When you decide to close a business and you need to sell the assets, you have several options regarding how to liquidate a small business in Texas. If it is a voluntary liquidation, meaning you are not in arrears with a lender who has a lien on the equipment, you are free to do whatever you deem the most beneficial. If you have a loan on the equipment or a loan that lists the equipment as collateral, you need to discuss the liquidation with your lender and make sure they are comfortable with the plan and they understand they will be receiving the proceeds until the loan is paid off. This is vitally important in order to legally sell the assets (collateral) free and clear.
3 Best Options to Liquidate a Small Business
There are 3 best options of business liquidation in Texas:
1. Sell the business with goodwill
Usually the best option for liquidating a small business is to actually sell the business as a going concern including the name, goodwill, phone number, website, furniture, fixtures, equipment and inventory. This will almost always take the most time of these options. If the buyer is borrowing money to make the transaction, you will need to be patient and have time on your side. You may want to hire a business broker to handle the transaction. The bottom line is this may be the best way to recover the most money, but it will be the most difficult and time consuming.
2. Hire a professional auction company
Start searching online for an auction company that has experience in selling similar assets. Go to their website and search their past auctions. This will give you a good idea of their areas of expertise. Auction companies that have sold similar equipment will already have buyers in their database and will have knowledge of that asset class. Professional auctioneers are accustomed to working with time constraints, especially regarding getting out of a leaded spaced by a certain date. Talk to at least two auction companies and compare their experience, trustworthiness, references and fees.
3. Sell everything yourself
The drawbacks include: knowing what prices to ask for the assets, knowing how and where to advertise the sale, what to do with the assets you can’t sell, being “commercially reasonable” if other partners or lenders are involved and of course, the process taking too much of your time.
Things to Consider to Liquidate a Small Business
What are you selling?
This is one of the first questions an auction professional will ask. Creating some sort of inventory will allow you to quickly identify the right professional to assist you. Another helpful tool is photos. Try to have photos available for some of the highlighted items. These can be forwarded to the auction company electronically.
Should I start selling what I can to friends and associates?
If you want to sell everything yourself, go ahead and get started. If you want an auction company to be involved, don’t sell anything yet. Be sure to get a professional opinion regarding existing offers, especially those from “friends & family”. You will usually be better off to let the auction company sell everything, which will allow them to advertise a “complete liquidation”. Remember, if your “friend” knows you are going to have an auction, and they want to buy something before the auction, you need to ask yourself, “why?” The obvious reason is they think they can get it cheaper before the auction. If you have contracted with an auction company, then you can reply “Oh, I would love to sell that to you now, but my hands are tied, I have an agreement with the auction company”. They can always bid in the auction and compete with everyone else.
Timeline
If you need to exit a leased space, you need to remember that liquidations don’t happen overnight. Auctions take several weeks to set up, market, conduct and orchestrate removal. You should contact an auction company (or talk to several) as soon as you know for sure that you are closing. An agreement with an auction company can take place even before you close. This allows much of the logistics to be worked out, marketing prepared and everything ready to go when the business is closed.
Decision Makers
Who else in your business is needed to make the selling decisions? Does your spouse, relative or business partner need to be involved in the decision making process? Having these people identified and present at the beginning of the liquidation process will save you from repeating meetings.
Involvement
How involved do you plan to be in the sales process? Some sellers want regular updates on every step of the auction, and others want to sign a contract and start working on the next stage of their life. Knowing your own tendencies and desires for communication will help your peace of mind. There are 100’s of actions and decisions in successfully conducting a liquidation auction and auction professionals are happy to share as many or as few with sellers as they request.
Meeting the Auctioneer
It will be important for an auction company representative to do a walk-through of your business site before they present you with an auction proposal. If you are still operating your business and you have not made the closing known to the employees, let the auctioneer know that information, so they can be discreet during your meeting with them. If you cannot meet with the auction company representative in person, plan to have a “zoom” type call so you can visit “face to face”. It is important that you feel comfortable with any auction company you work with.
Before you meet with the auctioneer, make a list of questions you have regarding the auction and the process. An experienced auctioneer will seek to answer all of your questions and bring up points you may not have considered. You want to get all of your questions answered before you sign an auction agreement. If an auctioneer cannot answer a question to your satisfaction, you may want to get a quote from another company as well.
Would you like to visit with an Auction Professional? A representative of Jones Swenson Auctions would be happy to review your potential auction situation. Call (512)261-3838 or go to Jonesswenson.com for a no obligation consultation.
