Business Liquidation

Liquidation of a company is a natural part of conducting business. Liquidation is an option a business can use when they are unable to make payments on its debts or expenses. This option, however, can present a huge opportunity for new business owners. Many people are starting to use the liquidation model as an opportunity to start a business for themselves. Since liquidation is a natural part of business life, business owners will use the products of a liquidating business (which tend to be cheaper than market value) and flip these products for a profit. An example of this is a company selling its return pallets at a discount to someone who will be able to sell these products at a premium to make a profit from their efforts.

The process of starting this business, like any other, requires certain steps to be accomplished before a business owner can start reaping profits. To start any business, there must be a certain amount of capital a business owner must have to buy these products. Then comes the decision of which liquidation model they are going to execute since there are many ways to get started from small-scale options to a full-scale operation. After buying said products, there comes a choice of which distribution channel you will use to sell your products. The liquidation business model can be a very lucrative business, but there must be a certain amount of leg work done before starting on this journey.

The Four Premises of Value

Going concern - The business will continue to operate.
Assemblage of assets - all I said are valued in place. However, not in current use and not as a part of an ongoing business.
Orderly disposition - assets will be sold individually and there will be a reasonable time in which to complete a sale.
Forced liquidation - assets will be sold individually and there will NOT be a reasonable time to complete the sale.

Reasons Companies Liquidate

Liquidation in business is a natural part of finance and economics; this is when a company sells its assets to pay off insolvent debts it cannot pay on its own through normal operation. When considering liquidating their assets, it's typically a sign that the business is closing its doors for good; the reason being the business uses the money from said assets to pay off creditors and shareholders depending on the priority of their claims. Although a majority of liquidations are because a business is closing down, there are instances when there is voluntary liquidation. This is where a company’s shareholders approve the cessation of business and decide to have their position bought by anyone willing to buy it.

By its nature, liquidation has different levels of severity. The severity of liquidation is dependent on the reason for the sale of assets, how severe the level of debt is in the business, and how high the expenses are for the business. The extent of this sell-off of assets can be from normal securities available within the business to personal assets such as a car, boat, home, etc. Liquidations can also be ordered by a court if a business has a long reputation of insolvency when dealing with other businesses.