Every successful business owner is well aware of the challenges associated with starting up a business, but few consider the difficulties of closing one after they have been in business for some time. Finding someone to purchase an existing business is often hard, if not impossible, and succession plans can require years of additional work. When a potential buyer can’t be found or a multi-year succession plan isn’t ideal, liquidation auctions give business owners a quick way to close their business and recover much of its assets’ value. If you currently own a business and are looking for an exit strategy, here’s how why a liquidation auction might be the right choice for you, along with how to plan one that will do well.
Turn Your Assets into Cash
A business liquidation auction directly converts assets into cash, and it does so quickly. Almost any physical asset that a business owns, including inventory, equipment and property, can be sold to the highest bidder at a liquidation auction. Because all sales are “as-is, where-is,” you won’t need to deal with returns, refunds or repairs. The bidder is responsible for the assets they purchase, and you’ll have money in hand when they take possession of the assets. (To ensure there isn’t any confusion about the sale, all bills of sale should clearly state “as-is, where-is.”)
If your business owes creditors, they will have first claim on any proceeds you receive from a liquidation auction. While no one enjoys paying creditors, it must be done. If your business has fallen on hard times, and you’re struggling to pay creditors, a liquidation auction help you raise the funds you need to pay your creditors. Even if your outstanding loans are current, you’ll still need to use proceeds from a liquidation auction to pay your remaining creditors. After all, your business is being liquidated, so there won’t be any future revenue to make credit payments with.
Once your business’ creditors are paid, the remaining proceeds from a liquidation auction go directly to the business owners. In fact, many auctions have a buyer’s premium, which winning bidders pay to the auction house. This can be used to lower, or sometimes eliminate, how much you need to pay the auction house, thus giving you and any fellow business owners more of the auction’s proceeds.
You and Fellow Business Owners Benefit
The real person who benefits from a business liquidation auction is you, along with any business partners you have. Not only do you get cash for your business’ assets, but you get it quickly. On the day of the auction, your assets will be sold to the highest bidder. Even if the highest bidder pays a little less for a specific asset than you might get in a private-party sale, the time saved with a liquidation auction usually more than makes up for the minor difference in sales price.
By selling your business’ assets quickly, you’ll be free to retire, apply to work for a corporation that provides a steady paycheck and benefits, or pursue another business immediately. You won’t have to wait until a magical buyer comes along or continue to work while someone else learns your business. You’ll immediately be free to move on — and have the money you need to do so.
To maximize how much you benefit from a liquidation auction, it’s important to both schedule the auction wisely and hire an expert to handle the liquidation.
Liquidation Auctions Need to be Scheduled Wisely
When scheduling your liquidation auction, there are three factors to consider:
• your business’ ongoing overhead expenses
• seasonal shifts in demand
• who would be interested in your business’ assets
By holding a business liquidation auction sooner rather than later, you’ll be able to reduce your overhead expenses. The longer you delay an auction, the more you’ll have to pay in rent or taxes, and insurance premiums. All else being equal, holding an auction sooner is preferable to delaying it, although this must be balanced with the other two considerations.
First, if demand for your business’ assets is seasonally affected, you’ll want to schedule the auction for when demand is at its peak. For example, if you’re liquidating a snow plowing company, more people will be interested in acquiring plows and snowblowers when winter is approaching, rather than when winter is ending. Similarly, if you have a retail pool store, there will be more demand when the weather is nice than when snow is falling.
Second, when gauging seasonal demand, make sure to account for the buying cycle in your industry. Companies will want to purchase products before the retail season picks up. Depending on your industry, the buying cycle may be anywhere from a few weeks to years. If you can time your auction for when fellow companies in your industry are looking to buy assets, you’ll increase how many people are interested in your business’ assets.
Finally, you should schedule your liquidation auction for a time when decision makers in your industry are available. In general, weekends are a good time, because most business owners are busy with other tasks on weekdays. In some industries, however, weekends may not be ideal. For instance, restaurant owners might be busy on the weekends if their business does a lot of breakfast and lunch business.
You should have a general idea of when demand for your business’ assets peak and when people in your industry are available. An expert who has held liquidation auctions before can help you use this knowledge to select the best time for your auction.
An Auction House That Specializes in Auctions
It is important to seek the help of an expert in the industry when planning a liquidation auction. Your business, which likely has significant assets, is being liquidated, and even a small mistake could significantly affect how much its assets go for. By hiring an auction house to help with your liquidation auction, you’ll ensure you get as much as possible from the event.
At Sohn and Associates, we’ve helped many businesses successfully liquidate their assets through an auction. Just recently, we’ve sold:
- a 1999 Pony Express three-horse Trailer for $4,600
- a Snapper groundbreaker, tiller and more for $375
- a convenience store in Spencer County, Indiana for $95,000
These sales don’t guarantee that your business’ assets will sell for such amounts. We at Sohn and Associates have sold many different types of assets for sizable sums, though, and we’d be happy to talk to you about liquidating your business.
When you hire us at Sohn and Associates, we’ll help with all aspects of the liquidation auction. We’ll help:
- market the auction to attract as large a crowd of buyers as possible
- professionally appraise items
- inventory, assess and price each item being auctioned
- take care of the paperwork involved with transferring ownership of the assets
To learn more about liquidation auctions and see whether we might help you, contact us at Sohn and Associates. Auctions are our specialty, and we’re ready to help you.