If you’ve considered using Rollover for Business Startup (ROBS) as a franchise funding strategy, you may already be familiar with many of the basics. ROBS strategies allow aspiring entrepreneurs to invest in themselves by using their own qualified retirement funds, without incurring any debt, tax penalties, or early withdrawal penalties.
While there’s plenty of information out there about the basics of ROBS strategies, answers to some of the more specific questions can be hard to find if you haven’t spoken with an expert.
1. Why Have My Accountant and Financial Planner not Heard of this Strategy?
The US retirement market is a multi-trillion-dollar industry! There’s no shortage of options when it comes to putting yourself in the best position to comfortably retire. Rollover for Business Startup (ROBS) is less commonly used than many other investment strategies, which is why it isn’t as well-known, even among financial professionals.
This highlights the importance of working with suppliers familiar with the franchise space when starting a new franchise business, regardless of whether or not you’re capitalizing with your retirement funds. The franchise industry is full of experts who are here to help entrepreneurs succeed. Working with financial professionals who specialize in franchise businesses will help you maximize your investment and run your business smoothly.
2. Why Should I Invest in Myself Rather than Leaving My Money Where it is?
Only you can answer this question for yourself, and it helps to have the best possible information to inform your decision.
Think of a ROBS strategy as another way to diversify your portfolio; you’re deciding that you want to invest this portion of your retirement funds into your own efforts, rather than relying on large companies that you have no control over. However, the tradeoff is that franchise business ownership is not a passive investment!
While the stock market has no doubt been on an amazing run this year, the average annual S&P 500 rate of return is around 10%. If you’re confident that your new business can outperform this benchmark, then an investment in yourself could be a great use of a portion of your retirement funds.
3. Can I Bring on Additional Investors?
Of course! Businesses funded with ROBS strategies are not one-time-only investments. When you first incorporate your business, shares are created, similarly to when a large company goes public. However, your business’ shares are held privately, by your newly created 401(k).
When a new owner is brought on, he or she can buy shares of your company after a third-party evaluation is done to determine the new share price. This is a very common practice when a ROBS-funded business expands to new locations.
Rollover for Business Startups (ROBS) strategies seem complicated, but an experienced funding provider like FranFund simplifies the process so you can focus on what really matters: maximizing your investment and growing your business. No matter where you are in your decision-making process, if you're interested in learning more about funding strategies for your new franchise business, we'd love to hear from you.