Review your financial statements to determine if you have overstock inventory. These materials can be sold to improve the cash flow of your business and save in storage costs. Run a detailed inventory report and identify exactly what materials should be included in the business liquidation.

Investigate the quality and overall condition of the surplus inventory and determine what items are suitable for sale. Make a list of these items and determine your cost. This is the minimum price you can accept without losing money on the liquidation sale. Calculate a second value with minimal profit margin to help you during negotiations. Follow the three steps below to learn more about business liquidation basics.

1. Identify business liquidation services firms.

2. Locate business liquidation consultants.

3. Research business liquidation.

Action Steps
The best contacts and resources to help you get it done

Look for business liquidation firms

Research business liquidation firms for your industry or type of good. Talk with business associates and colleagues to determine the local reputation of business liquidation services. Read the information provided on the websites for these firms to help determine if they have sufficient skill to assist.

I recommend: Schedule meetings with business liquidation solution companies to come and appraise the value of your goods and issue a quotation for their services. The Hilco Organization, Power Retailing and Liquidity Services are well known firms that specialize in business liquidation services.

Hire business liquidation professionals

Determine the size and scope of the surplus inventory to determine if business liquidation services are required. Business closure due to retirement, sudden illness or death typically requires the services of a business liquidation consultant. They can appraise the value of the goods and arrange for the sale and distribution of materials.

I recommend: Review proposals from at least three different firms before selecting one. Look at the price, level of service, timeliness and reputation. Ask for and follow up on references from prior customers to confirm the level of service provided. Quitting Business and NW Merchandisers are both business liquidation service providers who can assist you.

Read about business liquidation

Increase your knowledge of business liquidation by reading books and publications on this subject. The time invested will be well spent in discussions about inventory overruns, excess goods and the effectiveness of business liquidation services with your accounting services provider. Look at appropriate stock levels for your type of business and work with the inventory manager to keep the values at the appropriate levels.

I recommend: Select books to increase your understanding of this industry. There are many techniques used to increase the value of a business liquidation that can be completed without outside consultants. Read Liquidation Biz to gain further understanding of this industry. Life after Liquidation addresses the impact on the business owner. Learning from others mistakes is a great way to avoid business liquidation.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Reduce your risk of business liquidation by closely monitoring your stock levels and avoiding any excess inventory. Reduce production to ensure stock levels are at the minimal level possible for customer satisfaction.

Inventory overload can be a serious financial drag for your business. But what to do with excess items – no matter what they are or where they came from – can be a difficult dilemma. Selling it through normal channels may be out of the question. After all, that’s why you have the surplus.

And – especially if your surplus is new or unexpected – you probably have little patience or time for figuring out what to do with it. But there are several means at your disposal that can either net you a cash return on your items, or a nifty tax write-off for goods donated to a qualified charity. Five directions to go include:

1. Sign up to sell in bulk in a business-to-business (b2b) liquidation marketplace
2. Sell everything at once to an 'instant' liquidator
3. Sell small quantities at sites targeting consumer volume sales
4. Hold your own private online liquidation auction for invited guests only
5. Donate qualified items to a charity and earn a tax deduction of up to twice the cost of the goods.

Action Steps
The best contacts and resources to help you get it done

Unload in bulk, b2b

Retailers, wholesalers, manufacturers, distributors and others sell goods via centralized liquidation auctions.

I recommend: Liquidation.com is a b2b bulk marketplace where companies sell all kinds of excess goods. See How to Sell (PDF). Liquidation.com welcomes inventory from small businesses to sell on the auction marketplace, and has a track record of providing returns higher than other liquidation methods. (Nearly a half million small businesses also use Liquidation.com as a source of inventory for resale to consumers.)

Net instant cash on your excess inventory

Avoid the bother of auctions by selling to a surplus inventory liquidator.

I recommend: Instant Liquidators, Merchandise USA and Power Retailing buy a wide range of customer-returned and excess inventory. Excess Technologies is a professional surplus inventory liquidator.

Run your own private online auction

And guess who's going to help you do it – eBay, of course, the online auction king.

I recommend: eBay Private Marketplace is your own private-label, e-commerce site to liquidate excess inventory only to your invited buyers. Your Private Marketplace will have its own Web address and its own look-and-feel, but be hosted and supported by eBay technology. (For businesses with at least $2 million in excess inventory annually.)

Donate your new and qualifying excess goods for a juicy tax deduction

Your corporation can earn an above-cost, federal income tax deduction, clear out warehouse space, avoid liquidation nightmares and help schools and nonprofits.

I recommend: NAEIR, The National Association for the Exchange of Industrial Resources, takes donations of new, overstock or discontinued product and redistributes that product to schools and nonprofit groups nationwide. Donor companies can receive an enhanced income tax deduction of up to twice the cost of the goods, courtesy of Internal Revenue Tax Code Section 170 (e)(3). NAEIR takes donations of general, consumer goods such as school and office supplies, toys, games, building materials, clothing, tools, and much more. NAEIR provides the paperwork to aid in filing taxes. See how it works.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Donating merchandise to NAEIR is quick and easy. It's not unusual for donors to have their product on the way to NAEIR a week after initial contact.
• •  Donors may deduct cost, as carried on their books, plus half the difference between cost (basis) and the fair market value, except that the tax deduction cannot exceed twice the cost. For example, items carried on the books at a cost of $100 that have an established fair market value of $200 may be donated and a deduction of $150 may be taken. If however, those items carried at a $100 cost have an established fair market value of $300, they may be donated and a deduction of $200 may be taken.
• •  Schools and nonprofit organizations pay a membership fee to participate in NAEIR. Organizations that become NAEIR members must agree to use the merchandise received through NAEIR in accordance with IRC section 170(e)(3), which states that the merchandise must be used for the care of the ill, needy or minors and cannot be bartered, traded or sold.

Pay attention to business liquidation news and trends as a method of staying in touch with the pulse of your industry. Discuss the trends with your accounting services firm, business associates and your local banker. These resources are all valuable sources of information on business liquidation.

Invest the time to stay informed in the changes in other industries as well. An increase in the number of business liquidation sales in a particular physical area or industry indicates a localized problems. More widespread liquidations is the sign of larger economic issues. Follow the three steps below to learn more about business liquidation news and trends.

1. Sign up for business liquidation newsletters.

2. Get a book on business liquidation.

3. Find business liquidation statistics.

Action Steps
The best contacts and resources to help you get it done

Join business liquidation newsletters

Subscribe to business liquidation newsletters to get information on overstock inventory and excess goods. This information helps you stay current on industry trends and identify suppliers who are trying to liquidate overstock inventory. These newsletters are sent out on a regular basics and provide information on goods for sale at discounted prices.

I recommend: Make a list of your supplier and customers. Compare these lists to the companies participating in business liquidation sales. Keep an eye out for supplies at lower prices and track trends. Sign up for the automatic email from The Closeout Industry or National Auction List to be kept up to date on activity in the industry.

Study a book on business liquidation

Read books on business liquidation services to understand how the industry works and the ways that your firm can benefit from the sale of surplus inventory. Warehouse and surplus liquidation sales to retail customers have increased in popularity and are becoming a mainstream way to purchase goods. Use a business liquidation service to obtain the maximum return on your inventory.

I recommend: Select books that explore the business liquidation business and trends over time. The American Merchandise Liquidators provide a guide to the liquidation business. The Oxford University Press offers several books on the liquidation business, including Last Rights.

Expand your knowledge of business liquidation statistics

Investigate the results of surplus liquidation market research to enhance your knowledge of this industry. Pay careful attention to the trends in products you sell or produce. The value obtained by excess inventory or closeout merchandise sales is a more realistic valuation of the goods that the book or purchase value.

I recommend: Follow the trends over the course of a year to identify peaks and valleys in demand for surplus liquidation. Identify target markets and observe the ideal periods to buy or sell materials. Observe the impact of liquidation sales on the retail price. Subscribe to Plunkett Research to obtain reports on industry trends. Join BizStats to access reports and statistics on businesses in your area.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Keep a close eye on inventory levels in your firm and be aware of the number of overstock inventory sales in your industry.

When a business wants to unload extraneous inventory, understanding business liquidation key terms smoothes the unloading process. It helps business owners negotiate with other businesses and potential clients in clear, concise terminology, so everyone knows what to expect in business dealings.

Knowing business liquidation key terms also opens a business owners' eyes to the variety of methods that one could employ to liquidate materials. The knowledge leads to savvy transactions in the business world.

Action Steps
The best contacts and resources to help you get it done

Inventory

Inventory is the terminology used to define what's in stock in a particular store.

I recommend: National Barcode provides a definition for the term inventory. It divides the term into the different categories that apply to the term.

Liquidate

Sometimes parts of companies or full companies end their business dealings. When this happens, they distribute their assets and properties to other companies. In a liquidation process, the company ending its business redistributes inventory to other companies.

I recommend: PRLog.org highlights methods for detailing a plan to liquidate materials for optimal profit.

Appraisal

An appraisal is an assessment of something like stock, or inventory. It estimates the total value of the goods.

I recommend: AbleEstateSales offers free appraisals to businesses that plan on liquidating.

Surplus

Also called overstock, this term refers to an extra quantity of inventory than what's necessary. Liquidators often sell off surplus products at discounted prices to move inventory.

I recommend: Small Business Notes offers a detailed plan of action for business owners who want to liquidate their assets. It offers links to other sites that detail the steps and liquidation.

Business-to-business

Business-to-business, also called B2B, is an exchange of products between businesses as opposed to the exchange of products between consumers and businesses. Liquidators use this type of transaction to move excess inventory.

I recommend: TechTarget offers a detailed explanation of business-to-business transactions for Internet commerce. It defines the transactions and explains the benefits.

Liquidation auction

A liquidation auction, also called a surplus auction, is and event where a company or business rids itself of excess inventory by holding an auction, attempting to get the highest prices possible for the extraneous inventory.

I recommend: Government Liquidation is a fine example of an online marketplace used for the purpose of liquidating surplus government materials. It offers auction options for extraneous government inventory.