What Is The Difference Between a Going Out of Business Liquidation Sale and a Going out of Business Auction?
When companies are faced with the need to recover assets, they have few options. The most common ways to recover assets are with a liquidation sale or an auction. Both have their place and sometimes a combination of the two is needed or warranted. Read more to see what suits your situation. By understanding the distinction between these two types of sales can help a company make the right decision when it comes time to sell their assets.
Liquidations and Auctions – How are they Different?
AUCTION SALES AUCTIONS ARE OFTEN THE OPPOSITE OF LIQUIDATION SALES; IN THAT THEY TAKE PLACE VERY QUICKLY FROM START TO FINISH. IN AN AUCTION SALE, THE ASSETS ARE SIMPLY SOLD TO THE HIGHEST BIDDER VIA AN ONLINE AUCTION. THE COMPETITIVE BIDDING OF THE AUCTION METHOD PIT THE BUYERS AGAINST THEMSELVES TO SEE WHO IS WILLING TO PAY THE MOST FOR AN ITEM. STARTING BIDS START LOW AND WORK THEIR WAY EVER HIGHER DURING THE ONLINE TIMED AUCTION WITH A TREMENDOUS AMOUNT OF BIDDING ACTION THE LAST DAY IF THE AUCTION WAS MARKETED CORRECTLY.
THE BENEFITS OF AUCTION SALES ARE: · AUCTION SALES ARE QUICK, FROM START TO FINISH. FROM THE AUCTION AGREEMENT, THE PROCESS IS A SIMPLE AND QUICK ONE. 1ST THE SELLER NEEDS TO REMOVE OR SEGREGATE THE ITEMS THAT ARE NOT SELLING THEN THE AUCTIONEER TAKES OVER FROM THERE. FROM THE PHOTOGRAPH AND CATALOG STAGE, THE TIME THAT THE AUCTION ACCEPTS BIDS ONLINE TO THE LOADOUT AND CLEANUP CAN TAKE ONLY WEEKS, OR A FEW MONTHS.
· EFFECTIVE MARKETING CAN IMPROVE THE OUTCOME BECAUSE AN ONLINE AUCTION WILL REACH A WIDER POOL OF BIDDERS, NOT JUST THE LOCALS. NATIONAL MARKETING THAT OFFER SHIPPING AND TRANSPORTS SERVICES AVAILABLE AT BUYER EXPENSE INCREASES THE AMOUNT OF POTENTIAL BIDDERS INTERESTED IN THE ASSETS.
· BIDDER COMPETITION CAN DRIVE UP PRICES.
· RESERVES OR MINIMUMS CAN BE SET.
· 99% SELL THROUGH RATE. AUCTION SALES HAVE DRAWBACKS: ASSETS MIGHT NOT ALWAYS SELL FOR THE PRICE EXPECTED. COMPETITION AMONG BIDDERS IS WHAT DETERMINES AN ITEM’S SELLING PRICE, BUT THERE MAY NOT BE ENOUGH COMPETITION TO DRIVE A PRICE UP. GOOD MERCHANDISE AND GOOD MARKETING IS THE KEY TO SUCCESS WITH AN ONLINE AUCTION.
Orderly Liquidations A liquidation sale is the process of selling the assets of a business in an orderly fashion over a period of time in order to achieve values that are close to retail value. Liquidation sales are similar to store closings, or tag sales when a store sells its remaining inventory over a period of time. In retail settings, prices are dropped incrementally while the displays, racks, shelving, and other business assets are “tagged” for sale at this time. In industrial liquidation sales, the seller often reviews offers and negotiates prices. Assets can include just about anything and everything not nailed, glued or screwed to the Real Estate and may be sold over the course of weeks, months, and even years.
The Benefits of Going out of Business Liquidation Sales Are: · The Seller sets the starting price and are allowed more time to conduct the sale.
· Longer selling time, giving sellers the time to review multiple offers and try to negotiate the highest selling price for each individual item.
· Negotiation on the part of the buyer and the seller is the main driving force in determining what an asset sells for.
· Liquidation works better for more specialized or unique equipment such as CNC Machining Tools, Industrial Machinery. Often there are limited buyers, and a liquidation sale gives a seller the time to track down those buyers.
Liquidation Sales Have Drawbacks: · The Equipment and machinery will need to be stored onsite until the sale is made on all pieces meaning carrying cost such as facility payments, utility cost, property taxes, insurance and security cost continue.
· Prices drop incrementally as the sale drags on.
· If the sale takes place over months or years, costs can be high.
· Less of a National Market. A lot like an Estate Tag Sale your Buyers are limited to the immediate area with some possible regional interest.
One interesting aspect of liquidation sales is that they often turn into auction sales. After the larger, more expensive items sell through an orderly liquidation, the smaller pieces of equipment and other items are often sold at auction. This is an effective way to sell off assets from a commercial or industrial business after the larger items have been purchased.
Deciding Between a Liquidation Sale or Auction Sale Both types of sale work well to help a company maximize the value of their assets when it’s time to sell. Both methods can work due to going out of business, retirement, bankruptcy, etc. or simply to liquidate idle or surplus assets. If choosing which is right for your business, consider what needs you have. If you want to find a specific buyer for your assets or equipment and have time to spare, an orderly liquidation sale might work best for you. If time is of the essence and you need a quick recovery of the value of your assets, then an auction sale might better fit your needs.
CHECK OUT SOME OF OUR PAST BUSINESS LIQUIDATION AUCTIONS
Wichita Kansas Auction Co.
Business Liquidation Auctions are one of our Specialties here at Top Wichita Auction. If you are thinking about closing the doors or simply need to sell off some idle unwanted business equipment or inventory, we want to hear from you. Drop us a line and we will be in touch and see how we can help you.
CALL OUR AUCTION CONCIERGE SERVICE 316-683-2855 OR 316-681-3008 1-800-508-2855