ROBS 401k Case Study: Why Bryan Decided To Use A ROBS To Fund His Business Purchase
Posted 11.1.2023 in ROBS
Like many entrepreneurs, Bryan (not his real name) had a dream to buy a business – but he wasn’t sure how to finance it. With fluctuating interest rates at the time, Bryan was concerned about the impact of adding more debt to his bottom line and how that would impact his cash flow – especially during the early days of running his business. As Bryan considered how he would finance his new business, he discovered the ROBS 401k financing option. The ROBS (acronym for Roll Over Business Startup) has been successfully used by entrepreneurs to fund business/franchise purchases for many years.
Key considerations in Bryan’s decision process:
- How would I fund my business acquisition?
- How would I ensure that I had funds available for working capital during the early days?
- What are the tradeoffs between the various funding options?
- Which experts could advise me on how to fund my business?
- How would these options impact the cash flow of my business?
- What kind of compliance would be necessary in this process?
- How can I focus more on growing my business vs. spending too much time on required compliance?
Steps taken in Bryan’s process:
- Evaluated his assets (including available cash and his 401k)
- Researched various funding options and their impacts on business cash flow
- Identified the ROBS 401k funding option
- Educated himself on the steps and pros & cons of using a ROB 401k funding option
- Decided the ROBS 401k option best suited his situation
- Reached out to a ROBS 401k expert to start the ROBS 401k set-up process
- Engaged an accounting firm with ROBS 401k expertise that could support both his ongoing ROBS 401k compliance requirements as well as his regular bookkeeping and tax needs
Results of Bryan’s efforts:
- Bryan acquired a business-to-business (B2B) service in need of a turnaround
- He used his funds to make required changes and transformed the business
- After several years of expansion and growth, Bryan successfully exited his business
With interest rates rising over the last few years, starting or buying a business with less debt can make a lot of sense. Working with an expert to understand the pros/cons as well as the associated accounting and compliance requirements of the ROBS 401k is critical to making it work effectively for your business.
Are you looking for expert compliance, bookkeeping and tax support for your ROBS 401k funded business? Please contact Attaway Linville today at 803-831-0263 or 404-607-8400 to learn more about how we can help.