A liquidation auction, also known as a surplus auction, allows businesses to get rid of excess inventory. It’s also a way for companies to sell-off inventory before going out of business. In this event, the company needs to raise money to satisfy its creditors.
Given the two examples above, the term liquidation auction implies “everything must go.” Clearing inventory doesn’t necessarily mean the business is closing. Typically, an auction helps companies maximize the amount of money they get for the products they remove from inventory.
Businesses will usually hire a professional auction company to handle the liquidation sale. The auction house provides a wide variety of services including taking a complete inventory of assets, advertising for the auction and managing the event from start to finish. To find the best auction service for your liquidation auction, you should focus on experience, reputation, services, pricing, schedules and references. Thorough evaluation in these areas will help determine the right auction service provider for your business.
Closing a Business
Conducting a liquidation auction may be voluntary or forced by the courts. In many cases, it’s a step that must be taken before a business closes. In this scenario, the funds generated from the sale of goods typically go to the creditors first. Next, the shareholders of the business benefit from any remaining funds.
A liquidation auction for a closing business not only includes the stock of the company, but every other asset used by the company. For example, if the company produces a product or sells products, these items are auctioned. In addition, other items the company owns, like office equipment, computers, supplies, furniture, artwork and anything of value will be auctioned to the highest bidder.
An Alternative to Bankruptcy
Sometimes financial difficulties are short-term events for businesses. If your company is experiencing some cash-flow issues or other financial problems that you think are short-term, you may consider a liquidation auction instead of filing for bankruptcy. By liquidating some assets, you may be able to bridge the gap in negative cash flow situations.
This is an especially good strategy if you have inventory you can’t resell. For example, customer returns, damaged goods and surpluses may be prime asset candidates to bring in some extra needed cash. Because of the recent economic challenges many businesses have faced, reputable and experienced auction houses are specializing in liquidation auctions to help businesses get the most money from their inventory.
Improving the Bottom Line by Selling Unneeded Assets
Liquidation auctions are a great way for your business to earn extra profit. Targeting inventory you can’t sell as indicated above, or just have too much of, can help you pad your finances. You can also auction other assets used in your business that you no longer need. Old office equipment and furniture are prime examples.
Whatever your reason for conducting an auction, make sure you understand how to achieve the best results. Finding the right auction service is an important step. But, you also have to look at your particular situation and evaluate your financial statements. You have to know what you paid for these items so you can make sure they don’t sell for less at auction. In most cases, it wouldn’t make sense to lose money.
Liquidation auctions are great opportunities for both sellers and buyers. Businesses can earn extra cash, stay out of bankruptcy or satisfy creditors before a closure. Buyers can often get a wide variety of merchandise at below retail prices. And, there’s nothing better than a win-win situation!