By mid-December, I’d been certain I was going to have no problem paying off my security deposit. The pizzeria was packed virtually every night, and we were finally getting that traction we needed.
In retrospect, it wasn’t traction. It was exams.
Late-night studying led to lots of late-night pizza. Then exams finished, and the town emptied as students went home. The former bustling campus turned into a ghost town. Things picked up slightly around New Year’s, but classes didn’t start until January 21. I’d never realized how dead the college area was during break. Why would I? I’d never stayed through one before.
I kept my staff to a skeleton crew—easy, since most were on vacation—and worked as many shifts as I could. Still, my bank balance kept shrinking. I was finally paying the price for all those delayed payments I’d negotiated. By putting some of my vendors onto my credit card and others on Net 30 terms, I’d tried to buy myself a month’s worth of cash flow. Unfortunately, it also meant that all those bills I’d racked up in early December, when things were hot and I created my new logo and did my Grand Reopening, were coming due in mid to late January, when I’d been running a mostly empty pizzeria.
In desperation, I called Porte. I’d rather take his deal than lose everything. But his secretary said he was in Majorca and wouldn’t be back for a month.
I even considered another crowdfunding campaign. The last one had drained our resources for months, but it gave me cash up front. This time, though, there were no students around to support it.
Out of options, I called Professor Hunt, even though she was officially on break as well. She met me at the pizzeria before opening. “I didn’t realize how bad the crunch was,” I admitted.
“So what’s next?” she asked.
“Honestly?” I rubbed my forehead. “I’m out of ideas. And I’m about to start defaulting on payments. I’m scared I’m going to lose this place.”
She placed a hand on my back. “Whoa. Let’s not jump to conclusions. You’re far from closing down.”
I swallowed the lump in my throat. “But I don’t have enough cash to pay all my bills.”
“Then don’t pay all your bills.” Professor Hunt said.
“What?” I turned, startled. “You’ve told us a dozen times—when you’re out of cash, you’re out of business.”
“Exactly,” she said, deadpan. “So don’t run out of cash. And one way to avoid that is to not pay all your bills.”
“If I don’t pay, my suppliers will cut me off.”
“Some will.”
“You say that like it’s nothing,” I said, motioning to the fridge. “What do I tell my customers when their pizzas don’t have cheese?”
“Is cheese essential to your business?”
I banged on the table in frustration. “Obviously.”
“Then,” she banged as well, mocking me, “you obviously want to keep paying your cheese vendor.”
“Didn’t you just tell me not to?” I stood up in a huff. I needed to get energy out. I came around the counter and started chopping toppings.
“You need to be extremely selective regarding who you send cash to since you don’t have enough to go around.”
“Not following.”
Hunt approached the counter to face me. “How much money are you paying each month on your ovens?”
“$250.”
“What would happen if your oven supplier cut off your deliveries?”
I looked up from the peppers. “What deliveries? I have all the ovens I need.”
“Precisely.” My professor crossed her arms. “So who would you rather upset? Your cheese supplier or the oven company?”
OK, I was starting to get it. “The oven company, I suppose. But if I don’t pay them, couldn’t they come after me?”
“They sure could.”
“Great.” I slumped back down. “So how’s that supposed to help?”
“The oven company could come after you. But the fact is, they have very little leverage. The ovens that Bartley bought for $10,000 might only be worth $6000 if sold used. Not to mention that they’d have to be picked up at their expense. Plus, they would have to get a lawyer or a collection agency involved, costing even more. And they wouldn’t even be coming after you. They’d be coming after Bartley, who made the deal with them, and who is no longer in the pizza business.”
I winced at the image of betrayal and disappointment on Bartley’s face. “That would be really embarrassing. I told Bartley I’d take over the expenses.”
“Yep, and he left you with zero cash to pay his back bills.” Hunt leaned over, snatched a sliver of red pepper, and pointed it at me. “Which reminds me, the money you owe him on the furniture is also low priority.”
“But the agreement said he could take it back if I didn’t make the monthly payments to him on that.”
“Yep.” She bit into the pepper, “And do you think he wants to bring in a lawyer and sue you to get back used furniture that he would then have to move?”
“So I just shouldn’t pay him either?” I thought of everything my parents sacrificed to be honest and keep their commitments. Of everything they’d ever said about corporate leeches.
“Let me be 100% clear. You should pay everyone you owe. You should pay them all in full, just like you agreed.” At least Hunt wasn’t a total leech. “But if there’s not enough cash and you’re forced to default, you need to prioritize. Let’s say you have a large bill due on Monday to a vendor you’re not going to depend on in the future, and three days later, you have a small bill due to a vendor vital to your business. Don’t you dare cut that first check unless you’re absolutely certain you’ll have enough cash to cover the second.”
“But can’t I go bankrupt just as easily by defaulting to non-crucial vendors?”
“No. You’ll go bankrupt much faster defaulting to essential vendors.”
I stopped chopping the pile of mushrooms now on my cutting board. “I’m totally confused.”
“You’re confused because you’ve taken too many math classes.”
I smirked. “Math is the culprit?”
“Yes, because when your high school math teachers gave you word problems, all they cared about was your ability to work out the numbers, and in those problems a dollar is a dollar. But your crisis is only partially a math problem. This time, law and business are far more fundamental disciplines.”
“I’m still totally lost.”
She walked up to our specials board and erased it. “If you default to your cheese vendor, what will they do?” She wrote cheese vendor on the board.
“Stop delivering cheese?”
“Exactly. And if you serve pizza without cheese?”
I laughed. “That’s an oxymoron.”
“Right. You’ll lose your customers. With no cash coming in the door, you’ll have no choice but to close shop.”
“Okay. I get that.”
Hunt wrote a check mark next to cheese vendor and added oven vendor. “But if you default to your oven vendor, what would happen?”
I thought about what happened when our check to the dairy bounced. “I guess they’d call me.”
“And if you still didn’t pay?”
My stomach churned. “Send the police after me? I don’t know, actually.”
“Police?” Hunt giggled. “No. At the very worst they’d start legal action, which would take months to resolve.”
“So all that time I can be selling more pizza and generating more cash.”
Hunt snapped. “Precisely.”
“But you said at the very worst. What else would they do?”
“Most likely, they’d do nothing for a couple weeks. Then they’d send a polite email informing you that your payment is missing. Perhaps they’d follow up with a phone call a week later. Legal action is expensive. It’s not something anyone jumps to do until they’re fully convinced there’s no other choice.”
I scooped up a pile of mushroom slivers and slid them into their container. “So I just jerk them along until the lawsuit comes?”
“No. None of this jerking them along. That’s what immature kids do, and you’re an upright businessman. Talk to them like one. Ultimately, they know they have very little leverage. If they’re smart, they’ll be willing to negotiate a solution that works for everyone.”
Hunt’s words made me straighten my posture and face her. “Like what?”
“Like allowing you to miss a couple months of payments and tacking them onto the end of the contract. They’re more likely to get their money that way than by forcing you into bankruptcy.” She put an X next to oven vendor.
“But the cheese vendor…”
“Won’t be dumb enough to send your next order if you haven’t paid for the last one. If you absolutely can’t pay them, you’ll likely have to switch vendors before you can negotiate a payment plan on back money owed.”
My eyebrows furrowed. “So what do I do now?”
“Exactly what we’ve been doing here. List all the people you owe money to and prioritize the most vital vendors. Never pay any supplier unless you’re certain you can make your payments to each one higher up the list. You need to keep cash coming in. That’s your number one priority. As long as more cash comes in than goes out, given enough time, you’ll bail yourself out of this mess.”
“And if people sue me?”
“No one wants to sue a broke kid. They’ll spend far more in legal fees than they have a prayer of recovering. Their best hope for getting their money is your success.” Hunt held my gaze. “Have real, honest conversations with them. Explain what’s going on. Tell them you’re building a profitable business. Show them your plan for getting through this crisis and ultimately paying what you owe. Real conversations build real trust. And trust will buy you time.”
Hunt was sounding more and more like Dad. I suddenly wondered how he was managing his own financial pinch since the flood. As intimidating as calling suppliers again was, the person I was most embarrassed to face was my old boss.
“What about Bartley? You told him he could take back the furniture if I missed any payments.”
“You think he wants a truckload of used furniture? Talk to him. He understands he left you in a tight spot. He’ll work something out.”
I felt squeamish. “You’re sure?”
“No. Some people look for battles. But most want to see you succeed and will be patient if they realize it’s in everyone’s best interest.”
I gulped. “I guess I’ll have to roll the dice.”
My palms were sticky with sweat as I opened the door to Bartley’s workplace. It was a broad concrete and glass building with smoke stacks emitting white clouds of something I didn’t want to breathe.
We’d set to meet over his lunch hour, but when I arrived, he was barking orders on the phone, while biting into his sandwich and signing a pile of documents. When he finally hung up and heard my request, he bristled.
“Look, Ty,” he said, wiping crumbs from his shirt, “I wanted twenty-eight hundred for the furniture. I thought that was a decent deal—hell, I paid thirty-five hundred just six months earlier. Plus another three hundred for the mover. It was already a decade old when I bought it, so it’s not like the value was dropping fast. And now you’re telling me you can’t even keep up with the twenty-four hundred we agreed on?”
“Cash is super tight.” My hands were twisting into knots. “As you know, I need to pay the security deposit in a few weeks.”
“I haven’t forgotten. I can’t wait to get my name off that lease.” Bartley groaned. “Here’s what I’m willing to do. I didn’t like getting my balls squeezed to drop to $2400 for the furniture. Let’s say you agree to pay me the full $2800 I’d asked for. I, in turn, will give you a year and a half, rather than just a year to pay it off.”
“That’s not going to save me much on the monthly payments.” I looked him square in the eyes, just like I’d practiced, though I desperately wanted to run. He met my gaze, studying me as he chewed over his options.
Then he swallowed and said, “Tell you what. Forget the monthly payments altogether. You’ve given me six hundred so far. You’re late on one payment, another’s coming due. Keep it. Use that money for your deposit. The rest—let’s call it twenty-two hundred—I’ll let you pay it in a lump sum. Due in a year and a half from the date of purchase.”
I ran the numbers in my head. Four hundred in interest on the eighteen hundred I still owed. Not great, but still better than what I’d be paying on a credit card.
Besides, I’d always felt a little dirty about that furniture deal. Hunt had negotiated hard, and we’d gotten the price down, but I knew Bartley had taken a hit. If the oven supplier reached out to him about missed payments—and I had a feeling that call was coming—I wanted to be on good terms.
“Okay,” I said, extending my hand. “You have a deal. I’ll pay you twenty-two hundred, probably all at once, sometime next year.”
“Done.” He shook my hand with surprising warmth. “Best of luck, Ty.”
