Fahrenheit 1600 (Victor Kozol) (8 page)

Chapter 15

Throwing Out the Bait

Sam was in a conflicted mood after leaving Victor
and Duryea behind. Here was a young guy who never could get it together sinking
in a financial morass mostly of his own making. Serge’s reports have reinforced
that none of this reflects on any criminality in Vic’s life. He is what you
would expect to find in small town America. Sam would rather be trying to do a
deal with a shady operator in the Bronx than Mr. Clean in upstate Pennsylvania,
but the shady operator in the Bronx didn’t have a funeral home with all of the
right pieces to the puzzle in place. So, Sam will have to work around Vic
considering his family ties and solid background. He has promised too much to
Carlo and the family to fail on this his first very own major project. Sam is
determined not to fail.

Sam patiently lets another month go by carefully
checking Vic’s rapidly depleting checkbook balance which he views online from
his office. The $5,000 that Sam engineered for Vic at the casino is now gone
and it is time to act before Vic looks for other lifelines.

“Hello Vic, I really needed to call you and see how
you are getting along; because in all of our discussions I was so interested in
what you did, that I never gave you details on how my specialty works. I
operate primarily as a venture capitalist, Vic. My company invests in small
businesses that we think have a good chance of turning a profit, even if they
are not successful today.”

“Well, you better look somewhere else Sam, this
place is rapidly going down the tubes after fifty years of continuous
operation.”

“See Vic, this is where the optimist sees the glass
half-full and my associates and I are constantly searching for new
opportunities. It just so happens that I know this financial trends guru here
in New York by the name of Saul. Just coincidentally, while having lunch with
him, he is telling me about the great future all over the country for the
cremation business. It is already heading for 40% of all deaths and set to
climb even higher in the future.”

“Yes, I know all of this from school Sam, but I am
too small and too broke to buy the equipment.”

“Vic, that’s where I come in. I make a financial
model of how you will grow your business having the only cremation retort in
your town. People will like dealing with you for their cremation needs because
you have one stop shopping for them. You would be in the black in no time once
set-up and running.”

Sam knows in reality that at $400 a pop for doing a
cremation wholesale for another funeral home and maybe $750 retail for one of
his own clients, supporting a $50,000 piece of equipment would hardly be a good
return on the investment for Vic considering the low volume of business he had.
In fact, if you factor in the gas and electricity used, the operation would be
deep in the red, unless you do hundreds of cases every year.

“Vic, why don’t I have Saul, at no cost to you, do a
proforma for your funeral home owning a crematory, and then we can talk about
how you can finance it with some upfront loans from my company. Then you can
pay it all back with profits from operations.”

“Sure, okay Sam. Call me when you have something,
since not much is happening around here.”

“Oh Vic, by the way, we will need your latest
financials and tax information to make this work, can you send them to me right
away?”

“Yes, I have some stuff here from my accountant, but
I warn you it is not very impressive.”

Sam already has all he needs on Vic’s financials in
front of him, but he can’t let that cat out of the bag, so he responds, “Okay Vic.
You will be hearing from me soon.”

Vic hangs up and his temporary euphoria is soon
overtaken by the sodden state of his affairs. He probably will never be hearing
from Sam again after he reads these financials, just as well anyway.

Chapter 16

Going for the Close

Every aspiring sales trainee is taught first you
engage the customer and answer all of their objections, and then you go for the
close; you ask for their business. In one short week after their meeting, Sam
is back on the phone to set the hook for the close.

“Hello Vic, my good friends in accounting were able
to get your proposal together in record time, it’s what friends do for one
another, right?”

Vic is stunned; he had no expectation to ever hear
from Sam after his tour of his mundane funeral home and decrepit garage coupled
with his poor financial statements.

“Sam, I still don’t know, but if you think your idea
would save my business, come on over and make your pitch.”

In two days, Sam is sitting in Vic’s cramped office
in Duryea with pictures of the cremation retorts and many colorful spreadsheets
all showing how much money the crematory would return after expenses.

Sam begins, “In fact, we don’t even have to purchase
the thing outright, we can take a five year lease on the equipment and only
have to make monthly payments. Money you will generate from operating the
retort. It may not be a fortune at first, but you will have a solid second cash
flow to augment your funeral business. Your records show, you could really use
this injection. It’s a win, win situation for both of us; I get a new client,
even if a small one, and you get a chance to finally dig out from your
financial problems.”

Vic, like most people, likes the idea of gambling on
a business venture with other people’s money. “You mean you will front the
entire venture to get me started including enough working capital, Sam?”

“Yes Vic, we know this project doesn’t get off the
ground unless venture capital comes to the rescue. No regular bank would ever
front this deal without money up front from you Vic.”

“In that case, hand me the contracts and show me
where to sign.”

“Okay Vic, I have it all drawn up, first is the
retort lease application for $1,200 per month for five years, and second is the
loan documents for the $25,000, we think you will need to remodel the garage
and get the retort up and running, plus a little left over for working capital.
We even got you all of the applications for the federal, state, and local
approvals you will need for installing a crematory. You just need to sign,
couldn’t be easier. See how simple getting into business with me is; now, let’s
go to that great Italian restaurant you were telling me about in Old Forge, I’m
buying.”

Chapter 17

Onward, Upward, & Downward

Victor has his check for $25,000 and in two short
weeks everything is signed and sealed. In another month he gets his approvals
from the local authorities to install and operate the crematory retort.
Finally, Vic has something to live for. He is going to Chicago for three days
to attend a school for operating his new retort. He is also hiring contractors
to renovate and repair the old garage so that it can accommodate the new retort
and look more presentable. In another month, the retort is in and operating.
Victor puts out advertisements in the local papers and church bulletins
announcing his new venture, “Duryea’s own crematory.” The second day he gets
his first client family from his own funeral home, and is really feeling great
about the future.

Like so many business ventures, that are poorly or
only half thought out, the flaws in the crematory model were always there, but
Vic wasn’t in any mood to look too hard for them. First, many of the
townspeople have already written Vic off as a foul ball, not to be considered
as their funeral director. Once you lose a client family to another funeral
director, as happened with the Makovsky’s, the rest of the extended family will
also start going to your competitor. The only other place you can get cremation
business is from your competitors or other out-of-town funeral directors.

Here, if Vic would have not been so euphoric about
Sam’s great opportunity he could have made a couple of phone calls and found
out the stark truth. Competitors rarely will use a crematory in the same town
operated by another funeral director. They don’t want the other funeral
director to see the amount of cremations they are doing and the type of
merchandise they are selling for their cremations. They will gladly schlepp
their bodies up to Scranton rather than do business with a competitor. Bottom
line, there was no outside business for Vic from the local funeral directors in
his hometown.

After two months in operation, Vic has used his new
retort all of two times for his own client families. While he grossed $1200.00
for his work, he has already paid out $2,400 in lease payments for the past two
months. Added to this are the electric and natural gas bills of a couple of
hundred dollars for the retort.

When you carry this loss forward to his losses on
the funeral home side, where he is only doing about half the business of his
father, Vic is sinking even faster with the crematory. He has $5,000 left from
the original $25,000 startup money, but he owes both his father rent, and the
real estate taxes on the properties.

Vic sits down and wonders after this initial period,
where did I go wrong? Why are the pro forma projections not even near being met
on the income side? The only thing he could think of was to appeal to the one
guy who got him into all of this Sam, he would have an answer.

“Sam is that you, it’s your buddy Vic, I need to
talk to you.”

“Anything for an old friend and client, what’s
bothering you Vic?”

“I think I may need more working capital to get the
crematory going. Maybe another $20,000 would see me through until the crematory
starts pulling its own weight.”

“Well Vic, I didn’t expect this news, this is most
disappointing and a serious setback in our relationship.”

“Okay, then just $5,000 to hold me over, Sam.”

“Look Vic, you don’t seem to have this situation
under control and even your cash needs are wildly off the mark, I think you
should come to my office in New York so that we could hammer out an agreement.”

“Okay Sam, I can be there tomorrow, nothing to do
around here, how about 11:00 a.m.?”

Sam couldn’t have been more delighted, Vic is
running out of cash about a week before Sam projected it to happen. Sam will
certainly be ready with a hammer to bludgeon out a deal with Victor when he
arrives tomorrow.