In fact, with 150 staff and sales of around £19m, it’s safe to say it’s on the more compact and bijou PLC scale. Nevertheless with operations and partnerships in France, the Netherlands, Ireland, New Zealand and the US, Rafferty’s ambitions for Grafenia are clearly far from modest.

And despite the fact that Grafenia’s best known brand is still Printing.com, those ambitions extend well beyond print with its latest offering, Nettl, tasked with doing for web design what Printing.com did for quick printing.

Darryl Danielli How do you get into printing?

Tony Rafferty It all originated from nightclubs. Back in the days before Facebook they all needed flyers; on a Friday or Saturday night they would be handed out in their thousands, probably millions. 

Is that how you started?

Exactly, in Sheffield. My background was that as a kid I wrote computer games and that led to studying sciences at sixth form and then electronics at university. Then one day at university I started to think that it wasn’t all that interesting really and I got waylaid by putting events on, arranging gigs for bands, that sort of thing.

So you basically got sucked into the social side of university rather than the academic side.

Well it was the social side in the sense of putting events on and it became quite intoxicating, but it was a great way to learn about business I suppose. Then in my second year, quite surprisingly, the university said they didn’t really need me there anymore and in fact I shouldn’t come back.

So you got kicked out?

Well, yes. I think the technical term was that I had become distracted. So I had to think about what I was going to do and I started to look at the nightclubs and events in Sheffield where I’d been studying. And it really started out because I was putting eight A6 flyers on an A3 sheet. I had worked out that it was cheaper to produce en masse, but I only needed four of them for my own use, so I started selling the other four squares on the sheet to other organisers to cover the costs of my flyers. 

When was this?

1992, 1993 and 1994 we were just flying by the seats of our pants with flyers. I was still doing freelance club promotion and some nights you could take a £1,000 and a couple of bottles of Champagne for an after-party, other nights you would make a loss and try to bail out the fire exit because you couldn’t pay the venue. But you learned very quickly, because if you didn’t you fell by the wayside.

It sounds very hand to mouth?

Absolutely, there was lots of ducking and diving to try and turn over four or five thousand a month.

So when did it become a proper print business?

In 1994 we started to develop the structures and had a turnover of £600,000. It was also when we started to develop the core software, which over the years became the W3P [web-to-print] platform we sell commercially.

So were you a techie back then?

I was doing the systems analysis and the architecture. But today we have someone far, far better than me doing that side of things. Some of the lines of code, not much anymore admittedly, but some of the code and inherent logic dates back 20 years. But that was what enabled us to grow, well before we bought the Printing.com domain. We also started to develop the trade offering.

Is that what became Printing.com?

Eventually. We realised that printers back then didn’t often think about supply chain logistics, but we knew that if you didn’t apply a formal approach to getting the product into the hands of the end-user through the reseller, then it was too inefficient, there was too much uncertainty. We thought we would try to find a way to do it more efficiently and that was how we ended up experimenting with the Printing.com formula. The idea was that we would have our own shops in all the principal cities selling flyers and leaflets, adopt the hub and spoke production model and expand our software over a wider network. Any printer could open a shop in their hometown, but we wanted to prove our systems could work over an extended area.

How long did it take to prove the model?

We’re now up to around the year 2000, and we were stretching our systems and trying to prove the rules of engagement between the local Printing.com shop or studio and the hub, then we could make the whole process more efficient.

You’ve said that in the very early days the business was very hand to mouth, so how did you finance the growth?

To this day when people ask for business advice, I talk about factoring. From 1993 to 2000 I used factoring as the mechanism to grow the business, so basically selling my invoices and allowing someone to collect them. Because the greatest asset we had was our book debt and we needed to generate the maximum potential cashflow from the book debt.

Wasn’t that expensive though?

Well, in total we secured £3.5m to fund the business during its whole evolution from external shareholders and as we always show on our report we’ve now returned almost £12m, so if anyone thinks that 2% of turnover plus 2.5% over base rate is expensive, once you get into equity finance, it’s safe to say that factoring looks cheap at the time. You quickly find it’s a pragmatic way to borrow provided you keep growing the business and you have decent gross profits.

When did you float the business?

Legally the company was founded on 2 August 1992 and by the end of the second year we had 14 staff. But by then we knew we wanted to integrate production, because we were outsourcing all our print to various printers in Manchester. So we looked at all the options available, including raising some venture capital, but I read about a company called Revell & George in PrintWeek. It was a Manchester business that had had a big fight with the unions and been through some challenging times, but was only a couple of miles away. So I thought maybe they needed some more work and there might be an interesting deal to be done.

How do you mean interesting?

I called up the managing director Peter Gordon and we hit it off. It was a 100-year-old commercial printer and in the end we did a hybrid deal where rather than go into some sort of equity structure, we hired their printing presses and put our people on them. In the end they took their business and rolled it into another print business and there was an equity exchange and we took on their premises. So that got us the infrastructure we needed and I raised £200,000 for 15% of the business. That was 190,000 of preference shares and 10,000 of ordinary shares.

Meaning?

Well you can define preference shares anyway you like, but the way that venture capitalists define it is that you have to pay that money back using redemptions, so it’s akin to a loan. So what they said was that they would put £200,000 in, but would like £190,000 paid back as if it was a loan and they will have their shares as well. So when I see people on Dragons’ Den with their business barely at first base and yet they won’t give away 20% for £200,000 it makes me laugh. So anyway that was the deal that we did, that was us starting to dance with the devil to give us the momentum we needed to get to the next level.

So was that when you launched your first store?

Peter Gunning who is now a board director looking after IT, ran a small design business in Edinburgh so we did a deal with him where he came on board and pioneered the store concept.

Because you already had the hub by this point?

We did and we were selling to the trade and to nightclubs and a couple of other vertical markets, but we wanted to find something that was scalable and we felt that the ways of the quickprint shops with their small two-colour presses was outmoded and outdated. So we opened the first store, Edinburgh, in 1998 and we achieved higher first year sales with lower start-up costs than any of the mainstream print franchises.

Was Edinburgh a franchise then?

No, we owned it, but we got Peter on board as an entrepreneur to see what the impact would be. We had been hoicking the business around a few venture capitalists, but nobody was interested.

What sort of size were you at this time?

Around £2m or £3m. Eventually I spoke to guy I knew from the Manchester investment scene and he worked with high net-worth individuals that were looking to invest using the Enterprise Investment Scheme. Then we put the business onto OFEX, which was the Wild West investment exchange that was lower regulated than AIM. So that was what we did in 2000 and we acquired the Printing.com domain name for $1m.

Wow. Did you buy that from someone that was using the domain then?

I allow 10% of my time to be what I call ‘absent-minded time’, to dabble, explore and hit dead ends, because that’s really important. I was just dabbling one day when I wondered who owned Printing.com. This was March 2000 and the guy was getting bids from some of the big digital players, but we put an offer to him and gave him some involvement in the business and did the deal.

So what were you called before?

The stores were called Flyer Express. This was the time when a lot of dotcoms were crashing and burning, and we were sort of dotcom that wasn’t a dotcom. Well, I suppose we were because all of our revenues were coming in online from our stores, but the revenue for our stores from their customers was 100% offline. But at least we were moving part of the supply chain online, our part. We took the holistic view that it was about getting product from the centre into the hands of the local store as efficiently as possible, and having half of the supply chain 100% online was better than nothing. Then in 2002 we launched the bolt-on franchise model.

What led you to roll out the bolt-ons?

Well we just thought running these [stores] ourselves is fine, but our speed of growth was limited by the demands they placed on capital, so we thought why not let people that already have connections with their local business community do a Printing.com. So we launched the bolt-ons, in PrintWeek funnily enough, and we were inundated with enquiries.

So basically you had the wholly owned stores, then the franchises and then the bolt-ons?

We actually launched the bolt-ons before the full franchises, we launched those in 2003. That worked well, people paid us a fee and it worked because they were all familiar with working with files and trusting that if they followed the rules they were safe in the knowledge that it would come back the way their final client expected. We expanded printing quickly to 300 [bolt-ons] in the UK and Ireland and were making profits of £2.4m by 2007.

And with no massive capital outlay?

Well no, but we were investing heavily in our systems. But then the world changed in 2008/2009. The business model in print had been evolving for a while before that though. For example the first round of dotcoms in our sector like CtrlP didn’t work, Print Potato didn’t even launch even though it raised quite a lot of money In America there was iPrint, it raised $50m, but it went nowhere. By 2008 the online market was a genuine market. But we were probably slightly constrained by the symbiotic relationship between the franchisor and the franchisee.

So how do you overcome that?

My aim has always been to find the next scalable business. It’s in our DNA: developing formulas that help small graphic professionals grow. We’ve come to realise that this has to be the focus of the business. We’ve expanded W3P to more than 100 partners across the UK and Ireland. But our focus now is Nettl and our very low-touch relationship with trade buyers on Marqetspace.com, which has 1,200 trade buyers – our aim was to find a new agenda and new direction for the business that was scalable.

And Nettl is?

Nettl is for people that are about design for print. Nettl can be partnered with a very successful litho or digital printer that wants to create a cross-media offering for their client base, but they find the web part frustrating. Equally, if you have a design for print DNA, regardless of whether you do that print or not, Nettl works.

And Printing.com is still a core brand?

We’ve been having very genuine and honest discussions with our Printing.com partners over the past year, because Printing.com was always a price-driven business. But allowing for the margin of our partners, the reality is that whatever price point we set nowadays customers can always buy it cheaper online. So more and more of our partners are leading now with a creative edge.

But you’re not walking away from print?

Absolutely not. Print is still two thirds of the business at our established Nettl stores, but we know that the way to secure clients above the Vistaprint market, the bigger, local SME clients, is to be right at the heart of their long-term marketing and that means that you need to delivering their website, web shop or booking app. So we’ve developed a platform that enables designers with Photoshop skills to produce websites after four hours.

But if Nettl stores still offer print, but also web design, does that mean that you’re going to phase out the Printing.com brand?

What we’ve said is that our partners are invited to join Nettl, and if all of them decide to join then we will no longer continue the Printing.com franchise. But we will wait and see and we will have a further dialogue with them in January 2016.

And you can then sell the Printing.com domain to someone for a cool $1m?

[Laughs] I’m not even thinking that far ahead, our partners have contracts to use that name and we can’t push the agenda in a way our partners don’t want, otherwise they will vote with their feet.

You mentioned earlier that at one time there were around 300 Printing.com franchises and bolt-ons, how many are there now?

Just over 100. Some have adopted the W3P [web-to-print] system.

Which means they use their own branding?

Yes, but are linked to all of our back office functions.

So still a partner then?

Everything we do is about skill sets, keeping the most seemingly complex tasks in peoples’ comfort zones. So with W3P it is two hours to learn and then 10 minutes to make a template. With Brambl (Nettl’s web development application) after four hours training you can build a client’s website – which for many clients is their biggest pain point.

So you think that the web development is the next big scalable opportunity?

Well, if you look at the market, right at the bottom DIY end of the market you have the likes of Wix, GoDaddy and 1and1. With them a very small business could build their own website for probably £100 – but the point is that it’s an incredibly consolidated section of the market. Then in the next bracket £100-£1,000 [site builds] we reckon there are probably 20,000 practitioners. They all have adjectives, Tall Steve, Big Mike or Ke-ra-zy Fred and they’re nearly all one-man bands. There isn’t a nationwide network.

But aren’t you ultimately going to end up in the same position you are with Printing.com and end up in a price-driven market as the Nettl stores are competing with one-man bands?

It’s all about sinking time.

What’s that?

Basically the one-man operations are sinking a high proportion of time for each project into finding out how to do things, which nobody is prepared to pay for. So the idea is that we could centralise the ‘finding out’. A business client in Bristol, Birmingham, Bolton or Barnsley probably has similar needs. So if we can develop a utilitarian approach that will satisfy 80% of the opportunities and enable them to be done very efficiently, by building the critical know-how into the system enabling a lower skill set at the point of utilisation.

So basically you’re taking the hub and spoke model of Printing.com and using that for Nettl, it’s just that the hub is expertise and not printing presses.

Exactly.

So is Nettl the future of the business?

Priting.com is absolutely cherished, but we’re trying to take a big step with Nettl. And we’re trying to find bigger clients who we can sell print and web solutions to, but we can’t do it with a print-themed name. It’s taken a lot of soul searching. We asked ourselves the question whether we could create a ‘web zone’ on Printing.com or the ‘digital corner’ – I guess in end we opted for digital first. We believe we can grow it to the 200-300 Nettl stores in two to three years, that’s where we would like to be anyway.

But print is still part of Nettl?

Absolutely, an integral part. Printing.com is still part of the Nettl branding. In fact, much of the success of our Nettl stores is based in print. The stores that converted to Nettl already had the nucleus of the client relationship earned through print, then all they have to do is extend that relationship into websites and then build new ones with clients that might not have any print requirements.

How is the business doing generally?

Our results will be out at the beginning of June and we’ve already indicated to the market that there will be a slight growth in profits, but turnover will be lower as we’ve discontinued chasing some turnover that wasn’t profitable. 

Back to Nettl though, I appreciate that it’s about helping your customers to evolve and grow, but clearly it’s the same reasoning for your business – what changes have you had to make?

We’ve had to geek up. We’ve been developing W3P or some time, so we already had a fairly high geek quota, but we’ve taken some people off that and moved them onto Nettl and helped them to develop the base skills, so we now have a team that can support our customers. Franchising is about breaking something down to established steps, granulising what people need to do and making sure they have the necessary skills. It’s been a big change though.

Have you had to recruit more geeks though?

No. We don’t recruit from outside, we recruit from the bottom and move people up.

You mean graduates?

Exactly. The nucleus of the business is to get the best people and then give them the skill set they need. We have a highly structured development curve to give them the know-how and expertise. It’s about homogenising the underlying nuts and bolts, which leaves a platform for individual flair.

Do you look for a particular type of graduate?

We always like language graduates, because that’s the hardest skill to train. For Nettl though, we’re focused on people from design colleges, who don’t necessarily know a lot about the web, but understand design – we then give them the technical skills.

But that’s probably easier with graduates than a dyed-in-the-wool printer?

I think fewer print business owners are comfortable with the web, that’s true, but they already have the most important element: the clients. We’ve already learned with Printing.com how to train people and how to give effective feedback, so this is just changing the mechanism from print to web, which is a big change, but we’re using exactly the same foundations. There’s a lot of bollocks in web design, which can put people off. We make it accessible by creating things that we call fast paths to make it a step-by-step process.

Have those structures come about from following any particular business methodology?

In the early days I used to read a lot business books and learn the methodologies. But our mantra moving forward is how do you put a skeleton of a structure in place that controls the production flow, the ideas flow and the methodology and still build into that the flexibility that a customer demands? That’s the two sides of my operational ethos and that’s the start button we want to press with Nettl, we want to see that if we slightly skew the essence of the original [Printing.com] offering if we can go off and do that again – which we think we can.

So you developed your own methodology?

I believe in the Theory of Constraints, but lots of books talk about the size and shape of a business and when you should change it to grow. We got stuck at £110,000 per month in the mid 1990s. We put more people in and it didn’t work, it didn’t matter how many more people we put in. Over one bank holiday though we created four work groups, each with one account manager, an account executive and two designers rather than separate teams of each discipline. So we created modules that were scalable and we doubled the business in three months. It was a big deal at the time because we had to buy four fax machines.

Have there been any scary moments?

Actually it was after we created the work groups. In 1996 I overheated the company. We were going up every month, but we were growing too fast and we had three months of losses because our systems weren’t keeping up. It wasn’t failure, but we were staring at failure for a short while because we weren’t achieving our KPIs. But we realised what had to be done and did it.

Final question: with Printing.com you had the brand and the hub model, so you could have been the UK’s answer to Germany’s Flyeralarm, but you ended up going down the franchise route in 2003 instead, do you ever regret that?

We put a lot of effort and resource in adding online to our existing partners and we then made that available to our franchise partners in the shape of W3P. Looking back, if we had said in 2008: ‘Right enough of this franchise model’, perhaps we may have grown bigger with an online pureplay. But we would have most likely been ostracised by almost every one of our partners and it would certainly have been a very different five years from 2008 onwards. Would we have made more money last month or last year if we had gone down the Flyeralarm route? Who knows. But there’s no point dwelling on the past, at the moment we’re focused on the trade aspect of the business with Marqetspace and Nettl. The important thing is that we certainly believe our best days are ahead of us. 

Grafenia brands

• BrandDemand 
• Drukland 
• Flyerzone 
• Marqetspace 
• Nettl 
• Printing.com 
• TemplateCloud 
• W3P