Running a business requires a lot from a person. Many factors can influence the success of a business. We are in the age of a globalized market. What that means is we are all competing with the rest of the world. It is the key thing for every business owner to grasp. No longer are we in the age of your local stores struggling to keep the neighbors happy. This globalized marketplace is making it very complicated for small businesses in particular. Large chain stores are overwhelming the market with lower prices and large assortments. Online shopping is pretty much the standard. Sites are mostly offering products and services on a global scale. No one can fault a business for simply not being able to follow these trends. If the worst comes to pass and you need to be ready to shut things down. Let’s learn about the liquidation process.
The definition
First things first. Let us go over what liquidation even means. If your business is no longer solvent and profitable you will want to stop trading. The process of liquidation begins with you contacting an insolvency practitioner. If insolvency is the agreed best course of action, the process can begin. It means that you are selling your company assets and you are turning them into cash. These finances are used to pay back any debts you may have towards other parties. These can be creditors, employees, shareholders, etc. Do note that you will need professional guidance to ensure you do not make any mistakes along the way. Also, to make sure that you get the most out of this unfortunate occurrence. The company is therefore deregistered. There are two types of liquidation. Voluntary and involuntary. The difference is that the latter one is court-mandated. More on that later.
Why choose liquidation?
There are many situations that could warrant the liquidation of a company. The most common one is when you decide to retire. You will want to pay off all of your debts. And if you have none, a little bit extra in your savings account is always welcome. Maybe you have different entrepreneurial plans that are debt and retirement unrelated. Liquidation has a bad rap. The thing is, it is not a bad business decision if you are doing it voluntarily and with enough forethought. It helps save money and reputation. And with the shareholders, reputation is the name of the game. If you are employing good practice voluntary liquidation, you are showing your creditors and vendors that you know what you are doing. It takes a lot of guts to do something like that. Especially if you do it on your own accord. And people will notice and respect that.
What goes first?
Liquidation means selling all that is company-related. The goal is to create as much cash as possible. The first things that come to mind are the equipment. Now, this will vary greatly, depending on the industry and niche you are in. Some equipment will be much more valuable than others. Office equipment is pretty much everywhere, so that goes for sure. Next, furniture is going. Office desks chairs, shelves, storage space, etc. And those are pretty much the basics. Once all of that goes, make a list of what remains. Before even starting the process, make a detailed list of all that specific to your business. The professionals that you will have to hire will ask you for that list. It is always better to come prepared. This way you will appear professional rather than desperate.
Appraisals
It is best that you ask your lawyer to recommend a good appraiser. Do note that most of the prices will be significantly lower than their store price. There are several ways of going about liquidating your assets. If you have a lot of products, you can organize a closing-down-of-a-shop sale. This means lowering our prices and offering deals. Buy one, get one free, or a volume discount. The point is to sell as much as possible, get rid of everything, and get cash in return. Internet sales are definitely also very popular and arguably less expensive to organize. If you are strapped for cash and want to sell quickly, consider public auctions and negotiated sales. On the other hand, if you are not in a hurry, consider consignment sales. This means giving the products to a trusted third party. In turn, they will sell the products on their own.
There are plenty of options when choosing to go down the liquidation route. It is not necessarily a bad business decision. Yes, it is usually associated with closing down shop. But much can be gained from it if you are well informed. So, be proactive, know what liquidation entails and see how it can work to suit your needs.
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Thanks for pointing out that the goal of liquidation is to generate as much money as possible. I’d like to know more about liquidation sales because I’m interested in helping a friend keep his business afloat. A lot of downsizing will surely have to be done first.