not?
5. Assuming that the business is started, what choices do Tom and Ken have at the end of the
summer when it is time to return to class? Discuss.

Exhibit 1

Business Plan Components

THE OPPORTUNITY

Describe the situation and indicate why it represents an opportunity.

THE SERVICE

Describe the proposed service and highlight its unique features.

MARKET ANALYSIS AND MARKETING PLAN

Get a "feel" for the situation. Locate those who you will sell the service to and identify the competition.
Outline how you will get your target market to buy your service. Estimate your sales.

OPERATIONS PLAN

Identify what equipment you need and how you will deliver your service.

MANAGEMENT PLAN

Describe your skills and abilities as the operators of the business.

FINANCIAL PLAN

Calculate what you own, what you owe and how much money the business will earn. State how much
capital you need to start the business and where you will get it.