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How to Plan & Create a Company Strategy for a Business Exit

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How to Plan & Create a Company Strategy for a Business Exit

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Developing an exit strategy is probably the last thing on an entrepreneur’s mind when you start a business. But there may come a time when you decide to exit and move on. 

Maybe you’re ready for something new, maybe you’re ready to finally retire and reap the financial rewards of hard work, or maybe it was your plan all along? 

Whatever the reason, even if you don’t plan to sell your business right now, at BBN Times we know that developing a business and focusing on the right things is crucial before you can look into an exit strategy. It helps you prepare for unexpected circumstances and ensures a smooth exit when you decide to step down.

In this guide, we look closely at what a good business exit strategy is, the types, and tips you should consider. We also cover how you can develop an exit plan to ensure a smooth and profitable transition.

Without further ado,

What Is a Business Exit Strategy?

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An exit strategy is a plan that outlines how a business owner intends to transfer ownership of a company. This involves transferring control to another party but can also include terminating business entirely.

If a company grows and earns good profits, an exit strategy gives entrepreneurs the option to sell and turn a profit. It also helps business owners limit losses when struggling to stay afloat.

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If you receive an irresistible offer or need to take some time for personal reasons, then follow the steps outlined below to form your exit plan and get the process started. This includes chores like:

  • filing the necessary paperwork, 
  • transferring assets, 
  • notifying any stakeholders,
  • notifying staff.

To put together a viable and robust exit plan benefits the new owners in the case of a sale. With a process well-planned, written, and presented, people who want to acquire your assets can pick up from where you left off business with fewer worries and continue running the company with little to no hiccups.

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A Sturdy Exit Strategy Is Vital For Financing

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If you reach out to investors and funding, they’ll want to know how you’ll protect their prospect investment way before they lend your business any money. That’s called “trust in business” and it stands for robust business ethics.

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A precious trend in modern entrepreneurship is the zero-waste business model and philosophy as it stands for sustainable practices that signal absolute trust. Highly-recommended. 

Types of Business Exit Strategies

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There are a few different types of strategies you can consider when you decide to exit your business. 

Let’s take a closer look at the steps in more detail:

  1. Get acquired by another company.
  2. Sell to a new owner.
  3. Pass on your business to your family.
  4. Sell your business stake to partners.
  5. Liquidate your business.

Another Company Acquires Your Business

An acquisition, or merger, is when a company buys your business, most often because of capital needs. With this exit strategy, you hand over the reins of your business and give up ownership.

Becoming acquired can be extremely lucrative as long as you find the right buyer. In some cases, it also gives you the option to remain as a board member. However, if you decide to step away, you may need to sign a non-compete agreement.

You Sell Your Business to a New Owner

This business exit strategy is self-explanatory — it involves listing your business for sale and finding a new buyer. 

Ideally, this will be someone who’s familiar with the industry and has the business know-how to manage strategy and operations. Ways to find buyers include turning to business brokers and your social network.

Pass On Business to Family 

Many entrepreneurs decide to keep their business in the family. A good example is Walmart, which the Walton family still controls through various holding companies.

Passing on your business to a family member can seem like an excellent strategy. It allows you to involve yourself to some degree still and act as a mentor. 

However, taking this route can lead to familial tensions if there are disagreements about management decisions. One survey from PwC found that nearly half of family firms argued about the direction of the family business.

Sell Business Stakes to Partners

Selling to a partner is a highly common exit strategy. 

The benefit here is selling to someone who already knows the ins and outs of the business. The sale should also go more smoothly if you have a good working relationship, and we don’t mean the intimate aspects, right.

For this exit strategy, you must create a buy-sell agreement — a legally binding agreement that defines the procedure for transferring ownership. It also establishes a method for determining the business’ value.

Liquidate Your Business

It’s hard to shut down something that you’ve worked so hard to build. But liquidating your business is another option that you might consider.

Liquidating involves permanently closing your business and selling any assets you have, such as inventory and equipment. Just remember that you’ll need to use the cash to pay off any creditors before you pocket anything. 

If you decide to go this route, you’ll need to consider how liquidating will affect your employees and customers, so be sure to plan accordingly.

Planning Your Business Exit Strategy

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Having an exit strategy in place will ensure that you’re prepared if you need to sell. Follow these steps to develop an exit plan for your business.

  1. Prepare your finances
  2. Choose a strategy
  3. Increase your valuation
  4. Inform stakeholders
  5. Tell your employees
  6. Limit your involvement
  7. Get help

Prepare Your Finances

Buyers will want to see all financial records before they even consider your business. What documents should you prepare?

Start by putting together a profit-and-loss statement for the last few years. These financial reports summarise the company revenues, costs, and accounting. 

Consider working with an accounting firm to help you prepare your financial records.

If your business is at a loss and can’t pay off current liabilities, work with a credit repair company of sturdy reviews and proven trackback like Credit Saint before you even list for sale off the market.

Choose an Exit Strategy

What are your financial goals? Do you still want to stay involved in the business? Do you have any partners or creditors that you still owe money?

Answering these questions will help you find the right exit strategy.

If you want to take on an advisory role, you might consider passing on the business to a family member. But if you want to step away entirely and have enough for retirement, then finding a new buyer might be your best bet.

Increase the Value of Your Business

Look for ways to add more value to your business. That could mean optimising operations, team expansion, or tapping new markets.

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Consider seeking outside funding to help your business scale. A good example is StuDocu, an online content library that recently raised $50 million in Series B funding to scale its business. 

Selling a business can take time before you hand everything over. If you plan ahead, you can bring in more revenue and get a higher offer when you decide to exit.

Inform Your Shareholders

The decisions you make will ultimately affect your shareholders and investors. It’s important to involve them in your plans to exit the business as early as possible.

If you took out any loans or secured funding from investors, create a plan that details how you’ll repay them and when.

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Tell Your Employees

Breaking the news to your employees that you’re selling the business can be difficult. They may lose their job, and that’s tons of stress.

  • Once you have your nitty-gritty plan in place, inform employees on your decision to sell and what everybody can expect. 
  • Keep employees in the loop of any organisational changes (if any) and be prepared to answer their questions.

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Make Yourself Redundant

Buyers want a business that can sustain itself. If a business can’t survive without you, then potential buyers may have second thoughts.

Develop systems and document processes that break down how work gets done. 

These steps not only increase overall efficiency but also make your business more attractive to prospective buyers.

Hire a Business Broker

While you may think you can manage your business exit on your own, hiring a business broker can prove to be invaluable when it comes to getting the best possible offer.

Brokers generally work on commission, so it’s also in their best interest to help you. In addition to helping you find buyers, a broker can also assist with negotiations and ensure you have everything in order.

Develop a Business Exit Strategy, Final Thoughts

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Even if you have no immediate plans to sell your business, you should still put together and optimise a business exit plan in place as your circumstances may change in the future.

Follow the steps as laid out here to get started. Be sure to revisit your exit strategy as your personal and professional goals change.

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Are Sallie Mae Student Loans Federal or Private?

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When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

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Tips to do some fall cleaning on your finances

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Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

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How to Get a Loan Even with Bad Credit

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Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.

 

 

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