Q&A: “Should I Dig Into My 401k or Savings To Finance My Business Through COVID-19 Pandemic?”
Q: “Should I Dig Into My 401k or Savings To Finance My Business Through COVID-19 Pandemic?”
A by EMILY:
This is a hot button topic and I’m going to take a strong stance because sometimes it’s better to be polarized by a strong answer, because then you’ll have your own answer that’s right for you.
1. EVERYONE’S ANSWER SHOULD BE UNIQUE.
The first thing I would say is everyone’s in a unique situation. If you’re about to retire, don’t do it. If you talk to your spouse or your life partner and make sure that whatever decision you’re making makes sense given your current state of affairs. Consider whether the business you’re trying to fund was hemorrhaging before the quarantine. That’s an interesting question to ask yourself, “Is it because of the quarantine that things aren’t going well or was it not going so well before that?” If you have a model that you believe “yes, this can be resurrected” after quarantine or in quarantine, I personally believe then “YES” you take money out of your savings.
2. IF YOU SEE A FUTURE, THEN YES. HERE’S HOW.
A) REDUCE YOUR COSTS.
Don’t just keep living the same life, with the same expenses. For example you don’t keep paying your 6-figure sales rep, 6-figures if he can’t bring in sales at this moment. Instead you discuss, negotiate, make this a strategic decision that will incentives your key players to help you win.
B) FIND OTHER INCOME.
Consider partially taking money out and partially finding a new income source. Consider supplementing your income doing consulting. Most business owners are also operators of our business, right? Maybe you should go get a job and fire yourself for a minute, but keep everyone else on payroll? There’s nothing wrong with that.
C) ASK FOR MORE FROM YOUR TEAM.
In a crises, this is the time, more than ever to ask other people to step up to the bat. I’ve learned from owning my own business and consulting other business owners that we often carry the brunt of the burden for our whole team because we are so dynamic, so outgoing. We do everything. We wear all the hats. And right now in the midst of an emergency, your vendors, your landlord, your staff, everybody wants this to work out. So ask them to step up to the plate. You’ll be surprised at the leadership that’s already there within your resources that you didn’t realize were there. Who on your team could do more right now that would make a difference?
3. PAUSING OR QUITTING THIS BUSINESS ISN’T FOREVER FAILURE.
I say yes, be willing to put retirement money where your heart is in your business, but also realize that if it doesn’t make financial sense, REMEMBER it doesn’t make you a “forever failure.” It may be the healthy wise thing to say, “Hey I’m going to either put it on pause and go take another job” or accept a side hustle for now. That’s still long term success. As entrepreneurs – we exist to solve problems and face challenges. We get back up. Everyone has a high and low – every famous person in business we admire has failed on the way up. I think we all need to hear that at this time.
4. BE HONEST ABOUT WHERE YOU ARE.
If anyone out there is like, “Oh she’s saying these things, but she doesn’t know how hard it is.” Please understand, I’ve taken money out of my 401k when I had a client that filed chapter 11 bankruptcy. I did it because my company would have been 100% profitable for not not happening. I was on a winning streak and I knew that this is a black Swan event. We all go through them. But at the same time, I wouldn’t have done that in the very first two years because I hadn’t figured out how to make a profit.
Your wise next steps is all about where you are at and being honest with yourself. Have courage. Be wise. Strategic actions will move you forward. Entrepreneurs are made to overcome tough decisions and then keep going. Don’t let this moment crush your business dreams no matter what you decide to do.
I hope this Q&A encourages you with some fresh perspective of how to grow yourself and your business.
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Expert taken from “USC’s Alumni Entrepreneurship Webinar Q&A: Building Resilience For You And Your Business During COVID-19” (5/12/20). To watch or join the USCAE VISIT: https://www.facebook.com/watch/?v=535727827333636
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MORE ABOUT EMILY PAGE
Emily is CEO of Pearl Resourcing and has managed and launched multiple 7-figure brands in Costco, Williams-Sonoma, Kroger, and Amazon. She’s bringing you the expertise, resources, and mentors you need so that you can develop products and make them sell.
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