Digging my way out of debt was difficult. Businesses like mine are at the mercy of commodity price increases. Over the past few years, dairy costs have risen 18 percent. Chocolate prices have nearly doubled. So has the price of paper products like napkins. The competition for workers, even in the food services industry, has become intense, driving up labor costs. And health care is a killer: When I first started providing health insurance to every employee who worked more than 30 hours a week, my monthly cost was $80 per person. Today it's $258.
Some people suggested that I declare bankruptcy, pay off my taxes, and move on, but I was too stubborn for that. I liked running the business too much, and I liked the place I had created for myself in the world. I didn't want to admit that it was in danger of failing. I also felt that if I rolled over I would be leaving my financial backers in a bad position.
As my debt mounted, the state put a series of five liens on my business. To keep from falling further behind, I contracted with a payroll services company, and soon I was making all of my current tax payments. Now I had to work on those back taxes. The state was willing to work with me, especially because I wasn't adding to the debt I owed. But the interest and penalties compounded rapidly. I can understand why: The state doesn't want to be used as a bank. Though I made regular tax payments, my debt grew like kudzu.
Two years ago, my sister Mimi came aboard to help me run Toscanini's. She had managed a number of large white-tablecloth restaurants, and now she worked ferociously to understand and resolve our problems. We closed the Harvard Square store and the café and met with the Department of Revenue to negotiate a payment plan. By this point, I had paid $187,000 to the state -- the original bill and then some -- but because of penalties and interest, I still owed an additional $167,000. We thought that at least $50,000 of the assessments were incorrect and filed for an abatement.
Negotiations dragged on through the summer of last year and into the fall. At some point, we realized we had not heard from the Department of Revenue in a while. Mimi and I decided to let sleeping dogs lie. Spring was just a few months away, and our sales rise with the thermometer. We figured we could resolve the matter then, when our finances were on the upswing. When the state arrived to padlock our doors on that January morning, I realized my mistake.
The Department of Revenue officials told us that they didn't want to seize the business and that if we made a major payment, we could settle the case that very day. But that was easier said than done. A few friends generously offered to donate money to help us. But my sister and I had little savings, and with the business shut down, we were worried about covering our own day-to-day expenses, never mind making a balloon payment on back taxes.
My sense of embarrassment and humiliation grew hour by hour. I felt like the captain on the Exxon Valdez. How had I lost control? By my actions and inactions, I had placed in jeopardy the sum of many years of hard work on my part as well as the contributions made by employees. Expansion was possibly a good idea, but I had executed my plan in the worst possible way. I felt like I had let down my customers and my financial backers. That night, it was not easy to fall asleep.
The next day, Mimi and I contemplated our course of action. We needed to get in touch with family, friends, potential investors, and vendors. At the same time, the press was alternately eulogizing and gang-tackling us. Boston has two major daily newspapers, two major weeklies, lots of television and radio stations, and dozens of college papers and Internet start-ups. All of them wanted to write about Toscanini's, it seemed. In the midst of great confusion and near panic, we received a few offers of help, including some pledges for cash contributions. It was then that Mimi called Sam Mehr.
When he is not studying at the Eastman School of Music in Rochester, New York, Sam makes ice cream at Toscanini's. He started working at the business when he was in high school and picks up shifts when he is back in town on school vacations. Sam invented a number of our flavors, including Blue Lemon. He also serves as our IT guy. And as it happens, he is an experienced fundraiser. A few years ago, he raised $40,000 to create an endowment for his high school music program.
Mimi told Sam about the situation and that some people had offered to donate money to help us reopen the business. The best way to do this, Sam said, was to create a website. He suggested we set up a PayPal account, linked to the site, to facilitate transactions. I was embarrassed at the idea of taking donations, but then my brother Joe told me to relax and let people be nice to me. So Sam went ahead and created the website. In no time at all, we had raised $500. By the end of the first day, $3,000 had been donated. After two days, we topped $6,000.
Though this was heartwarming, I wasn't sure we were going to make it. And I didn't quite realize that the website would become an open forum for the Toscanini's community. Many of our donors posted comments thanking us for coming up with great flavors like Burnt Caramel. But other people left angry notes. "I think it is outrageous to not pay your taxes and then have other people pay for it. Shame on you Gus…" wrote one person. "I don't see that it's the public's responsibility to pay an individual business owner's taxes," said another. (See Feedback Comes in More Than 100 Different Flavors.) These statements were hard to ignore and played into my growing sense of fear and self-doubt. I worried that every encounter on the street would elicit a reproach from a stranger or a friend or a former customer. The stress was incredibly high and would peak when I tried to sleep.
