Liquidation Checklist
Liquidating your inventory is usually not a pleasant experience to deal with but the current financial crisis has made the need to liquidate your inventory an almost unavoidable part of business. In previous years inventory liquidation was more often than not the result of poor management or bad business decisions, but today the tightened economy is bringing even well-managed businesses to their knees.
When the economy restricts and consumers become cautious about their spending, backlogs of inventory begin to pile up. When inventory piles up, cash gets tight. And when cash gets tight, it’s difficult to pay off creditors let alone invest in new ventures. If a business gets to this point, it may be too late.
What’s your plan?
The first thing to remember is that time is your most valuable asset. Your financial obligations don’t wait and neither do your customers, so the quicker you act, the quicker you can turn things around. Also, it’s important to remember that your inventory is losing value with each passing day. So to preserve whatever value your inventory does have left, it’s vital that you act quickly and decisively.
Where to start?
It makes sense to begin the process by drawing up an accurate liquidation checklist, a liquidation blueprint if you will. While the liquidation checklist is obviously going to vary according to the nature of the business, whichever liquidation company you choose to assist you in this process will be well aware of these differences and know how to relate to each business’s specific needs. Given these differences, each business still needs to know the answers to these three questions before starting their liquidation:
- What are your competitors doing?
- What is the market telling you?
- Where do you see yourself in 5 years?
Without getting into a detailed market analysis, by starting with the end in mind you have a much better chance of getting to where you want to be. If you do not have a solid plan for adapting to the changing climate, your liquidation may become permanent.
For the sake of this article, I’m going to keep the checklist limited to a simple inventory liquidation and not an entire business liquidation. If you want to know more about the bankruptcy liquidation process, please read my recent article Business Bankruptcy and Liquidations.
Your Inventory Liquidation Checklist:
Audit your inventory- Many times inventory gets lost, your inventory database gets corrupted, inventory gets found, etc. Having an accurate inventory count, with pictures if possible, is critical.
Place a dollar amount on your inventory- Although it is a liquidation, it still helps to know how much money your working with. Either a wholesale cost or retail value is acceptable.
Know your limitations- If you’re locked into a lease and fees are accruing; you need to know when you can pinch pennies and when you can’t. When you need the job done quickly sometimes it’s better to lose a little upfront than to lose a lot in the end. This will help you decide between an auction or liquidation company, and more specifically which company you go with.
Finding the right liquidation company- Time is almost always worth more than money, so finding the right liquidation company is critical to making the most of your inventory liquidation. It’s a lot easier to give you a good price upfront than it is to deliver quality service later on. And I can tell you from experience, quality service will save you more money in the long run.
Closing the deal- Besides getting a fair return for your inventory, it’s important to understand the process in the backend. Where is your inventory going to end up? Is it being sold wholesale or is the liquidation company the end-user as well? Will it be distributed in new markets or will your own merchandise become your new competition? Will the inventory liquidators work with you to protect your channels of distribution and fraudulent customer returns? Who is going to remove the inventory? Who is going to handle the shipping and logistics and how much is that going to cost? And finally, what are the terms, will the buyer pay cash, or is it a consignment?
Now that you have your Inventory Liquidation Checklist, the work is only just beginning. The hard part is actually doing it. Before you venture out on your own and attempt to find an inventory buyer that’s right for you, I would highly recommend you read, “How to Find the Right Liquidation Company.”
For immediate help with your inventory liquidation please call 1-877-279-3353
or you can email us at support@ccmllc.com
