When most small business owners decide to change industries, they immediately assume that selling the company to an interested buyer is the best method for getting out of a business. In fact, liquidation is often the easier and more profitable solution. Read on to find out why business owners, especially those who work in retail, should consider liquidation as an exit strategy.
Selling a Business Poses Unique Challenges
Finding a buyer for a business with significant assets can be more of a challenge than most small business owners think.
Qualified buyers may be unwilling to invest, and those who are genuinely interested may not be able to finance the purchase. Even genuinely interested and qualified buyers are unlikely to pay a fair price for the company’s inventory because most prefer to select and purchase their own assets.
Liquidation Is Much More Straightforward
Working with Liquidation Services is a much more straightforward and less time-consuming ordeal than finding a business broker, seeking qualified buyers, and negotiating the sale of the business. As a result, business owners who choose liquidation as an exit strategy usually get the money they’ve earned through years of hard work much faster.
Types of Businesses That Can Liquidate Assets
Liquidation is only the right solution for certain types of businesses. More specifically, it’s a great alternative to selling a company that has significant inventory or equipment. Consider liquidating businesses that fall into one of these three categories.
- Businesses That Use Assets to Produce Income Directly
This category of companies includes retail storefronts such as apparel or shoe stores, sporting goods shops, and furniture showrooms.
Independent business owners who do not operate within popular franchises stand to gain the most by liquidating their assets and inventory. Public companies and franchises usually wait until they are facing bankruptcy to liquidate.
- Businesses That Use Assets as Tools to Produce Income Directly
Restaurants, manufacturing companies, and construction firms all fall into this broad category. They use their assets to provide goods or services to customers and clients, but the assets themselves are also quite valuable. They can be sold to used equipment dealers, auctioned, or sold wholesale to other similar businesses.
- Businesses That Use Assets to Produce Income Indirectly
Some businesses, such as insurance agencies or attorney’s offices, only use their assets indirectly to produce income. In this case, assets usually include furniture, fixtures, and equipment. The liquidation value of these assets is limited when selling to used office equipment dealers, but auctions can be a viable alternative.
Tips for Liquidating Inventory
Of all the types of assets, retail inventory is the hardest to liquidate. The process requires a going out of the business sale. Here are a few tips to follow to maximize gains:
- Keep the sale short to limit overhead expenses.
- Choose the right time of year.
- Predetermine initial markdowns and the timing of further markdowns.
- Develop a promotion program for the sale.
Start Planning Now
Planning to switch inventories or make an exit from the business world? The first step for anyone who wants to liquidate his or her company’s assets is to hire a consultant or retail liquidation company.
Start planning early to ensure everything goes as smoothly as possible, and don’t be afraid to ask questions of liquidation experts. They’re here to help.