Top five things you need to look for in a liquidator
So, you’re looking to liquidate. Great! What’s next?
A quick search of the term “liquidation” generates results along the lines of “the process of a closing business selling off their assets”. However, a more thorough analysis of these definitions reveals a more flexible definition wherein liquidation in and of itself is simply the process of converting assets into cash – bankruptcy or business closure need not be a prerequisite.
Over the years, the process of liquidation has evolved from simply being a failing business’ exit strategy into a viable and promising method used by thriving businesses to recover value from assets that would’ve otherwise represented complete losses.
Simply put, liquidation has transformed from a one-off strategy into what could possibly be an essential part of any company’s daily operations.
All is not lost: The role of liquidation in managing excess and aging inventory
The most common way in which liquidation has lent itself to the strategic growth of thriving companies is in the area of inventory management.
If your company stores and sells goods, then you already know how essential it is to remain on top of your inventory, from purchasing stock, allocating warehouse space, maintaining the quality of goods, and ensuring the proper flow of inventory into the market.
Two particular factors that could cause a bottleneck or hurdle in your company’s smooth operations are excess and aged inventory.
The term excess inventory refers to the goods companies haven’t sold yet due to a lack of demand from consumers. These items are often nearing the end of their life cycle and the longer they are left sitting around the shelves, the lower the chances of them being sold off. Aging inventory, also called slow-moving goods, is a form of excess inventory that has been kept in storage from 60 to 180 days due to low demand.
Another form of excess goods is dead stock. This refers to inventory that has surpassed the 180-day mark. If aged inventory poses a challenge for making a sale, dead stock doubles down on that. This is because items that are considered dead stock are often damaged, expired or outdated.
Excess inventory is the result of plenty of factors but from a broad perspective, it comes down to an overestimation of demand from consumers and of course, quick shifts in consumer behavior and trends.
These different forms of excess inventory curtails a company’s operations by representing unrecovered investment, affecting your business’ cash flow. Furthermore, these goods eat away at precious storage space that could’ve been allocated towards better-selling or new arrival items. Another concern of carrying excess goods are the costs it takes to keep them in storage such as utilities and labor.
So, if you’re a company facing the dilemma of what to do with your excess inventory and you’ve turned to liquidation as a solution, then you’re on the right track. The next step is ensuring that your venture into liquidation is as productive as possible – successfully recovering value from your unused assets instead of entailing any more unnecessary costs.
While there is no best way to go about liquidating, some methods are definitely better than others. On the occasion that your company has the manpower and experience to explore in-house liquidation, then deliberating the qualities on what to look for in a liquidator may not be as big of a concern for you.
However, more often than not, businesses are already preoccupied with the needs of their day-to-day operations and may not know where to even begin. This is where liquidation companies swoop in with their experience and expertise to help you deal with selling off your unused assets – from evaluating your goods according to the current market value, marketing your items, connecting you to the right buyers, and more.
It is important to note, however, that not all liquidation companies are built equally. Depending on the assets of your business, the nature of your industry, and the goals you have in mind, finding the right liquidator is crucial if the partnership is to be a productive one.
We recognize how important it is for companies (especially those that are new to liquidation) to find their right match. In this article, we’ll be divulging the top 5 things you must consider when looking for a liquidation partner.
More often than not, the primary cause of entering liquidation is to recover capital invested in non-moving assets. So, it is only logical that cost should be one of the top things you should consider when looking for a liquidator.
Of course, before making any moves towards liquidation, it is important to consider and be transparent with the resources your company has. This is an important factor to thoroughly discuss with liquidation companies upon setting a point of contact. How much will their services cost? Will there be a retainer fee required during the partnership? If you’re specifically liquidating inventory, one must also consider how the liquidator will go about selling these assets. Are the items going to be fully purchased outright or is a consignment an option? How will profits be split and distributed?
It is also crucial that the responsibilities and expectations you have of your liquidator are discussed thoroughly. This allows you to fully gauge whether the range of services being provided to your company are worth every dime invested in the partnership.
The complexity of your company’s affairs often affects the cost of liquidation. This involves looking at factors such as the timeline and urgency surrounding the partnership, any outstanding debts, legal considerations, and more. Furthermore, consider the different asset realization costs involved to make a sale. For example, if your items will be hosted in an in-person auction, this may entail transportation, storage, auctioneer, and advertising fees.
You will know that a liquidator is promising when they are willing to invest time into getting to know you and your company’s needs, set realistic expectations, and work together towards fulfilling these in a manner that is as efficient as possible.
Liquidation companies come in all shapes and sizes.
When doing your research on potential liquidators, it is important to look at the clients they have catered to. Are they well-versed in all sorts of industries or do they tend to have a specialty?
One of the easiest ways to discern this is to look at their websites and review sections, paying close attention to their client list. Examining the type of industries your potential liquidation partner has catered to also tells you about the potential buyers of your assets.
If a liquidator has a history of dealing with a wide range of clients, they may have a diverse set of B2B partners, marketing methods and channels, and thus potentially capable of tapping into different segments of the socioeconomic classes.
You may consider looking for liquidators specializing in a certain industry if your assets fall into a specific niche. For example, liquidators with experience in dealing with antiques are most likely equipped with the contacts, auction houses, auctioneers, and direct buyers suited for such items.
Considering your potential liquidators industry-fit is important, especially if your assets fall into a specific category needing specialized handling and treatment. However, taking into account a liquidators experience in the liquidation industry as a whole is equally important.
Liquidation is a strategy that involves many moving parts of your business, from your business development, operations, warehousing, finances, marketing, and more. The process can become increasingly complicated and frustrating if you engage with a liquidator who lacks the significant experience needed to meet your goals.
Aside from doing your own research, one of the simplest ways to discern a liquidator’s level of experience is by asking questions. Probe your potential liquidation partner on the average cost across the market for liquidation, the price and level of service your partnership will entail, and their strategies for mitigating losses. Bear in mind that experienced liquidators must be equipped with the knowledge, operational expertise, technology, and the right connections.
Look for detailed answers when you ask how your assets will be priced, which selling channels they’ll be onboarded on to, and how you can receive reports on their movement or performance.
There are several more questions you can ask, each one varying according to the nature of your assets, industry, and short and long-term goals.
Furthermore, a good liquidator will be transparent off the bat, informing you of pain points, bottlenecks, and potential roadblocks while also offering potential solutions to be explored throughout the partnership. Statements from your liquidator such as, “Don’t worry about it,” or “Leave it up to us,” just won’t cut it.
If you sense that your liquidator tends to deflect or takes an alarmingly long time to answer your inquiries, then you may want to rethink your partnership or look elsewhere altogether.
Any good business owner or entrepreneur must be constantly aware of the different market shifts and trends, emerging technologies, and other opportunities for growth. After all, part of running a successful company has to do with remaining current and constantly innovating. Why should your potential liquidation partner be any different?
When you’re looking for a liquidator, one thing to consider is their innovative spirit as a company. Look at how they present themselves on their website, social media, advertisements, etc. What kind of feedback has their previous clients left?
You may also be interested in considering the different channels they utilize to liquidate. If you’re liquidating excess or aged inventory in particular, ask about what different selling channels and marketing initiatives they utilize.
Furthermore, pay attention to the recommendations they give as to how to proceed with your partnership. A good liquidator should be able to recognize what strategies and tools are most appropriate for the goal at hand. Additionally, they should also be able to think quickly on their feet, addressing any potential losses before they occur, and constantly innovating on how to recover value from your unused items or assets.
Last but not the least is reputation. This is perhaps the culmination of all the attributes you must look for in a liquidator.
Aside from the questions and courses of action we’ve previously recommended, it may also benefit you to directly reach out to a liquidator’s previous clients and get firsthand knowledge on what their experience was like.
It is important to also consider the ease of the transaction. Was the liquidation company easy to contact? Were regular updates given to their clients? Are they capable of working on a budget? Were their financial reports and estimated value of your assets transparent and fair?
Liquidation may be a strategic way of recovering value from your unused assets, but that does not automatically make it an easy one. Choosing a liquidator who exhibits professionalism and transparency all throughout the partnership will make your decision to liquidate a good one.
Finding your perfect (liquidation) match
In this article, we’ve discussed five of what we have discerned to be the most important factors any business owner should consider when looking to partner with a liquidation company.
At the end of the day, it’s all about asking the right questions, establishing transparency and expectations from the start, and ensuring that a constant team effort is being exerted throughout the duration of the partnership.
There are several other green flags one can look for in a liquidator, but the five detailed in this article should be enough to help you start communicating and negotiating with liquidators confidently.
Liquidate your excess and aging inventory with Humble Sustainability
Humble Sustainability is a liquidation company with a purpose, having partnered with ecommerce stores, logistics providers, brands, malls, retailers, manufacturers, distributors and so much more. They accept items from a wide range of categories including high-value IT and office assets such as laptops, mobile phones, furniture, home and living appliances, and more!
If you’re wondering, “Can I liquidate my products to Humble Sustainability?” or perhaps, “How much can my company earn through a partnership with Humble Sustainability?”, then reach out to the Humble team! You may schedule a call, discuss your inventory and receive an estimate on how much value your business can recover by filling out their contact form or sending a message directly to email@example.com.
Make your office assets and excess inventory the hero or buy sustainably-sourced items in bulk. Start your business’ sustainable journey with Humble Sustainability today!
Send us an email: firstname.lastname@example.org | Contact us through mobile: +63 915 573 9111 | Our warehouse: 664 Sgt. Bumatay St. Mandaluyong City, Metro Manila, Philippines