Should I close my business?
How do you come to this decision? What are the factors you should consider? What’s the right way to close a business such that you’ll be able to live to fight another day? In a frank conversation with “Decision Vision” Host Michael Blake, Milas King of Davinci’s Pizza answers these questions and more.
Milas King, Davinci’s Pizza
Milas King is the Co-Founder and Co-Owner of DaVinci’s Pizza, with locations in Midtown Atlanta, Smyrna, and Kennesaw, Georgia. Davinci’s Pizza is recognized for their made from scratch pizzas and other menu items, great service, and community involvement.
Milas is also the owner of an e-commerce company and a real estate development company.
Michael Blake, Brady Ware & Company
Michael Blake is Host of the “Decision Vision” podcast series and a Director of Brady Ware & Company. Mike specializes in the valuation of intellectual property-driven firms, such as software firms, aerospace firms and professional services firms, most frequently in the capacity as a transaction advisor, helping clients obtain great outcomes from complex transaction opportunities. He is also a specialist in the appraisal of intellectual properties as stand-alone assets, such as software, trade secrets, and patents.
Mike has been a full-time business appraiser for 13 years with public accounting firms, boutique business appraisal firms, and an owner of his own firm. Prior to that, he spent 8 years in venture capital and investment banking, including transactions in the U.S., Israel, Russia, Ukraine, and Belarus.
Brady Ware & Company
Brady Ware & Company is a regional full-service accounting and advisory firm which helps businesses and entrepreneurs make visions a reality. Brady Ware services clients nationally from its offices in Alpharetta, GA; Columbus and Dayton, OH; and Richmond, IN. The firm is growth minded, committed to the regions in which they operate, and most importantly, they make significant investments in their people and service offerings to meet the changing financial needs of those they are privileged to serve. The firm is dedicated to providing results that make a difference for its clients.
Decision Vision Podcast Series
“Decision Vision” is a podcast covering topics and issues facing small business owners and connecting them with solutions from leading experts. This series is presented by Brady Ware & Company. If you are a decision maker for a small business, we’d love to hear from you. Contact us at decisionvision@bradyware.com and make sure to listen to every Thursday to the “Decision Vision” podcast. Past episodes of “Decision Vision” can be found here. “Decision Vision” is produced and broadcast by Business RadioX®.
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Show Transcript
Intro: [00:00:01] Welcome to Decision Vision, a podcast series focusing on critical business decisions, brought to you by Brady Ware & Company. Brady Ware is a regional full-service, accounting and advisory firm that helps businesses and entrepreneurs make vision a reality.
Michael Blake: [00:00:20] And welcome to another episode of Decision Vision, a podcast giving you, the listener, clear vision to make great decisions. In each episode, we’re discussing the process of making decision on a different topic. Rather than making recommendations because everyone’s circumstances are different, we will talk to subject matter experts about how they would recommend thinking about that decision.
Michael Blake: [00:00:38] My name is Mike Blake, and I am your host for today’s program. I’m a Director at Brady Ware & Company, a full-service accounting firm based in Dayton, Ohio, with offices in Dayton; Columbus, Ohio; Richmond, Indiana; and Alpharetta, Georgia, which is where we are recording today. Brady Ware is sponsoring this podcast. If you like this podcast, please subscribe on your favorite podcast aggregator, and please also consider leaving a review of the podcast as well.
Michael Blake: [00:01:03] And so, our topic today is, should you close your business? And I predict this topic is going to have a lot of interest because it’s kind of one of those topics nobody wants to talk about. When you’re an entrepreneur, particularly if you’re a first-time entrepreneur, you sort of have boundless optimism. The last thing you want to think about is the end of the road. You hope it never happens.
Michael Blake: [00:01:29] And talking to entrepreneurs about closing a business is like talking to your parents or your grandparents about their funeral arrangements. It’s about as pleasant and comfortable a conversation, and you’re about as enthusiastic engagement. But the fact of the matter is that not every business survives forever. In fact, most businesses don’t survive even a year or two. And sometimes, closing a business effectively and efficiency is as important as how you run the business because if you do it the wrong way the results can be very unpleasant and even disastrous. If you do it the right way, that often means that you, kind of, live to fight another day.
Michael Blake: [00:02:15] And I am delighted to invite Milas King on the program. Milas is a serial entrepreneur. And he’s usually on the other side of the microphone rather than being the target here of the interview. And I’m very grateful. And I hope our listeners are grateful because not everyone wants to talk about this kind of subject. Milas is willing to do it. I think it takes a lot of courage, It takes a lot of emotional maturity to do that because you do talk about some very tough subjects and will probably reliving some tough moments here. And I’m very grateful that Milas is willing to do that with us today.
Michael Blake: [00:02:56] Milas is co-founder of DaVinci’s Pizzeria, which is a small pizza chain with various locations around Atlanta. Founded in 2006 as an original concept, they built their brand on forgotten values in today’s distracted tech-driven society. I say this as I’m reading off of both a smartphone and an iPad. Be the neighborhood pizzeria of choice to the passionate commitment to food quality, guest experience, employee empowerment, and community advocacy is their motto. Milas, thank you so much for joining us today.
Milas King: [00:03:26] Okay. Thanks for having me.
Michael Blake: [00:03:28] So, you’ve got one business that we just talked about. You’re in the pizza business. Any other businesses? You’re not just a one-trick pony, are you?
Milas King: [00:03:39] Yeah, I have a couple of things. I have an e-commerce group in Scanner Society, and I just started a real estate company.
Michael Blake: [00:03:50] And I kind of wonder if you have — I’m going to go off the script for just a second. I promise I’ll come back to it. But that answer kind of begs the question. You’ve closed a couple of businesses in your career.
Milas King: [00:04:02] That’s correct.
Michael Blake: [00:04:03] Is the fact that you had to close a couple of businesses, do you think that drives the fact that you have multiple businesses now, or that’s sort of a diversification thing?
Milas King: [00:04:11] Sort of, because it’s like you put a couple of horses in the race and see which one you think you’re going to go all in on. Because that way, for me, it has worked out better. So, I didn’t have two to three years not doing anything else when I could have been — maybe something would have shown better promise in the beginning. So, yes, that is a part of it.
Michael Blake: [00:04:36] So, what kinds of businesses have you had and have had to close over the years?
Milas King: [00:04:42] The first one was my original passion, which was video production. So, I did a studio back in ’92. I had a building, employees, and then the DSLR came out. And what happened was all the corporate clients I used to get, they started going to the schools. And then, the schools, back then, you have to find a good film program. Now, everybody had a film program. So, you have this massive influx of every quarter, media, professionals coming out. And then the corporate people will just start going to these local colleges to get their things produced. And so, it really just dried up and kind of disrupted the business.
Michael Blake: [00:05:22] So, overnight, that technology made your business to something viable and, I hope, financially successful into something that was really going to be a struggle because, in effect, it democratized your skillset.
Milas King: [00:05:35] Absolutely. When I started, one of the major things I did was weddings. Wedding videos is a big one. All the studios can just go in on Craigslist and say, “I do your wedding video $400-$500.” And I used to get around two grand to do a wedding video. And there was a two-year span where the prices just cratered. And it got — I looked around at my numbers, this is year eight or nine of me doing over hundreds of weddings, and yet my sales were down. My network was better, my work was better, and my marketing was better, but sales were dropping. That’s when I knew it was the forest.
Michael Blake: [00:06:11] At some point, you can’t fight city hall, right?
Milas King: [00:06:13] Yes.
Michael Blake: [00:06:13] It doesn’t matter how good you are, at some point, it’s not going to happen. Now, what else? You’ve had at least one other business that was closed?
Milas King: [00:06:19] That was another pizza chain, Big Fella’s. That was before 9/11. And we try to compete in a space with our brand that wasn’t our strength. So, we were trying to use, for example, pizza-controlled pricing. Papa Johns was quality and Domino’s was service. And yet, we didn’t hang our hat on anything. We tried to compete with them all in that, and that really did the scene.
Michael Blake: [00:06:44] So, you learned there was a reason they all sort of picked their one thing.
Milas King: [00:06:48] Exactly.
Michael Blake: [00:06:50] It couldn’t be all things to all people.
Milas King: [00:06:52] Right.
Michael Blake: [00:06:52] So, I want to focus on that because you’re in business with my wife, and she told me something that you told her, that I’ve talked to dozens of people now, which I think is is extremely profound. I’m going to ask this in a different way because I want you to tell it. Your first pizza business was not successful. You, then, turned around and start another one. Why?
Milas King: [00:07:14] I told my partner, literally after we close, I told him, “We have to do it again.” I said, “Otherwise, everything we just learned is a waste.” And he looked at me. He was like, “Whatever, man.” He was not trying to hear what we just went through. And I just said, “We got to. All of these, we just learned. We would do everything differently. So, let’s do it differently.”
Michael Blake: [00:07:37] And that makes perfect sense because you literally just paid one of the most expensive tuitions you could possibly imagine, but without the benefit of student loans even.
Milas King: [00:07:46] Right.
Michael Blake: [00:07:46] We’ll probably get into this, right? But then, you’re right, you’ve just learned that maybe your execution may have been great, all the things are great, but the fundamental strategy was it couldn’t be all things to all people. You try it again, and then maybe you can have some success.
Milas King: [00:08:05] Yes.
Michael Blake: [00:08:05] And that’s not something that’s celebrated enough. Google is famous for the fail fast, and they celebrate failure, right? I think it’s because of that celebration of failure that makes them what they are is because failure is a fact of life, but as Bill Gates said, “Success is a lousy teacher.”
Milas King: [00:08:23] Right.
Michael Blake: [00:08:27] So, pick either one of the businesses, it doesn’t matter. How hard is it to come to that realization that, “This thing just got to stop. We’re at the end”?
Milas King: [00:08:39] Well, if you pay attention to your business and the data, you let the data lead you there. When you look at everything you had going for you, and if it all starts to move against you, and you look outside your company to see what other ones are experiencing, it’s easier to accept that you did what you could, and you might need to pivot to something else.
Michael Blake: [00:09:00] Interesting. So, you look at, I guess, in the photo and the video business, you saw it wasn’t just you that was really suffering, all your competitors couldn’t give their businesses away.
Milas King: [00:09:12] Absolutely. Like I used to do music videos. And with the iPhone all the artists are shooting their own. And they start trying to kind of use their name as a credit card. And the record labels used to pay for it. Then, they start taking it out of the artists. So, all that just collapsed, as an example.
Michael Blake: [00:09:31] And in some respect, I mean, it’s smart not to fight that. Is this even a part of my business that is now going away due to technology? And I lost one of my oldest clients, actually a 10-year client to that technology, right. But in the cold, hard light of day, I have to acknowledge that they’re probably making the better choice by going with the automated, right. And I’ve got to pivot and find something else useful to do as well.
Milas King: [00:09:59] Right.
Michael Blake: [00:10:00] Technology is just one thing that’s really hard to fight.
Milas King: [00:10:03] Yes.
Michael Blake: [00:10:03] So, you talked about data, and I know that you’re a big data guy. What are some of those data points that kind of say, “Well, this is not just a speed bump. This is a structural event”?
Milas King: [00:10:23] The video or the pizza?
Michael Blake: [00:10:24] Either one.
Milas King: [00:10:24] Okay. Or I can do both quickly.
Michael Blake: [00:10:27] or both.
Milas King: [00:10:27] In video, like I said, my network was stronger, my product was as good as it’s ever been, and my marketing was as good as it’s ever been, but the sales were dropping precipitously. And then, when I looked at the technology, and what the students were doing, and why it was dropping, then I knew. It was an easy solution. It wasn’t me. It’s like trying to sell pages now. It’s just something, no matter what your marketing is, you can’t sell pages.
Michael Blake: [00:10:53] Yeah.
Milas King: [00:10:54] So-
Michael Blake: [00:10:54] I’m expecting a call from 1986.
Milas King: [00:10:56] Right. Right. So, I knew, that one, we had to pivot. Currently, even though we rebooted in ’06 for DaVinci’s, the pizzeria, now, 13 years later, things have changed again. We have a lot of — perfect example. Labor costs are at a search level that was never there before. And I’ve said before, you can’t pay someone $20 an hour to take an order. Yes, they need that to live, but it’s just not there in food. It’s not efficient.
Michael Blake: [00:11:28] Right. You can’t sell $30 pizzas.
Milas King: [00:11:29] Right. Exactly.
Michael Blake: [00:11:31] Markets will not sustain that.
Milas King: [00:11:32] Right. And then another issue is the apps. The delivery services have wedged themselves more and more in between our customer. And so, we’re losing data and insight to our customers. For example, Uber Eats, they take 30% of the order and we have none of the data.
Michael Blake: [00:11:49] Now, I’ve heard about that cut and the fact that it’s — I read in The Wall Street Journal about four or six weeks ago, something like that, that these ordered services are being very disruptive in a different way, just making it harder to operate a business because businesses are operating a take-out business.
Milas King: [00:12:08] Yes.
Michael Blake: [00:12:09] Just different operationally than a sit-down, quick-service restaurant, right?
Milas King: [00:12:14] Correct.
Michael Blake: [00:12:14] But now, if you don’t have that, you’re dead because so many Americans now, culturally, they don’t want to come into the restaurant, right?
Milas King: [00:12:23] Right.
Michael Blake: [00:12:24] But it massively disrupts your operations. So, I’ve understood that part, and that I did not know it’s 30%, I mean, with margins of a restaurant. Not many restaurants make a 30% margin, period.
Milas King: [00:12:38] Right.
Michael Blake: [00:12:38] So, the economics have changed there. I never thought about the data. So, now, they’re also stealing the data from you.
Milas King: [00:12:45] Right.
Michael Blake: [00:12:46] And you don’t get any of that as a pastor.
Milas King: [00:12:48] Exactly.
Michael Blake: [00:12:48] So, you make less money. Your operations are less efficient.
Milas King: [00:12:53] Yes.
Michael Blake: [00:12:53] And you know less about your customers.
Milas King: [00:12:55] Exactly.
Michael Blake: [00:12:56] And you own less of the relationship.
Milas King: [00:12:57] Right.
Michael Blake: [00:12:57] Other than that it sounds like a great deal.
Milas King: [00:12:59] Right, right. And so, Uber or apps as a general, I’d say, two years ago was probably 1% to 2% of our revenue. It’s now 9%. So, it’s having an outsized impact on our margins.
Michael Blake: [00:13:12] And then, you’ve got to think about too, when you started in 2006, you started a restaurant thinking that you needed a certain footprint because you’re going to have traffic parking. In Buckhead, that ain’t easy either, right?
Milas King: [00:13:26] Right.
Michael Blake: [00:13:27] And now you’ve got, I’m guessing an asset mismatch.
Milas King: [00:13:32] Yes.
Michael Blake: [00:13:32] Right. If that’s really where it’s going, at some point, these pizza chains is just going to be a counter.
Milas King: [00:13:38] Right, exactly.
Michael Blake: [00:13:39] They’ll be just sitting, and that means less real estate costs, and maybe that’s how the business model ultimately works. But if you’re caught in the middle on a 10=year lease, God forbids you own the building.
Milas King: [00:13:48] Correct.
Michael Blake: [00:13:48] You can’t just sort of switch that on a dime, can you?
Milas King: [00:13:52] Right.
Michael Blake: [00:13:52] And that’s another example of technology coming in and you can’t fight it. You either going to adapt or you’re not.
Milas King: [00:14:02] Yeah. So, now we’ve covered labor. We’ve covered some logistics. Now, let’s talk about the actual transactional costs. Five to six years ago, people used cash. And so, the credit cards was as a mix less than a percent of your revenue. Now, we’re getting the full hit of that straight to margins 2% to 3% because everybody uses credit card.
Michael Blake: [00:14:23] I haven’t of thought of that either, but I can’t remember the last time I paid cash for a meal.
Milas King: [00:14:28] So, we do our own 400K in revenue per month. If you’re talking 3% of that, that is 12 grand right off the bottom line. That wasn’t there four or five years ago.
Michael Blake: [00:14:41] Yeah, yeah.
Milas King: [00:14:41] Now, 9% of app orders. So, now, we’re paying-
Michael Blake: [00:14:45] 36 grand out.
Milas King: [00:14:47] Exactly, exactly. And then, the labor costs are basically creeping up to $20 an hour. So, we feel like the walls are beginning to close in.
Michael Blake: [00:14:58] Yeah. So, I guess what’s going to happen then, you either got to raise your prices, and that’s either going to happen because you can raise the prices or you can wait it out while your customers go away, but then your competitors will either have to raise prices or shut down and sort of wait for that readjustment, or do you say, “You know what, it’s just time to cut our losses. Let’s get out early.”
Milas King: [00:15:23] It is because it’s becoming a scale game. So, for someone to pick up our restaurants would be a buyer who’s looking to really start scaling, and we just don’t have the capital. Because even today, these businesses are going to, “Let’s compete by seeing who can lose the money the longest. So, then we capture the market share, and then grow.”
Michael Blake: [00:15:44] Yeah. And I’ve likened that and you see that in the startup world all the time, right. The startup world, even Uber, and Lyft, and those guys, they’re not making any money, they’ve gone in public, but the startup world or if you’ve got a structural issue with your business, it’s almost like chemotherapy.
Milas King: [00:16:03] Right, yeah.
Michael Blake: [00:16:04] Chemotherapy is really just a race to see if the cancer dies before the patient does.
Milas King: [00:16:12] Right.
Michael Blake: [00:16:12] Right. And that’s exactly what you’re, kind of, describing if you try to stick it out, right. Does the other guy die first and then I’m-
Milas King: [00:16:20] Exactly.
Michael Blake: [00:16:20] … sort of there in a smaller market. And that’s not easy.
Milas King: [00:16:25] Right.
Michael Blake: [00:16:25] So, one of the things that strikes me about you – I know you a little bit – that I think it might differentiate you a little bit is, at least, with this round of businesses you’re in, you’re not overly emotional about them, are you?
Milas King: [00:16:41] Correct. Not anymore.
Michael Blake: [00:16:42] So, with your earlier businesses, were you? Were they kind of your baby and-
Milas King: [00:16:46] Yes, because you start to take it personal and say, “I failed. What did I do wrong? What could have I done differently?” And now, I have a more objective view. When you look at the data and just see, like when you know what would fix it, and then you know I don’t have the solution to do that, like the scale now. For DaVinci’s to continue to grow, we would need massive capital and try to get to scale. So, I know the solution. The question is, do I have it?
Michael Blake: [00:17:13] And was it those initial setbacks that taught you to be less emotional?
Milas King: [00:17:20] Yes.
Michael Blake: [00:17:20] And how does that help you now?
Milas King: [00:17:25] I can be more objective when I approach something, and I have a more foundational view before I even start. Before, it was just like, if we hustle hard enough, we’ll make it happen. Well, no, you need to check-
Michael Blake: [00:17:37] That’s what we’re taught.
Milas King: [00:17:38] Yeah. You need to check the boxes because, to me, it’s about percentage of success, right. So, if none of the boxes are checked, maybe you have a 5%. You check them all, maybe you have 80% chance of success. So, how many boxes can I check when I look at an idea to give me the most percentage for success?
Michael Blake: [00:17:55] Okay. So, in your previous, it was Big Fella’s, right?
Milas King: [00:18:00] Yes.
Michael Blake: [00:18:01] You had a business partner.
Milas King: [00:18:02] Yes.
Michael Blake: [00:18:03] Did you both agree, at the time, that it was time to close, or did one of you want to stick it out longer than the other? How did that dynamic work?
Milas King: [00:18:13] We both agreed at the same time.
Michael Blake: [00:18:14] Okay. So, you both have the same route.
Milas King: [00:18:15] Yes, yes. With Big Fella’s, we didn’t have a choice because we ran out of money. We just failed.
Michael Blake: [00:18:21] Okay. All right.
Milas King: [00:18:23] We just failed.
Michael Blake: [00:18:23] The decision was made for you.
Milas King: [00:18:24] Right. This one, it was definitely both of us. We’re high school friends. So, this was a lightning strike in that he’s been my partner in everything. We just work well together. So, this time, we looked at the same data and got the same conclusion.
Michael Blake: [00:18:41] Okay. So, I like to talk about that day you sort of run out of money. I have to imagine that’s a traumatic, panic-inducing experience. It would be for me.
Milas King: [00:18:53] It is like so. It’s almost like someone passing away. You really mourn. You feel like you let a lot of people down, even though you realize everybody will go and get jobs elsewhere, but it feels like they put their financial well-being, at least, at that moment in your hands, and you drop the ball. So, yeah.
Michael Blake: [00:19:15] So, when you ran out, I mean, were you able to at least make the last payroll?
Milas King: [00:19:23] Oh sure.
Michael Blake: [00:19:23] You were able to do that?
Milas King: [00:19:24] Right.
Michael Blake: [00:19:24] You were? Okay.
Milas King: [00:19:24] Well, it was an orderly shutdown.
Michael Blake: [00:19:27] Okay.
Milas King: [00:19:27] Yeah. It wasn’t just like they showed up in the doors like — no.
Michael Blake: [00:19:30] Okay, because sometimes that happens so.
Milas King: [00:19:31] Right, absolutely. No, we didn’t do that.
Michael Blake: [00:19:33] Okay. So, what was — As you approach that, you’re obviously a very organized guy, and you did this in an organized way. What were some of the kind of the key points of that to-do list when you realized we’re going to shut this thing down?
Milas King: [00:19:47] Start getting your receivables caught up and start paying for everything in cash, so you can really see where your cash flow is. Give the employees a heads up. We weren’t going to just — And a lot of them will appreciate that. They’ll work all the way through if you let them know everything ahead of time. You say, “Listen, we’re going to be closing down in the next 60 days.” And then, they’ll start looking for things. And they’ll even tell their next job, “I can’t start until this date.” So, those are types of things we did.
Michael Blake: [00:20:16] That’s a little counterintuitive. So, I think most people would say, “Don’t let anybody know you’re in trouble, right? That starts the death spiral. You just got to sort of do the cold turkey thing.” But in your experience, if you show people the loyalty to them, then they’ll show you the loyalty back.
Milas King: [00:20:34] Right, right. Yeah. At least, that’s how we felt.
Michael Blake: [00:20:37] Okay. And that was in both. So, obviously, you had employees for the videography business, and you did for the piece of business. You found that was roughly the same kind of experience?
Milas King: [00:20:48] Yes.
Michael Blake: [00:20:48] Okay.
Milas King: [00:20:49] And the funny thing is this time around DaVinci’s, a lot of our old employees have come back. We’ve got managers that worked with us 15 years ago. They were early 20s, Now, they’re 30 some working with us, been with us since we opened.
Michael Blake: [00:21:02] Right. And maybe they’ll be with you with the next thing too, right?
Milas King: [00:21:05] Yeah, it could be.
Michael Blake: [00:21:08] So, when you were seeing the handwriting on the wall, did you think about alternatives? Do you think about trying to sell, trying to merge, anything like that as a way to kind of save the business?
Milas King: [00:21:21] No, because maybe we could have or maybe not, but we looked at it as if it wasn’t worth anything.
Michael Blake: [00:21:28] Okay.
Milas King: [00:21:30] It didn’t even cross our mind why would someone buy this, it’s dying.
Michael Blake: [00:21:34] One of the things I remember from the Dot Com era, the first one in the late ’90s was that a lot of startups merge. And what they’re trying to do is merge their problems away. But at the end of the day, neither one of them had any customers.
Milas King: [00:21:49] Right.
Michael Blake: [00:21:50] So it didn’t matter. So, only people that really benefit from that were the accountants and attorneys to create those transaction documents, but it generally didn’t save those businesses.
Milas King: [00:21:59] Especially in the restaurant space, they’re everywhere. Restaurants everywhere. So, unless there’s something spectacular about yours to begin with, they might as well just start their own if yours is dying.
Michael Blake: [00:22:09] Right. Yeah, that’s true, right. Selling tickets to the Titanic is a tough sell, right, no matter how you slice it because you know how the movie ends.
Milas King: [00:22:20] Hey, you might turn it around.
Michael Blake: [00:22:24] So, did you have advisors helping you during this process of closing the businesses. And if so, how did they help you?
Milas King: [00:22:31] No. And that’s probably in experience. Maybe we should have, but no, we didn’t.
Michael Blake: [00:22:35] So, you went it alone.
Milas King: [00:22:36] Yes.
Michael Blake: [00:22:37] So, what did you learn from that process? Did you make any moves you’d like to have back, or did you kind of figured out any way?
Milas King: [00:22:45] From closing it down?
Michael Blake: [00:22:46] Yeah.
Milas King: [00:22:48] Keep your sales tax accurate.
Michael Blake: [00:22:49] Okay. The government has a very poor sense of humor about the sales tax.
Milas King: [00:22:53] Right, right. So, we did have a little bit of that. And the biggest thing I learned was leases, how you’re still responsible for those leases afterwards. And you’re like, “Well, I’m out a business.” Well, you still have six years on your lease.
Michael Blake: [00:23:06] You signed a personal guarantee.
Milas King: [00:23:08] Yes. So, that was one. We had to do some negotiations to settle those. So, that was a big one. That was — didn’t realize.
Michael Blake: [00:23:17] So, other than kind of the education, what are some of the other positives you take from closing businesses historically?
Milas King: [00:23:27] That my partner, Jason, was the right partner because it could have easily been finger-pointing, and it was his fault, and this, and that. It actually made our friendship stronger because we had failed together.
Michael Blake: [00:23:41] And what’s the nature of that business relationship? Are you the operational guy, and he tends to be more capital, or are you both really rolling up your sleeves, you’re both in the business day-to-day? What does that look like?
Milas King: [00:23:52] In the beginning, we were both operating. And then, the evening, I would market. And then, probably five or six years later, he went operations, and I went more training, marketing, talking to vendors. And, now, 10 years in, we both are sort of out of operations. He’s really dealing with vendors and just putting out fires every day at the restaurants. And myself is more of the marketing.
Michael Blake: [00:24:20] Okay. Now, one of the things I would think, for me, would be very difficult is, how do you decide whether or not the business is in trouble and can be turned around versus it’s just got to end?
Milas King: [00:24:37] For a restaurant, it was easier – And I had to speak in the restaurant space – is your cash flow. I would benchmark where our cash flow was trending, and what it would take to turn that around. And you can project out how much months and cash you have. And so, like the first time, that’s how we knew in 60 days, without trying to go into debt and do all these things, like let’s just end it because we don’t really see a solution. So, even here now, it’s just projecting out cash flow is our number one reason to see what we need to do if we’re in trouble.
Michael Blake: [00:25:10] So, having discipline with the numbers-
Milas King: [00:25:12] Yes.
Michael Blake: [00:25:12] … obviously is a big deal. The numbers, at some point, math is math.
Milas King: [00:25:16] Yes.
Michael Blake: [00:25:16] Right? Now, you said something there I kind of want to pursue a little bit. One option business owners have if they have some sort of convictions, you could borrow money to kind of cover the shortfall. Now, that’s something you chose not to do.
Milas King: [00:25:32] Correct.
Michael Blake: [00:25:33] Is that something you chose not to do on principle that if you had a business in trouble, you just would never borrow money to sustain it, and there’s nothing wrong with that, or is it because in those particular businesses, you did not see a path to victory, so why extend yourself?
Milas King: [00:25:49] That’s correct. If I see a solution, I will borrow because I have in other circumstances. But if I don’t see a path, I’m not going to make it worse by piling debt into it.
Michael Blake: [00:26:00] So, obviously, one theme that’s really emerging here is called self-awareness. It’s so critical.
Milas King: [00:26:09] Okay, yeah.
Michael Blake: [00:26:09] Because it sounds like, right?
Milas King: [00:26:11] Yeah.
Michael Blake: [00:26:11] That there are all kinds of reasons you don’t want to close a business, right? You can find a lot of excuses not to close it.
Milas King: [00:26:18] Yes, yes.
Michael Blake: [00:26:20] And people even lend you money when they probably shouldn’t to help you keep it open.
Milas King: [00:26:23] Yes, they call us now. And it’s like these mafia loans. But I’d give you an example of of little losses along the way. So, we’ve opened five locations. We only have three. So, we decided never let something kill the body, right. So, when we did our Roswell location, we quarantined it. We’re like, “Here’s the funds we’re dedicating to it. This is how much time it has to get off the ground. If it doesn’t, we close it,” because we’re not going to let it drag down the other restaurants. We spent years building trying to make, “This one’s got to work.” So, we did one in Roswell, it didn’t work. And we did one, Decatur. Decatur didn’t work. And they didn’t work for different reasons, but we quarantined them, so the company stayed healthy.
Michael Blake: [00:27:08] So, that’s an interesting strategy. And clearly, that worked for you to keep the core business going as long as it has, right?
Milas King: [00:27:16] Right.
Michael Blake: [00:27:20] And again, it sounds like you do embrace that Google philosophy of failing fast.
Milas King: [00:27:26] I guess, unwillingly, maybe, I guess so.
Michael Blake: [00:27:29] Well, okay, yes. It’s worked for them. So, it’s hard to argue with that kind of success. So-
Milas King: [00:27:35] I was going to finish that point. So, that taught us the power of saying no after that because your ego starts to be like, “Yeah, we could do it. We’ve got these three. Let’s just make it work.” And when they start not working, like we’ve had other location approaches like the Braves Stadium, they were a great company. Fuqua, I think that was it. Great company, it was great lease, everything for us to go in there, but we didn’t have the cash flow to sustain it. So, we had to tell them no. And we started doing it after the failure of Roswell and realized you just can’t brute force it. If the boxes aren’t checked, don’t do it.
Michael Blake: [00:28:13] I’m curious what your reaction will be to this. When entrepreneurs ask me for advice about their business, they’re struggling, I liken a business to Great Dane. The Great Dane will tell you what to do with the business and how well you’re doing. If the Great Dane is pulling you down the street, and you can’t keep up with it, it’s going to rip your shoulder off, right?
Milas King: [00:28:44] Right, okay.
Michael Blake: [00:28:45] That’s telling you about the business. That’s the signal that’s telling you to reinvest, to double down, right-
Milas King: [00:28:50] You have to.
Michael Blake: [00:28:50] … because you can’t catch your breath. If on the other hand, that great danger sits his butt down the sidewalk as like Marmaduke, and you’re yanking on the thing saying, “Please, please, would you please walk?” that’s a useful signal.
Milas King: [00:29:06] Got you.
Michael Blake: [00:29:06] The Marmaduke telling you something. We’ll bring it up because of copyright laws. The big Great Dane from a comic strip is telling you something that you need to be listening to. And, sometimes, you’re just never going to get that dog to move.
Milas King: [00:29:21] Right, I can see that. Yeah, yeah.
Michael Blake: [00:29:23] So, think back from when you closed either Big Fella’s or the video production company, think about the day after, what was that day like for you?
Milas King: [00:29:35] I guess the analogy would be like after a big race. So, you just did a decathlon or a marathon, and you’re exhausted, you’re regrouping, you just started thinking what’s the next step, and you got to take a little time to just let the fog clear. Otherwise, you might make a knee jerk reaction and do something, go in a bad direction just because-
Michael Blake: [00:29:56] Like a rebound relationship?
Milas King: [00:29:57] Right, exactly. Take some time. Yes, let it marinate. Not to be cliche, but do an autopsy of what happened. And that will give you things to, then, make sure of when you’re doing your next project to look into, “Well, here’s what caused us to fail before. Let’s answer this.”
Milas King: [00:30:18] For example, I can tell you like what having DaVinci’s. Here’s everything we fixed that now we’re 13 years in. So, the mistake we made the first time is we try to compete on price. So, what we did was pizza. So, what we said, “Let’s make all sizes.” So, their extra large is smaller than ours. Their extra large is 16, ours is 20. So, the all sizes gave us our price control back.
Milas King: [00:30:38] Domino’s was get to the door, speed of delivery. So, in a better product, we started par baking our dough almost like bread, and it makes a better product, so we could get to the door in 15 to 20 minutes. We could beat them by changing our process. Then, Papa Johns was easy because they sort of abandoned quality. Me and Jason both came up through Papa John’s.
Michael Blake: [00:30:57] Really?
Milas King: [00:30:59] Yeah. I was a manager there for about five years. Jason was even longer. And they used to fly us out to the tomatoes, and let us pick tomatoes, and they’re canned, and preserves, and all of that is gone. So, we decided to hang our hat on quality. And the thing about quality is just don’t add stuff to it. Just make it in its natural form. So, that’s what we did,
Milas King: [00:31:20] So, we addressed, what were the strengths of all three, and what would, not necessarily beat them, but judo, use our strength against them, and what wouldn’t hurt us. That’s everything we learned from the first time.
Michael Blake: [00:31:30] That’s just the over-complicating part. Pizza seems to me, to have the attraction, it’s got to be one of the easier foods to make. Is that fair or not?
Milas King: [00:31:40] No because-
Michael Blake: [00:31:40] Because I don’t know.
Milas King: [00:31:41] … you can make it a million different ways.
Michael Blake: [00:31:43] Yeah.
Milas King: [00:31:43] Yeah.
Michael Blake: [00:31:44] Okay.
Milas King: [00:31:44] So, to me, it’s hard to make it well, to make it — like, you’ll see the commercials made with whole mozzarella. Why isn’t it whole mozzarella? Ours is whole mozzarella. It’s like they’re putting oil and everything in there. We’re like, “Just use the cheese.”
Michael Blake: [00:32:02] Yeah. Maybe, I guess, that should be table stakes, right?What is the alternative?
Milas King: [00:32:08] Right.
Michael Blake: [00:32:09] Part mozzarella and part toxic-
Milas King: [00:32:11] Exactly. So, when you see that cheese stretching, that’s oil. Cheese shouldn’t do that.
Michael Blake: [00:32:18] I think, I’ll have hummus for lunch now instead of pizza. So, how long did it take for that fog to lift, right? You’re in that postmortem. You’ve run that race. You’re exhausted. How long did it take you then to say, “Okay. I think I’m ready to try something again”?
Milas King: [00:32:34] Actually, when you have — it’s kind of like when you’re ending a relationship. Sometimes, it’s over before it actually is. So, there’s a little bit of relief in it. And then, you have in the back of your mind. Being an entrepreneur, there’s something else I’ve been one to try. So, that’s when I started my video production studio. So, I went and sat down with my dad, put down a plan, and actually make an investment. I was going to pay a return on his investment and I’ve founded my studio.
Michael Blake: [00:33:00] And how long did that — I mean, was that days? Hours? Weeks?
Milas King: [00:33:05] A couple of weeks. It wasn’t long.
Michael Blake: [00:33:07] So, you weren’t — there wasn’t — you’re right on the runway. I mean, you were ready to-
Milas King: [00:33:08] Got bills to pay.
Michael Blake: [00:33:11] You got knocked out. You’re ready to get back up.
Milas King: [00:33:14] And even in sunsetting, I had set aside recent money because I knew that’s how I was going to get a job. If I didn’t try something else, I was preparing for that too.
Michael Blake: [00:33:22] Yeah. And I’d like to explore that point. So, one of the things you did was, in effect, you had that contingency plan. It wasn’t that you ran out of money that you spent your last dollar.
Milas King: [00:33:33] Right.
Michael Blake: [00:33:34] But you ran out of money in terms of what you were prepared to spend.
Milas King: [00:33:37] Exactly.
Michael Blake: [00:33:38] And you set, sort of, this point of no return-
Milas King: [00:33:41] Exactly.
Michael Blake: [00:33:41] …that you just weren’t going to go by.
Milas King: [00:33:42] Yeah.
Michael Blake: [00:33:43] And then, that empowered you, then, to have the dry powder to come back.
Milas King: [00:33:47] Exactly.
Michael Blake: [00:33:48] And, also, you’re not in a financial panic where you have to get a job.
Milas King: [00:33:51] Exactly.
Michael Blake: [00:33:52] So, you’re leaving yourself more choices, right. So, one thing I was advising a client of mine that’s in a dispute, and we’re trying to help them negotiate it is, if you’ve got a raccoon that you got to get rid of, and you got it cornered, you want to have two things. You want to have a club, and you want to have a hole in the wall for it to run out through other because, otherwise, it will not end well. And what you have, you made sure that you have that hole through the wall to run through, right?
Milas King: [00:34:24] Right.
Michael Blake: [00:34:24] Because if you didn’t have that, at some point, where there’s a point of no return, you start making irrational decisions.
Milas King: [00:34:30] Yes.
Michael Blake: [00:34:31] Right? And maybe you would’ve stuck with it longer than you should have because you wouldn’t have had an alternative?
Milas King: [00:34:35] One bad decision leads to another.
Michael Blake: [00:34:37] It does, it does. And there’s studies that talk about when people are in financial crisis, their effective IQ is reduced by 10% to 15%.
Milas King: [00:34:47] Okay.
Michael Blake: [00:34:48] So, staying out of that empowers you. Literally, your brain chemistry lets you make better decisions.
Milas King: [00:34:54] Yeah. I guess there’s a part of me that’s always kept me from going for broke. And it’s like, “We’ll go for it but not to broke. Just make sure if it’s going to work or not.”
Michael Blake: [00:35:03] And I think no serial entrepreneur has ever gone for broke. Got you.
Milas King: [00:35:10] Okay, makes sense. Okay.
Michael Blake: [00:35:10] That’s the definition of a one-time entrepreneur, one way or the other.
Milas King: [00:35:14] Got you.
Michael Blake: [00:35:16] So, what kind of expenses, when you’re — you generally can’t close a business for free, or maybe you can, you tell me. My impression is you can’t do that. Do you need to have some capital set aside to make sure that you can close the business in an orderly manner?
Milas King: [00:35:36] It depends how you set up your vendor relationships. If you have a lot of 14 day, 30-day terms, yes, because you got all that flow-through you got account for once you close. We pretty much ran pretty close to the day of operations. So, it is literally just the leases. Then, we’ve got deposits back. So, that was good too from utilities and everything else. So, we didn’t really run along receivables that we owed.
Michael Blake: [00:36:04] And you basically moved to a cash-base-
Milas King: [00:36:07] Exactly, yeah.
Michael Blake: [00:36:08] You didn’t pay for anything unless you had the cash to pay for it.
Milas King: [00:36:10] Right.
Michael Blake: [00:36:14] Any other key lessons that you can think of or maybe something that you might have done differently in closing either of these businesses?
Milas King: [00:36:25] Experience is the best teacher. So, looking back, there’s lots of things I know I should do. But at the time, you don’t know until afterwards, right. But I do tell other people that are looking to start their own businesses is expect to fail. That way, the pressure’s off. I said, you have, at least, experience. You’re in the weakest position ever. You’re going to put all that pressure on yourself. So, if anything, prepare yourself to try it again.
Michael Blake: [00:36:50] That’s interesting. It reminds me of what I think is the Samurai code. Nothing I’m an expert in Japanese history, but I think the Samurai code is samurai would go out to battle with the mentality they’re already dead.
Milas King: [00:37:03] Got you. Okay, yeah, I’ve heard that.
Michael Blake: [00:37:06] They had nothing to lose, right?
Milas King: [00:37:07] Yeah.
Michael Blake: [00:37:07] So, if you’re already dead, sure I’ll jump into the five other people with spears, and swords, and stuff. Why not, right?
Milas King: [00:37:14] And the other thing that I would advise is, for me, with that mentality, until I reach a certain point, I always just committed my own money. I see a lot of people, they use other people’s money. I’ve never been comfortable with that, right. And so, when I would go in expecting to fail, I just make sure I was the only one at risk.
Michael Blake: [00:37:32] I think that’s smart. You see a lot of — you see the use of an expression called friends, family, and fools that will fund startups, right. And at the outset, they say, “Look, I don’t care if I get money back. I’m just investing in you. I’d like you to be successful.” And sometimes, it turns out to be right. Sometimes, it’s not, right. And maybe your business is not doing as well as you thought. And I was kind of curious when I might be able to get some of my money back.
Milas King: [00:38:04] Right, right.
Michael Blake: [00:38:05] I thought you weren’t interested in that. Well, I got some expenses now.
Milas King: [00:38:09] It is funny you say that. You know how I funded DaVinci’s?
Michael Blake: [00:38:12] No.
Milas King: [00:38:12] I literally went to my dad, and I said, “Let me rent two credit cards from you. I’ll pay you $100 a month until I give them back to you balance free.” So, he lent me two credit cards. We bought some used equipment, and some stuff and Best Buy, and that’s how we started.
Michael Blake: [00:38:27] Is that right?
Milas King: [00:38:28] Yeah.
Michael Blake: [00:38:28] And you paid back every penny?
Milas King: [00:38:29] Yeah. Within like nine months, I gave him his card back.
Michael Blake: [00:38:32] And with all the other businesses, you paid all your vendors. Anybody that likes any credit, you paid back every penny, correct?
Milas King: [00:38:38] Yeah, yes.
Michael Blake: [00:38:38] And I think you’re proud of that.
Milas King: [00:38:41] Yeah.
Michael Blake: [00:38:41] As you should be. You didn’t walk away from anything, nobody hung anything. And if you ever need them again, they’ll be right there for you.
Milas King: [00:38:48] My dad has been there every time. When I did the studio, he loaned me $30,000. And when I was closing it, I converted his investment into a straight interest loan. So, over five years, I just made payments to close him out as I was closing the business out.
Michael Blake: [00:39:03] When you take money from family and friends, I mean, I don’t think I could do it either. I don’t have a suspension of guilt or responsibility.
Milas King: [00:39:16] Right.
Michael Blake: [00:39:16] And it would just make for some pretty awkward Thanksgiving conversations and Christmas conversations, right? “Pass the turkey. And by the way, how’s your business doing Asia?” Chirp, chirp.
Milas King: [00:39:28] Right. Like I’ve told you, I have entrepreneur’s credit. Some things work, some things didn’t. But your family and friends, they didn’t do a credit check when they gave you the money. So, they were always the first I paid.
Michael Blake: [00:39:38] Yeah. This has been great. I think our listeners are going to learn a ton. And, again, I’m so grateful for your willingness to come on and talk about this – the good, bad, and the ugly. Hopefully, you’ll never have to go through it again.
Milas King: [00:39:52] Right.
Michael Blake: [00:39:52] But, obviously, if you do, you obviously know what you’re doing. If somebody is kind of thinking about this, can they reach out to you, maybe shoot you an email-
Milas King: [00:39:59] Sure.
Michael Blake: [00:40:00] … or something and ask you about your experience with it because I think it would really help them.
Milas King: [00:40:04] Yeah, absolutely. You can reach me milas@davincisdelivers.com.
Michael Blake: [00:40:06] @davincisdelivers.com.
Milas King: [00:40:12] Yeah.
Michael Blake: [00:40:12] Okay. So, we’re adapting. Well, that’s great. Thank you so much. That’s going to wrap it up for today’s program. And I want to thank Miles so much for joining us and sharing his expertise with us.
Michael Blake: [00:40:22] We’ll be exploring a new topic each week. So, please tune in, so that when you’re faced with your next business decision, you have clear vision when making it. If you enjoy this podcast, please consider leaving a review with your favorite podcast aggregator. It helps people find us, so that we can help them. Once again, this is Mike Blake. Our sponsor’s Brady Ware & Company. And this has been the Decision Vision Podcast.
