Small Business Cents

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By liquidating your business, you convert your business assets into cash. Business owners choose to liquidate for various reasons - they can't find a buyer, their business is not profitable etc. However, if you ultimately choose to liquidate your business assets, there are some best practices to keep in mind in order to ensure that you are not only making the right choice for your business, but also maximizing the benefits of liquidation.

Why Would I Liquidate My Business?

Small businesses liquidate for various reasons, the most common of which is a decision to close up shop..  You can liquidate out of need - for example, if you run out of capital from excessive losses, lose investment support, or if you are unable to find a suitable buyer., You can also liquidate by choice - to pursue new endeavors,  or as a means to stay in business by liquidating some assets to increase cash flow.

How to Liquidate Your Business

Liquidation can get tricky. Whether you do it yourself or outsource it to a third party, it is helpful to have a general grasp of the liquidation process.

1. Assess your Assets

Itemize your assets. List all the business assets that you are going to sell and include as much information and documentation on them as you can e.g. descriptions, photographs, etc. For older equipment or furniture that isn't likely to sell, consider charitable donations to earn tax deductions.

Determine the value. Before you sell, you have to check how much money your asset can sell for. Consider working with an appraiser to determine fair market value of your assets.

Is liquidation worth it? Liquidation costs can ramp up, so calculate whether it makes good business sense before you start the process. Subtract the commission payment (to professionals, if you choose to hire one), labor, storage, and other associated business expenses from the value of your business assets. If the numbers do not look favorable, you may want to consider other options.

2. Sell your Assets

Choose how you want to sell.  Your line of business and time frame will affect which liquidation methods you use. If there are several buyers interested, you may want a negotiated sale, in which you have more leverage over the best deal. You can also assign a dealer to manage a consignment sale. Public auctions and internet sales are other possible alternatives.

Select a timeline. Tune into your customer base- when would they most likely buy? Depending on the type of business you have, the industry, and what your assets look like, the best time to sell varies. For example, if you want to sell your inventory of snow plows, the winter season is a good time to attract buyers.

Select location. Does it make more sense to sell at your business site or elsewhere? A retail clothing store would probably want to have a liquidation sale at their store location to sell off their inventory, while a home-based business may prefer to rent a lot in a more commercial area.

3. Seek Professional Help

You can liquidate on your own, but if it sounds intimidating you may want to consider hiring a liquidation professional to do all the work for you. An expert will charge fees for their work, so weigh the costs and benefits before you decide to hire one. Don't forget to assess your business needs and do thorough research on various liquidation professionals before you hire.

An alternative to hiring a liquidation professional is consulting with an accountant or lawyer to help value your business assets.

Have more questions about liquidating your business?  Ask them in the community.

Resources

Liquidate Assets

Bankruptcy Options for the Small Business Owner

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