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Raising the White Flag: Liquidation

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21 May 2024: Raising the White Flag – Liquidation

Last week an article caught my eye about the imminent closing of a century-old small business in a town near where I grew up. The business in question – a hardware store – has been owned by the current owner for more than 25 years.

In an interview published in the local paper the owner claimed that he’d “…been trying to sell the business for years”. Given the impending liquidation, such a claim suggests one or more of the many reasons businesses don’t sell existed during these years. My guess is more than one – including over-pricing and no professional representation.

But those are reasons – and topics – for future posts. In this one, we want to discuss the decision to liquidate, the preparation, the plan, the consideration and, arguably most significant, the emotional impact.

Most of you gentle readers are aware of our tagline, “Every Business That Doesn’t Fail Will Sell…EVERY ONE!” Over the past couple of decades we’ve had some people question the accuracy of that statement but we stand by it. I mean, why would anyone close or liquidate a business if the business has some value above liquidation? And if the business has no value above the liquidation value, it meets our definition of a failed business.


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We are not privy to the financials of the business in question but we have certainly sold hardware stores and, based on some customer quotes included in the article, this business has served generations of local residents and is likely blessed with a significant amount of goodwill. A strong back, young eyes and fresh ideas might be all this business needs.

But whatever the reasons for closing are, that decision has been made – and, given publication of that fact in the Local Font of Knowledge, it’s a bell that probably can’t be unrung. So how should on orderly liquidation proceed? Here are some issues that must be addressed.

Assessment and Decision Making:

Before initiating the liquidation process, it’s essential to conduct a thorough assessment of the business’s financial health and viability. Evaluate factors such as cash flow, profitability, outstanding debts, asset value, and market conditions. Determine whether the business can feasibly continue operations or if liquidation is the most viable option.

Consider consulting with financial advisors, accountants, or legal experts to gain insights into the potential implications of liquidation and explore alternative solutions if feasible. Assess the legal obligations and requirements associated with dissolving the business, including fulfilling any contractual obligations, notifying the appropriate people, and complying with regulatory frameworks.

Developing a Liquidation Plan:

Once the decision to liquidate has been made, develop a comprehensive plan outlining the steps involved, timelines, responsibilities, and resource allocation. Identify key objectives such as maximizing asset value, minimizing liabilities, and ensuring a fair distribution of proceeds to creditors.


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Create a timeline that outlines specific milestones and deadlines for each phase of the liquidation process. Assign roles and responsibilities to internal stakeholders or consider hiring external professionals with expertise in liquidation, accounting, or legal matters.

Asset Evaluation and Inventory:

An integral aspect of the liquidation process is conducting a detailed inventory of assets and assessing their fair market value. This includes tangible assets such as equipment, inventory, and real estate, as well as intangible assets like intellectual property and goodwill.

You’ve got to know what these assets are worth. Engage qualified appraisers or valuation experts to accurately determine their valuation taking into account factors such as depreciation, market demand, and condition. Prioritize the sale of assets based on their liquidity, potential value, and marketability.

Debt Settlement and Creditor Communication:

One of the primary responsibilities during liquidation is settling outstanding debts and obligations to creditors. Make sure you’ve got a complete list of creditors, including lenders, suppliers, service providers, and other any others with outstanding claims against the business.

To avoid panic breaking out among creditors, initiate the contact to inform them of the liquidation process, provide updates on asset sales and distribution timelines, and negotiate settlement terms where possible. Prioritize debts based on their priority status, such as secured debts, taxes, and employee wages.

Asset Liquidation and Sales:

With a clear understanding of asset value and creditor obligations, you can begin to liquidate assets through various channels, including auctions, private sales, or asset liquidation firms. Develop and implement marketing strategies to attract potential buyers and maximize asset value, using online platforms, industry networks, and professional contacts.

Negotiate sales agreements, terms, and conditions, ensuring transparency and compliance with legal requirements. Consider bundling assets or offering discounts to expedite sales and minimize holding costs.

Debt Repayment and Distribution:

As asset sales generate proceeds, allocate funds towards repaying outstanding debts and obligations to creditors in accordance with priority rankings and legal requirements. Establish a fair and transparent distribution process to ensure equitable treatment of all involved.


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Document all transactions, payments, and distributions meticulously to maintain transparency and accountability throughout the liquidation process. Seek legal advice to navigate complex legal and regulatory frameworks, particularly concerning bankruptcy laws, creditor rights, and tax implications.

Dissolution and Closure:

Once all assets have been liquidated, debts settled, and proceeds distributed, begin the formal dissolution of the business entity. Prepare and file necessary legal documents with relevant authorities, such as Articles of Dissolution, tax forms, and final financial statements.

Notify regulatory agencies, creditors, customers, employees, and anyone else that should be notified of the business’s closure and cessation of operations. Close bank accounts, cancel licenses, leases, and contracts, and fulfill any remaining administrative obligations to wind down the business effectively.

Post Liquidation

Here’s where the emotions come in – and in most cases, they arrive with a vengeance.

Last week, our post was about the emotional impact of selling a business. While that type of emotional impact can be equally wrenching, it’s usually somewhat mitigated, sometimes substantially, by the sudden significant increase in the seller’s bank account. Liquidating a business brings the added burden of dissolving a legacy – the seller’s, certainly, but sometimes, as in the case of the business profiled in the article I read that inspired this post, the legacy of generations of owners and, more to the point, of the brand.

The Bottom Line

Liquidating a business is tough and the process has many aspects and potential pitfalls. In my opinion, the toughest of these is the emotional aspect.

Business owners considering liquidation have to be emotionally prepared for the mental fallout and they must realize that getting prepared takes intestinal fortitude and a team that can help in both the physical tasks and the mental doubts and feelings of failure.

I’d like to hear from you. What topics would you like me to cover? How can we tailor these posts to be more useful to you and your business. Let me know in the comments box, below, or email me at jo*@Wo*******************.com.

If you have any questions or comments on this topic – or any topic related to business – I’d like to hear from you. Put them in the comments box below. Start the conversation and I’ll get back to you with answers or my own comments. If I get enough on one topic, I’ll address them in a future post or podcast.

I’ll be back with you again next Monday. In the meantime, I hope you have a safe and profitable week.


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The author is the founder, in 2001, of Worldwide Business Brokers and holds a certification from the International Business Brokers Association (IBBA) as a Certified Business Intermediary (CBI) of which there are fewer than 600 in the world. He can be reached at jo*@Wo*******************.com

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