How to Run a Liquidation Sale

by Maggie Gebremichael; Updated September 26, 2017
Nation's Economic Downturn

Liquidation sales arise when a business must quickly sell assets -- usually to satisfy outstanding debt. Businesses often hold liquidation sales before going out of business, but some creditors file petitions to compel liquidation. You also can hold a liquidation sale to get rid of excess inventory. Liquidations can take place at your place of business, online, or even at a local market hall.

Step 1

Organize your assets carefully without relying solely on past purchase orders that might be outdated. You should prepare an accurate, current listing of all items, such as inventory, real estate, and office supplies.

Step 2

Analyze your expenses. You must understand how much you owe both to secured and unsecured creditors. Negotiate with creditors to determine settlement options. For example, a credit card company might accept 75 percent of the total debt if you can make a lump-sum payment.

Step 3

Determine liquidation values for all assets by considering the retail value and how quickly you need to complete the sale. For instance, if you have 30 days, then you might initially discount items by one to five percent. Make further discounts as needed.

Step 4

Implement various marketing strategies. You can place ads in a local newspaper, post on your website, mail fliers, and display large posters that are visible to drive-by traffic. Purchase distinct signs, perhaps in yellow, to hang above your door. If your target clients are business owners, notify them directly.

Step 5

Highlight return policies and warranties. Even if you will no longer operate after the liquidation sale, your receipts should clearly state the return policy (e.g., all sales final, as is, no warranty). Place notices near the cash register so they are easily visible to customers.

Tips

  • Most successful liquidation sales do not price items at market value but still earn a profit because retail prices carry high margins (instead of $20, earn $15). You can hire a professional liquidator to assist you. Consult with an attorney and accountant about specific legal and financial exposure -- even if you are going out of business.

Warnings

  • If you have filed bankruptcy for your business, then you must submit a liquidation plan before the trustee. Once the trustee approves the plan, you can conduct the sale.

About the Author

Maggie Gebremichael has been a freelance writer since 2002. She speaks Spanish fluently and resides in Texas. When she is not writing articles for eHow.com, Gebremichael loves to travel internationally and learn about different cultures. She obtained an undergraduate degree with a focus on anthropology and business from the University of Texas and enjoys writing about her various interests.

Photo Credits

  • Tim Boyle/Getty Images News/Getty Images