Need to sell off the business? A business liquidation auction in Texas can be a smart option for you. However, there’re further options available.
Note that the best options depend on the size of your business and the industry you are in. We’ve jotted down 3 different ways to liquidate your business in this blog.
Explore them and weigh their advantages and disadvantages, choosing what’s best for the business transition or your current financial circumstance.
- Putting up business for an auction
Do you have a significant amount of returns and excess inventory? Then you can sell a truck full of inventories to wholesalers and liquidators via an auction.
As popular as auctions are, online auctions are the most sought-after for bulk liquidation these days.
Although an auction marketplace is one of the best options, it might not be suitable for you. So, let’s consider its benefits and drawbacks to find out if it’s actually an option for you.
Pros
- Unlike private auctions, you can share the list of products you want to sell. So your buyer will be more convinced to bid.
- You make the bidding amount visible to everyone participating in the auction. As a result, buyers can see what others are bidding and decide accordingly.
- The total price may be very low or high. In such a case, you won’t know what price to fix. In terms of too high and low value, you can let the auction decide the price.
- Also, you can set the minimum price to sell your business. That will protect your best interest in the liquidation.
Cons
- Both online and in-person auctioning can take a long time to wrap up. For example, selling your full inventory can take as long as 10 days.
- As you know, the price in an auction is mostly unpredictable. Therefore, not knowing anything about the outcome discourages buyers from participating in auctions.
- You might not be able to sell up to the desired volume because it is connected with the demand. That means the amount of the product you can liquidate depends on the seasons and occasions.
- Look for an internal sell
Selling your business inside your organization can be another good option. Generally, in internal sales, people offer it to family members, management, and employees.
Evaluate the drawbacks and benefits of this plan.
Pros
- It’s a profitable option because you can avoid a large amount of tax and related fees by selling internally.
- It offers you the safest and smoothest business transition. As the people you will be selling are associated with your business, any learning curve isn’t necessary. As an impact, your business culture, operations, and customer service will remain unchanged.
- If you sell to your management, you can expect to have more flexibility. For example, you can decide to sell portions of only two partners.
- It has an altruistic aspect. To clarify, you have established this successful business with your employees. By selling it to them, you will see your employees drive more profits from what you have built together.
Cons
- In internal sales, you typically obtain a lower price. That’s because the management team is supposed to have less capital.
- Additionally, management might need funding from banks to make the transition happen. Overall, this decreases your business price and involves more debts.
- Your management team might not put in the effort you did for the business.
- The decision involved making a proper plan that would take time to prepare and implement.
- Selling businesses to financial buyers
This is one of the options for making an external sale. Additionally, your buyer might not be working in your industry.
One example of such buyers can be private equity funds. These entities usually look for businesses that have the potential to be more valuable. Eventually, these funds can sell these businesses with more profit.
Find the benefits and drawbacks of this option below.
Pros
- Generally, these buyers are capitalized. You can get a higher price than making an internal sale.
- Also, these kinds of external buyers have better human resources. Consequently, your business will be in good hands, receiving enhanced management support. Altogether, the new owner increases the value of your business in several ways.
Cons
- As financial buyers want to profit by taking over your business, they will try to increase the value of your business. To do that, they might repay the debts involved with your business, grow the business with a new plan, and change the management for improved performance. This way, your current operational style will change. And it can affect the company culture, brand value, and existing human resources.
- Often, sellers are required to stay connected with the business for a long time, even after selling it off. This could be essential for your new owner. In that case, this option might not suit your other plans.
Final remarks
These three options are commonly chosen by people who want to liquidate their businesses. Among these options, the first and third option is about external selling.
Although these are the most popular, people seek other external buyers, such as a big fish in your industry targeting smaller businesses. You have possible options laid out, and now you can decide how you want to sell your business.
