You Don’t Need
to Start a Business
I have 2 points to make in this post:
1) Franchises or Business Opportunities May Not Be as Expensive as You May Think
Whenever I would consider investing in a business, I was thinking it would take hundreds of thousands of dollar, but when I started researching, I found there were businesses and franchises that could be started for under $50,000, under $25,000 and even less! Right now, we have a portfolio of around 444 franchises and businesses and about 13% require cash of $25,000 or less. Almost all franchises require some of your own cash and they call that “having skin in the game”.
Franchisees who have invested some of their own money are more likely to be successful. Other financial requirements you will hear from franchisors are, Net Worth, Total Investment, and Credit score. Many times the cash you put up will only cover the franchise fee. The rest of the total investment can be borrowed if your credit is good and your net worth is enough to keep your household running until your business is making a profit.
So, starting a business doesn’t have to take a ton of money, BUT, if you are like the large majority of people, including myself, that think $25,000 IS A TON OF MONEY, let me show you a business that can be started for -0-, zip, zilch! No credit card needed, just CHECK THIS OUT.
2) You May Have Funds to Invest in a Business That You Didn’t Know You Could Use
Did you know you can use 401K or IRA funds to start a business without penalty? It remains a retirement asset but is put under an umbrella of a C-Corporation that you form for your new business. Some people call this “pimping out your 401k”!! Others call it ROBS (Rollovers as Business Startups).
Now, I have people that can explain this in detail, and can perform the conversion for you, but I’m here to tell you that you may have options you didn’t think you had. Many of you have been contributing to an employer-managed 401k for years, with some employers even matching a percentage of your contribution. Think if you could use that money now to start your own business. Maybe you’ve just lost your job due to lay-offs, or are just tired of the corporate rat-race, that money could open doors to reap the rewards of your own efforts. Why not work to make yourself wealthy instead of doing it for someone else?
There is a rule of thumb that you should have at least $40,000 in your 401k for the conversion to be worth it. In most cases, the 401k would need to be from a previous employer, so if you were currently working, you would need to resign before those funds would be available for conversion. An exception to this might be an employer who allows in-service distributions. Your personal IRA funds can also be used for this rollover if you wanted to remain at your job.
This is a very common practice with those I help buy a franchise, or invest in a business opportunity. I have funding partners who do nothing more than these conversions and are helping people live their dream of owning their own business.
Again, I am not the expert here…I help people acquire businesses and franchises but I have partners that do these conversions for my clients. If I were to give you an example of how this works, it would go something like this:
Let’s say you want to own your own business, and you go searching online to find one. You may come across my website since that is exactly what I do. I help people find the right business based on their goals and objective and what kind of lifestyle they are looking to have. And let’s say I find you a Scout & Molly’s franchise that is the perfect business model for you. It’s the right price, operates during the hours you wish to be open, they allow passive ownership and it provides the return on investment you were looking for.A Scout & Molly’s Franchise requires a cash investment of $275,000!! But you only have $100,000 in liquid assets, but your 401K has $250,000. I would then hook you up with our funding partners. Your new business, the Scout & Molly’s franchise, would be set up as a C-Corporation.
You would open a bank account for your new business and a second bank account that would be for your new business’s retirement account, another tax-exempt account. $175,000 (extra cash amount required for Scout & Molly’s) of your 401K funds would be moved into the retirement account and this is called the “Rollover”. $75,000 would remain in the 401k in this example. As a trustee of your new business, you would issue a check from the retirement account into the C-Corp account. Then, you as president of your new business, would issue the first stock certificate back to you as Trustee for the benefit of your rollover account.
The Corporation is Funded – There are no taxes, no penalties and this is NOT a Loan
As owner of the new company, you can now direct what the 401(k) invests in. You’re then free to use the cash for whatever is required to buy the business or pay for start-up and on-going costs.
The rollover itself will cost between $4,000 and $5,000 and yearly administration fees to manage the account run about $900 per year.
Is there risk involved in this rollover? Of course, there is risk involved in any business venture. If your business were to fail, you not only lose your business but possibly a significant portion of your retirement. I always recommend investing in a proven business model; a franchise, or a business opportunity that has demonstrated success. I would also recommend not rolling over 100% of your 401k if at all possible.
Before considering, weigh all your options and compare total costs to the value it will bring you. You don’t need to do this alone…. get experts to help you and give you the best advice. That advice is all part of the fee you pay if you do decide to do the rollover, so consider it free if you decide not to. I am part of that equation and can get you started, at no cost, so contact me today. You can also research your funding options HERE.