Pizza Hell: Week #17

Hi.

I need to vent.

WHY IS STARTING A BUSINESS SUCH A FUCKING SHITSTORM?!

*Takes deep breath*

Ok, feeling better now.

Two months into negotiations with Fast Food Bill, my back-up financing option calls it quits, leaving me at the mercy of the guy that wants me to make a shitty salary at my own company (fun, right?). Bill is one of Panama’s most succesful and renowned fast food businessmen. He’s already in his 60’s and has a life’s worth of industry experience and contacts. I, on the other hand, am still in diapers when it comes to starting a business. This is my first legit try.

A couple of years ago, I left my investment banking job in the U.S. to become a project analyst at one of Panama’s most important conglomerates. I was the CFO’s right hand man. I was balls deep in projects, from a wide range of industries and countries. It was awesome. Then, the economy slowed down and our project pipeline shrunk significantly, leaving me with plenty of idle time. That was a red flag. I took the job primarily to learn, because the pay was pretty low by U.S. standards, but you don’t learn during idle time. So there I was, not learning and not making good money. I started getting anxious.

One day, I went out for pizza and realized there were only nice italian restaurants or “junk food” chains on offer. There was no chill place to grab some wood-oven za without having to dress up or make an event out of it. Having lived in the U.S. for half of my life, pizza was a daily thing for me, not a weekend treat. As soon as I noticed this, I went home to build a financial model. I wanted to see of there was a business opportunity at hand. And there was!

Numbers worked out, attractive IRR and exciting project. I was stoked.

I told my dad about my idea. His answer: “First, learn how to make pizza. Then we’ll talk”. So I went for it.

“This can’t be as hard as learning financial modeling”, I thought. Boy was I wrong.

I had never cooked an egg in my life but I was determined to do this. I ordered books, watched videos, read forums and cooked a fuck ton of pizza. And as months went by, I got pretty good!

Simultaneously, I kept working on my financial model, cleaning out the details of my business plan, and saving up as much money as I could.

After about 8 months, I got fired from my job. The project pipeline was still slim and the company couldn’t afford to have a project analyst on ice anymore. It was all on good terms and even kind of felt like a blessing. It was like life had given me that little push to start my project, “quitting my job” wasn’t something I had to worry about anymore.

So there I was, job-less, with a business plan in my hands and $16k in the bank ($6k saved up and $10k severance package). My mom offered to put down an extra $10k and with that I was sure I could start my first restaurant, which would serve as the flagship location of my future fast-food chain (easier said then done).

Four months have passed since then. I’ve turned down a handful of interesting job interviews and offers to pursue this venture. Those $16k have turned into $11k and I have barely anything tangible to show for it. Fuck me, right?!

What I have so far (everything has been done by myself, on account of the tight budget):

• Registered name
• 2 logos that have already been registered for trademark
• 3 pretty good dough recipes (one of the city’s top young chefs calls my pizza his 2nd favorite in town!)
• Website (which I had to code myself, over 1k lines of HTML and CSS)
• List of all equipment necessary, prices and suppliers
• Production schedule with two modules (one optimizes for minimal waste and another optimizes for best customer experience)
• Store renders
• I have been negotiating a SICK corner location for the past months and have gotten the property owners to lower their asking price by almost half and accept a flexible, tiered payment structure (big thanks to Roger Fisher for showing how to negotiate with stubborn people)

Oh and there’s one more thing, the little detail that’s been keeping me awake at night with stress. My ongoing negotiation with Fast Food Bill.

Quick background on Bill: When you think of “fast food” what American chain comes to mind? You know which one I’m talking about, the American ICON chain, the fucking EPITOME of fast food . Yeah, that one! Well, Bill brought it down to Panama 10 years ago, turned it into a BEAST and later sold it for millions. So, yeah, be like Bill.

My dad is good childhood friends with Bill and asked him if he could give me some quick pointers. Bill agreed and so we met two months ago. 45 minutes into the meeting, Bill said he liked my concept a lot and wanted to invest, be my business partner and open 12 locations within 5 years. Also, he wanted 25% of the company for about $10K (which meant I would need to put down $30k, which I did not have). I asked him to give me a couple of days to analyze the offer and get back to him.

My dad’s advice: “Take it. Take whatever he offers. He’s doing you a favor. He doesn’t need your shit project. It’s charity. Be humble you little shit…”

So I decided to stop asking my dad for advice, big moment right there. I knew he had good intentions, he just wanted me to succeed and he thought I could only achieve that with Bill’s experience. My gut just didn’t think the offer was fair. So I went with my gut and did a full valuation of my project, later offering Bill 25% of the company for $50k, he agreed and asked to see a full business plan in a next meeting.

Little did I know that would be the beginning of a long two months of negotiation. Everything is a negotiation. Every little fucking thing. It makes things go by soooo slow. It drives me fucking crazy. Every step forward feels amazing, like AMAZING. When he “accepted” the $50k investment I felt like Neil-fucking-Armstrong. But the next meeting, and there is always a next meeting, he gave two steps back and said he wanted 30% and to bring in his buddy, a high level fast food exec with 20%. Back to the drawing board. I analyzed it and later said no, since neither of them was going to be in the trenches with me. One was enough. He agreed.

So there we were, almost ready to close the deal. 25% @ a $200k valuation.

We met so I could present the full business plan, It was going great. 3 hours into the presentation, he -kindly- says he disagrees with my salary proposal and says it should be [picture a bullshit salary here, seriously, a salary you would NEVER consider], growing at a snails pace into the 5th year.

His mindset? That I would have 75% of the company and would get mad bread when (and if) a liquidity event ocurred, which he expected in year 5. Oh and he proposed no dividends until the end of the 3rd year.

My mindset? I’LL BE FUCKING 34 IN FIVE YEARS!! So I’m supposed to spend the next five years still living with my parents?? Keep in mind Bill’s projections for this project are pretty fucking high, and he seems really confident about them. SO WTF SHOULD I EARN LESS THAN I WOULD FLIPPING BURGERS?? Did I forget to mention I’d be the CEO of a chain with, eventually, double digit locations? That sounds like a lot of work, which I look very forward to doing, don’t get me wrong, but sure as hell not for scraps.

So here I am now, analyzing the shit out of this financial model, making sure that the salary I am proposing won’t be a drag on business operations so that I can confidently defend my position this week when Bill gets back from his two week trip to god-knows-where.

Oh and to make things even better, my back-up source of financing (a.k.a. my mom) told me yesterday to not count on her $15k loan anymore and to just take whatever Bill offered. Fucking great…

Names, product, country and pretty much everything has been changed. Any similarities to real life are not really there. Just picture the South Park disclaimer right here lol. Also, despite the occasional setbacks, being an entrepreneur (or at least trying to be) has been one of the most fun and educating experiences ever thus far.