The Entrepreneur Awakens: Pivoting from Tech to Ownership

Okay, thank you for that, Ken. And then another thing I wanted to ask about how you were structuring all this was robs, the tapping 401k capital to buy the business. You looked at doing it and then decided against it.

Talk us through that. Yeah, so initially I was looking at just all the possible ways to fund a deal without tapping into my liquidity.

Right. So essentially long storage or TLDL is going to be. You could use the fund from the 401k without tax penalties to fund a business acquisition. So everything sounded great.

I was going to go with that so that I don't have to pull up all my liquidity. You know, I pay the provider and all that all the way to the almost at the finish line when I find a catch that if you, if you think about using rops, it's almost like you are going into a business partnership with your 401k fund. So let's say you take, you know, half of the liquidity required from the 401k fund and you…

Essentially you're forming like a 50, 50 partnership with your 401k that after you purchase or acquire the business with the ROP setup, whenever you want to take a distribution from the business, you have to distribute an equal amount back to the 401k. So that kind of limits how you want to do profit distribution down the road. So that's One thing to me is like a big no no.

And that wasn't clear to me at the very beginning. So that was a big no no. The other no no was that you could eventually get away with ROPS if you could buy out the ROPS's share from the business.

Right? Yep. So you could do that. That is going to be triggered. You have to do another business valuation which is going to be additional like fees and all that if you want to do that.

And the other part is if you successfully grow the business where the enterprise value of the company grows, the shares from the rops also grows. That means you're going to be, you know, let's say if you take 50 grand from the, from the ROPS 401k program as like a 50 partnership right now the company grows like double. Right. Eventually.

Now you take 100k to just buy back the share of the rops so that you can be like completely clean, not having to think about all this profit distribution and all those logistics. So I think those restrictions wasn't very clear to me upfront and I really found out at the very end. So I already paid the provider five grand for that.

Realizing that it just wasn't a good flexible setup for me. So I just decided to ditch that and fund the deal with my, with just all my liquidity. Okay, that was, that was very helpful.

So let me just distill this. The robs is tapping your 401k to use the capital in your 401k to contribute to the equity to buy a business tax without the tax penalty. That typically comes along with withdrawing cash from your 401k before you're supposed to.