Liquidation as an Exit Strategy: How to Liquidate Your Business Assets 

 

When the end of the line of your enterprise becomes the most optimistic choice or, as in many instances, the only option, liquidating assets becomes a feasible approach for exiting. The most optimal and prevalent operation in terms of abandoning your organization is selling your business to keep buyers. But according to Business Finders, not all business owners want the same thing. Approximately 80% of companies on the market will not sell, because owners undervalue how important a projection of sale is.

Investors and owners demand this strategy to secure their capital from a business venture. Therefore, you should always have one prepared, despite your expectation for success. As you probably know, a scenario for potentially dissolving your business involves securing a return on your investment, and having a hearty level of trust for financiers in your company, tied into the process of liquidation is essential before moving forward for your exit strategy to be beneficial.

What is Liquidation?

Liquidation is the process of winding up a company, the selling of items to allocate them depending on whether the business is solvent or insolvent.

A liquidation process typically occurs when a limited enterprise has reached a point where, for a reason or another, it has been decided that the company will not continue its operations. At this stage, you might think about liquidating your business; which generally means turning your assets into income.

Converting your assets into income is typically done in order to pay off different debts, depending on investment made into the business by loans taken out in growing the organization or creditors, for example.

Liquidations dissolve the company and bring all activity to a close. It is a way for a company that has run out of funds (or is insolvent) to pay any remaining debts.

Why would a business liquidate?

One of the main reasons a company would choose to liquidate their valuables is due to insolvency. As we previously mentioned, insolvency typically means that an organization has reached a point where it cannot undergo necessary payments when they are due.

For this reason, choosing liquidation turns the business assets to income, which is so necessary for making these payments.

Insolvency

There is a great chance for you to be forced into liquidation as your business is no longer solvent. When a company remains solvent, it can still be operated by the owner of the company, however, when it is insolvent, you can place the business in control of a liquidator professional who will then deal with the aspects of liquidation or dissolving the organization.

When the business is deemed insolvent, any lasting asset will be sold in order to cover any remaining creditors. Therefore, any amount remaining after all essential payments have been made is then shared amongst any shareholders.

The role of the liquidator?

A liquidator is brought in to tackle the liquidation process. Their main objectives are to take stock of the business’s assets and pay, if funds are available, a percentage to the creditors. A fundamental part of the liquidator’s role would be to explore all of your business affairs should they need to recover any business’s assets that have been sold or misplaced at less than the organization’s market value because the liquidator is at liberty to reverse such transactions.

Know what you want to sell

Depending on your niche, it might be difficult for you to determine exactly what you want to try and liquidate. There are at  least three main types of assets that you will want to consider:

Take a look at any inventor you have. This will help you find any finished goods that would be able to be directly sold to your clients. For instance, a clothing shop would consider inventorying any pants, shirts, jackets, and dresses on the rack or sitting around the inventory.

Assess the assets that are used in the production of goods or inventory. In doing so, you may include the heaviest equipment and machinery that is used during an explicit production process. An example could be the machines in a die or tool shop, or construction equipment used on a job site.

Create descriptions and assign values

Once you’ve made your mind into what you will be liquidating, make sure you write out descriptions for each of the assets and assign a dollar value to it. Also, you might want to include descriptions of each asset and the care it has received.

To understand how to better assign a value to each item, consult first depreciation amounts on your ballparking estimates, balance sheets, or why not, hiring a professional appraiser.

Decide how you want to sell assets

As we’ve previously mentioned, this will depend entirely on your niche. If you happen to be in retail, your current clients would most likely enjoy buying up your inventory in a markdown sale. You can simply do that by dropping your prices and opening your door, and customers are sure to come flooding in.

If you possess larger items to sell, the general public most likely won’t be interested in, consider business liquidation auctions to help sell your assets. Not only will this make the whole process endurable, but the professionals will sell out their own experience to help make your liquidation process the most successful it can be.

Consider who you want to sell to

Once you head into liquidation, you will want to ensure you know who would be attracted to purchasing your goods. Again, this may vary depending on your niche. If you happen to be in retail, your customers would most likely love to purchase your inventory for a marked-down price.

If you have a tool and die shop, consider then stores in the area that may be interested in purchasing your equipment. Also, make sure you contact others who are in your relative niche to see whether they would want to buy your assets.