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BABY BOOMERS RETIREMENT CREATES NEW BUSINESS OPPORTUNITIES

  Baby Boomers, those born between 1946 and 1964, account for a significant portion of the small business community in the United States and many are now approaching retirement age, with the last of the boomers reaching full retirement age in 2031. According to industry experts, a “Silver Tsunami” is expected to occur as these owners exit their businesses in waves offering more businesses for sale in 2023 and 2024. As many of these baby boomers look to plan their exit, and sell their business to enter retirement, this demographic shift will have the potential to open new avenues for business ownership.   According to the BizBuySell’s quarterly Insight Report 46% of surveyed buyers said that they would like to leave their current job to take control of their future, with an additional 13% of newly unemployed people saying the same. By acquiring well-established businesses, young entrepreneurs will be able to leverage the goodwill that baby boomers have built over the years and contribute to the local economy. The purchase of an existing business can reduce startup time, provide a built-in customer base, and enable lenders to evaluate the financial performance of the existing business.   In addition to offering young entrepreneurs the opportunity to purchase an established business, it also fosters in a new generation of investors. It’s important to keep in mind that not every baby boomer is heading for the exit; some choose to invest in new ventures for younger generations of entrepreneurs as an alternative to heading for retirement. As a large and influential generation, many continue to be actively involved in a meaningful way through mentorship and investments in small businesses. A new generation of business owners can benefit from their years of knowledge, skills, and expertise, setting them up for success in the world of small business. During the next few years, there will be many new opportunities created by the expected exodus of business owners, paving the way for the next generation of entrepreneurs. Source: BizBuySell / Transworld

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THE FEDERAL RESERVE PAUSES INTEREST RATES BETWEEN 5% AND 5.25%

   In a unanimous decision Wednesday, June 14, Federal Reserve Officials agreed to hold the benchmark federal-funds rate steady at a range between 5% and 5.25% after a streak of 10 consecutive increases in the fastest rate rise since the 1980’s. Last week’s economic projections strongly indicated that officials are leaning toward reducing interest rate hikes rather than halting them altogether. They are now cautious about raising interest rates with concerns of a delayed effect from their previous rapid rate increases from last year and the recent strains in the banking system. As a result, they are currently trying to strike a balance between high inflation and increasing interest rates with the possibility that there will be a sharper economic slowdown in the coming year.    While the decision has been made to pause interest rates for the moment, Federal Reserve Chair Jerome Powell hinted that his default position for now is to raise rates at the Fed’s July 25-26 meeting. Powell has said that he favors spacing out the Fed’s rate increases given how close they were to their final destination for rates. While 12 of the 18 Federal Reserve Officials still believe they will need to increase rates to a range between 5.5% and 5.75%. This would require two additional quarter-point increases at any of the four meetings this year, lifting rates to their highest point in 22 years.

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BENCHMARK FEDERAL-FUNDS RATE HITS 16 YEAR HIGH

    A quarter percentage point increase in interest rates was approved by the Federal Reserve last Wednesday, bringing the benchmark federal funds rate to a range between 5% and 5.25%. With this decision, the Federal Open Market Committee delivered its tenth consecutive rate increase aimed at battling inflation, bringing the new benchmark federal-funds rate to a 16-year high, the fastest rate increase cycle in 40 years. In a new statement issued Wednesday, officials stated they would monitor economic and financial market developments as well as the effects of their earlier rate increases to assess whether additional policy firming may be necessary over time to return inflation to the 2% target. In the past few months, officials have been looking for clear signs of an economic slowdown to warrant ending rate hikes. Despite some signs of cooling, such as muted consumer spending and factory activity, steady hiring and brisk wage gains could sustain an elevated level of inflation. As a result of this, the Fed may change their strategy, and may need to see stronger signs of economic growth, employment, and inflation before continuing to raise rates.      Many economists and Fed officials urged greater caution in raising interest rates ahead of Wednesday’s meeting due to the lingering effects of banking stress and previous Fed rate increases. The belief was that this could expose additional banking vulnerabilities similar to the recent rescue of First Republic Bank by JPMorgan Chase. Others believed that the Fed would conclude increasing interest rates early if economic activity and inflation remain high, possibly creating a dilemma for the central banks between managing inflation and maintaining financial stability.    Source: WSJ

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GROWING POPULARITY AMONG RESTAURANTS AND NICHE VENUES

In the aftermath of two years of COVID restrictions, restaurants that were struggling are experiencing a significant increase in demand for dining out and socializing with friends in local restaurants. A growing number of niche establishments that offer quality, unique products at an affordable price are also becoming more popular as inflation continues to be a major concern among restaurant owners and customers alike. Among the establishments that are trending in 2023 are Boba tea shops, coffee shops, pizza joints, and sandwich shops, with takeout and delivery options remaining popular over the next few years. Entrepreneurs looking to start businesses are increasingly turning to operations that cater to take out and delivery options, ghost kitchens, food trucks, and quick serve restaurants. Despite a modest 6.5% gain in 2021, restaurant acquisitions soared 20% in 2022, and the average number of days on the market decreased from 176 to 169 in the same time frame. Restaurant owners seeking to sell their business may find this to be an exciting time, as restaurants in 2023 showed strong financial performance and sold at higher prices. Source: BizBuySell

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WHAT IS AN EXIT STRATEGY AND WHY YOU SHOULD HAVE ONE

 One of the most important things an entrepreneur needs to consider when creating a business is creating an exit strategy, as without it they may be limiting their options in the future. This is a plan that addresses all the business stakeholders, finances, and operations, and outlines what needs to be done in order to sell or close the business. It is a comprehensive plan designed to help the business reach its long-term goals without disruption, enabling a smooth transition into a new phase. An exit strategy can maximize profits for a well-performing business and minimize losses for a struggling one. In theory, this strategy should guarantee that the value of the business is not undermined and provide additional opportunities to optimize outcomes. An exit strategy will require a comprehensive analysis of your finances, which can provide a measurable value to guide the best-selling situation. A commitment to your business vision and goals will give potential buyers additional value by demonstrating a commitment to setting goals and making strategic decisions that make progress towards your anticipated business outcomes. A business exit strategy explains all roles within the organization, how they contribute to the business’s operations, keeps all employees and stakeholders informed, and ensures that transitions will be smooth and predictable. These strategies can prevent unwanted consequences, such as bankruptcy, during the business exit process. When creating your exit plan, there are two types of strategies to consider, selling the business or closing it and selling off its assets or running out of funds. Your business may be sold to a new owner and you may transition out of the day-to-day operations either by financing it overtime with a buyer or by selling the entire business at once. In some cases, closing a business can be the best method for repaying investors and still making money. This can include closing the doors to the business and selling all assets as quickly as possible, but all creditors must first be reimbursed before any money is taken to pay for yourself. Lifestyle businesses are another practice where you are paid until the business runs dry instead of reinvesting the money back into your business. Although this can be advantageous to you as the business owner as you will still receive payment and maintain your lifestyle, it can also stunt your business’ growth, making it less valuable if you decide to sell it in the future.

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FEDERAL RESERVE APPROVES NINTH INCREASE IN INTEREST RATES

The Federal Reserve has approved another quarter-point increase in interest rates but has signaled that financial turmoil may end its rate-hike campaign sooner than anticipated. This is the ninth consecutive increase in interest rates since last year to combat increased inflation. The new benchmark federal-funds rate range is now at 4.75% to 5% the highest level since September 2007. Jerome Powell, the Fed’s chairman, hinted that Wednesday’s increase may be the last for now, depending on the extent of any lending pullback following the bank run earlier this month. Most of the 18 participants in the meeting expect the fed-funds rate to rise to at least 5.1% this year, which implies another quarter-point rate increase and no rate cuts. Fed officials have acknowledged the risk of being forced to simultaneously fight two problems, financial instability and inflation. Federal Reserve officials have stated that they would use emergency lending tools to stabilize the credit markets as well as continuing to raise interest rates or hold them at higher levels to combat inflation. Several former Fed policy makers have argued that not raising interest rates may raise questions over whether banking problems are more serious than they appear at present. According to Jan Hatzius, Goldman’s chief economist, it is prudent for the Fed to move cautiously given the highly uncertain environment caused by the banking stress. Source: WSJ.com

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