How to 101: Surviving Economic Pitfalls With Liquidation Auctions

If your business is having financial problems you may want to consider liquidating some of your assets to bring in more money or avoid bankruptcy. Many businesses are considering liquidation before bankruptcy to gain more financial buoyancy. They are liquidating their unsellable customer returns, and overstock to make money from otherwise unusable stock. Liquidation involves a liquidation auction, and many auction houses are thriving with this new economic phenomenon. Whether you are a liquidator, retailer or consumer, there are many things you must know in order to financially succeed in this forum. The following guidelines are for a business to take advantage of liquidation auctions to improve their business’s bottom line.

Liquidation auctions specialize in most everything such as electronics, clothing, shoes, cosmetics, furniture, general merchandise, groceries, packing supplies, health & beauty aids, industrial equipment, tools/hardware and much more. All of these products are being offered at a fraction of the original retail price. Items can be purchased by the case, pallet or truck load.

Before you start looking at liquidation auction services, you should do your homework.

- Review your financial statements to determine overstock and returned inventory. Have a detailed report of these items to identify exactly what is to be auctioned.

- Always review the quality of the inventory to be auctioned, to determine which are suitable for resale. Make a list of these items and list your initial cost of the items. This would be the minimum price you would be willing to sell the items without loosing money at the auction.

- Calculate a secondary value for a minimal profit to help during auction negotiations.

- Research business liquidation auctions.

- Talk to a liquidation auction consultant if possible.

- Find a business liquidation firm in your area.

Before you use an auction to liquidate it’s important to know and understand the glossary, or terms related. They are:

InventoryInventory is the terminology used to define what’s in stock in a particular store.

LiquidateSometimes parts of companies or full companies end their business dealings. When this happens, they distribute their assets and properties to other companies. In a liquidation process, the company ending its business redistributes inventory to other companies.

AppraisalAn appraisal is an assessment of something like stock, or inventory. It estimates the total value of the goods.

SurplusAlso called overstock, this term refers to an extra quantity of inventory than what’s necessary. Liquidators often sell off surplus products at discounted prices to move inventory.

Business-to-businessBusiness-to-business, also called B2B, is an exchange of products between businesses as opposed to the exchange of products between consumers and businesses. Liquidators use this type of transaction to move excess inventory.

Liquidation auctionA liquidation auction, also called a surplus auction, is and event where a company or business rids itself of excess inventory by holding an auction, attempting to get the highest prices possible for the extraneous inventory.

In general, auction liquidation services provide management and set up of the auction, including a complete inventory of assets. They provide the advertising, catalogues and even the auctioneer as well as a choice of payment options for the customer. All of these services will be indispensable to the success of your particular auction. It’s best to get proposals from three different agencies before you settle on the best one for you. Price, level of service, timelines and reputation are the key to determining the best service providers. Always check references when choosing the right liquidation auction service.

Following these steps will be the foundation to the success of your liquidation auction. The best offence against financial ruin is a great defense, and liquidating your overstock and/or customer returns is in my opinion the best way for your business to survive. These steps will help you to not only understand your business’s problems and future goals, but to also gain some money from otherwise unsellable inventory.

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