Holding a Liquidation Sale Could Possibly Be the Best Way of Exiting Your Business.
I remember in the early 1990’s there was a company that came into town from somewhere exotic, and helped a local business conduct a liquidation sale to enable the owners to exit their business.
People were lined up around the block for days on end and the visibility of the signs and the manner in which the sale was conducted was fascinating to me. Despite the big crowds the sale was not over in days but lasted weeks and probably a month or longer.
As I learned, the owner of the business was not only successful in having huge sales for one day but for weeks on end. He was re-ordering his fast moving products, replenishing his inventory and reselling that inventory not once but multiple times. If he had $500,000 in inventory at retail he probably would have sold over $1 million dollars in the two months he was open. While his local competitors hurt for a few weeks or months, he made off like a bandit with his inflated sales earnings.
So why would you have a liquidation sale as opposed to selling your business?
Well I can tell you from experience that businesses can be difficult to sell. Many businesses take 6-12 months if not more for a sale to occur and be completed. Prices that buyers are willing to pay seem to be dropping in recent months especially for businesses that are not highly profitable. https://www.bizbuysell.com/news/bizbuysell-2024-first-quarter-insight-report/
Having a liquidation sale can get money in your pocket quicker in some cases and possibly more than you would receive from the sale of your business. Additionally it is often required by sellers to carry some vendor financing, this poses a risk of you getting your business back. No seller wants that when they have their eyes set on retirement.
How do I conduct a liquidation sale?
There are companies that specialize in providing liquidation sales for customers who like you want to get out of their business with some cash in their pockets. However you can do this yourself if you follow some basic guidelines.
Marketing a liquidation sale effectively is crucial for maximizing returns and attracting a large number of customers. Here are some strategies to consider:
1.Develop a Strong Marketing Plan specifically for your liquidation:
Set Clear Objectives - Define what you aim to achieve with the liquidation sale, such as clearing out inventory and recovering as much revenue as possible. You may also want to have some targets about your sales and how much money you want to leave the business with when you close down.
Target Audience**: Identify your target audience and tailor your marketing messages to appeal to them. Like any marketing plan you will want to be specific and tap into your data base for your business. Likely most of your buyers over the next few months or week are going to be your customers and you will want to encourage them to buy large and buy often.
2. Leverage Digital Marketing, It may be obvious in these times but for businesses where owners like you are aging out, you may not be completely comfortable with social media. This is where you may want to consider hiring some help and boosting your ads on platforms like Facebook, Instagram, Twitter, and LinkedIn to promote the sale. Have someone who understands marketing create engaging posts with eye-catching visuals and compelling offers. Specific to your customers Don't forget to ensure your website is updated with details about the liquidation sale. Include a prominent banner or pop-up to grab visitors' attention. If you have a good data base use Email Marketing: Send out newsletters to your existing customer base announcing the sale. Highlight special discounts and limited-time offers to create a sense of urgency.
3. Local Advertising:
You may think that anything other than social media ads are out of date but you would be surprised how many of your customers read your local newspaper and listen to the radio or watch the local news. Place ads in local newspapers, magazines, and community bulletins. Ensure the ad clearly states the sale details, including dates, discounts, and location. Give people the story about why you are selling and how long your business has been serving them. If done properly you may also run some press releases to garner more free media.
4. In-Store Promotions:
Signage: Your signage needs to capture attention both instore and outside your store. Using huge signs in bright colors outside your building to announce the liquidation sale makes a big difference and will draw attention to the sale. Clearly display discount rates and special offers. Have some Banners and Flyers printed: Distribute flyers in high-traffic areas and place banners in visible locations around the store.
5. Special Events and Incentives
Launch Event: Host a kickoff event to attract customers on the first day of the sale. Offer additional discounts or freebies for early shoppers. Perhaps you have a presale sale for your best customers and send them personal invites. Additionally you will want to have limited-Time Offers: Introduce flash sales or daily deals to encourage repeat visits and create a sense of urgency and if you want to reward your long time customers, offer additional discounts or rewards to loyal customers who refer friends or make multiple purchases.
6. Track and Adjust:
The key to having a great going out of business sale is to Monitor Performance: Keep track of which marketing strategies are driving the most traffic and sales. Figure out what products are selling the best at what price and discount and order more of these if you are making money on them. Use tools like Google Analytics, your pos reports and database as well as social media insights to measure effectiveness. Once you see what is happening - Adjust Strategies: Be flexible and ready to adjust your marketing and sales tactics for your big sale based on performance data and customer feedback.
So How Much Should I discount to liquidate my inventory and retire successfully?
You might be worried that you are going to give the farm away, and the key to a great liquidation sale is to balance what you give away with what you sell at a profit. So w
ell there is no fixed amount that you should discount, it depends on the type of inventory, your industry, customer expectations of what is a good discount and margins you have in your business. Having a strategy for discounting and sales that enables you to reorder products that will sell over and over during your sale and enable you to make money for your retirement is critical.
Here is a Business Liquidation plan that might work for you in terms of timelines
Implementing a structured discount strategy over a six-week liquidation period can help you maximize returns while efficiently clearing out inventory. Here's a suggested discount schedule:
Week 1-2: Attract Initial Interest
20% off : Start with a moderate discount to draw in customers while maintaining reasonable profit margins. Have special Promotions: Offer buy-one-get-one (BOGO) deals or discounts on bulk purchases to encourage larger sales.
Week 2: 30% off : Increase the discount to attract more customers and encourage those who were undecided to make purchases. Category-specific Discounts: Apply higher discounts (up to 40%) on specific categories of products that are not moving as quickly.
Week 3-4: Boost Sales and Clear More Inventory
Week 3:40% off: Offer a substantial discount to clear out more inventory.
Flash Sales**: Introduce limited-time offers (e.g., additional 10% off for 24 hours) to create urgency.
Week 4:
50% off Increase the discount to move larger quantities of inventory.
Bundle Deals: Encourage customers to buy more by offering bundle deals (e.g., buy two items, get an additional 20% off).
Week 5-6: Maximize Clearance
Week 5: 60% off: Provide deep discounts to clear out the majority of the remaining inventory.
Loyalty Rewards: Offer extra discounts or rewards to say goodbye to loyal customers who have made previous purchases during the sale.
Week 6:
70-80% off Apply very high discounts to sell off the remaining inventory.
Final Clearance Event : Promote a final clearance event, emphasizing that this is the last chance to buy at drastically reduced prices.
Final Days (Last 2-3 Days) Everything Must Go
Up to 90% off Offer steep discounts to liquidate any remaining stock.
Bulk Discounts Encourage bulk purchases by offering additional discounts on larger quantities.
Throughout the liquidation period, it's important to really watch what is selling and consider those items you can sell more than once. If they are profitable still at discounted prices you may want to bring in more. Alternatively if products aren’t selling, you may want to deep discount them earlier. It does you no good to have product left at the end of your sale. When I had my store I would often go over to a competitor who was having a going out of business sale and buy up their inventory at a discounted price so that their sales wouldn’t affect mine for the long term. You may find that this happens with your business as well.
By gradually increasing discounts and using a variety of promotional tactics, you can effectively manage your inventory and maximize sales during the liquidation process. While this is one way to get out of your business, it may not be the best method for you. However when buyers are slim it is often a great way to reward your customers and put cash in your pocket.
Reach out to me if you have any questions
Dave Fuller, MBA, Realtor,
Comments