While there is plenty of advice floating around about how to bounce back from a business failure, and how to learn from it, that is the end of the process. It is just as important to be prepared to handle everything that leads up to it. You may have had an overstock situation too long and now instead of downsizing the warehouse you are forced to shut down operations and liquidate the entire inventory. Excess inventory can be a problem if not properly managed and selling closeouts while times are good is important. Closing a small business isn’t just a matter of closing the door and walking away and having an inventory liquidation sale. There are a lot of administrative tasks to take care of, and there’s plenty of potential to miss important details. This is how to close a business, both the emotional and practical steps to take.
The first step in the liquidation process is putting aside emotion for just long enough to take a good, hard, honest, look at the state of your closeout business. You probably have a lot of excess inventory you should have liquidated a long time ago. No business owner wants to lose money, but selling closeouts and excess inventory to an overstock inventory buyer can help you reduce inventory, generate cash flow, and make room in the warehouse for new products coming in. Once you do that, you can make the toughest type of business decision there is: do you do whatever you can to keep your business going, or do you shut it down? Do you try downsizing the warehouse and cutting payroll? Do you move 3PL warehouses into a smaller space to save money? If you have an overstock situation and are sitting on too much inventory, can you sell it to closeout distributors or closeout websites to raise capital? A post from Daily Worth, “6 Signs It’s Time to Close Your Business,” highlights key indications that it is time to call it quits.
Once you’ve made the decision, your work of closing down a small business and liquidating the entire inventory is just beginning. For example, you’ll need to figure out how to liquidate assets, pay creditors, close customer accounts, lay-off staff, and a million other little details. The liquidation process can be overwhelming, which is why it is a good idea to seek professional assistance from lawyers, accountants, brokers, and other business specialists. For the inventory, you can find inventory liquidation buyers who will make you an offer to buy everything in one fell swoop. Closeout liquidators take excess inventory and distribute it to discount stores and closeout wholesalers where products are sold at deep discounts often as much as 90% off regular retail. Customers that buy liquidation stock may have a discount store, they might sell closeouts online and they may even be an Amazon FBA seller for closeouts and wholesale surplus.
Another good place to start figuring out what you’ll need is the Getting Out section of the Small Business Administration (SBA) website. The Steps to Closing a Business article walks you through key steps including how to file dissolution documents, how to cancel registrations, permits, licenses, and business names, how to comply with employment and labor laws, how to resolve financial obligations, and how to keep all the appropriate records. Refer to Legal Resources for Exiting for links to helpful articles.
The IRS Closing a Business portal also provides resources that will help you meet all tax requirements, and ensure that you do not make mistakes that will end up costing you money in the future. You can find a good inventory liquidator by searching online for business liquidation, buy closeout inventory, downsizing warehouse, overstock situation, buy excess merchandise, closeouts or sell overstock inventory. The Closing-a-Business-Checklist provides links to twenty forms you may need. Even if you don’t want to handle these yourself, the checklist is a good place to look to help you know what to discuss with your lawyer and/or accountant.
In the steps of how to close a business, this is where it will get real. Tell your employees as soon as possible; you don’t want them to get the news from anyone else but you. If you’re looking at mass layoffs, you’ll need to make sure you comply with employment and labor laws, which includes making the proper employee payments after closing. In general, if you employ over 100 people, you’ll need to provide at least 60 days’ notice before closings and mass layoffs. If there is a lot of inventory to get rid of, companies in liquidation often reach out to product liquidation companies that specialize in closeouts and buying out excess inventory and liquidations.
If your business is registered as an LLC or corporation, you’ll have to file for dissolution in the state where you registered the business, or you’ll be on the hook for continued taxes and business debts. The rules for filing a Certificate of Dissolution vary from state to state: some require you to settle creditor debts before you file for dissolution, while others require you to file for dissolution first. Be sure you check your state’s rules to be sure and talk with an accountant or lawyer to be sure. In general, sole proprietors do not have to file anything with the state.
Hopefully when closing down a small business, you will be able to close the business without having to declare bankruptcy. Unfortunately, that’s not always possible. In extreme cases, you may need to consider filing for bankruptcy. If bankruptcy is your only viable option, be sure to check out Declaring Bankruptcy on the IRS website. If it is possible to liquidate enough inventory to raise cash, you will be much better off and you will also make room in the warehouse. With 3PL warehouses charging so much for storage fees, you may also be able to sublease some of the extra space you make in the warehouse. When liquidating inventory it is always best to find a reliable liquidation buyer that has experience in buying all different kinds of overstock inventory and closeout merchandise for sale. Merchandise liquidators will guide you through the closeout process so you are comfortable in getting rid of your liquidation goods quickly.
However, don’t make that decision too hastily. The High Cost of Saving a Failing Business, from the Wall Street Journal, provides examples of costly small business bankruptcies that cost anywhere from $100,000 to $600,000. As noted, before you choose bankruptcy, take a close look at every possible business asset you have. You may find the liquidation process offers you the best option to shutting down your business and getting merchandise out of the warehouse. If you need to liquidate Amazon inventory you may find it is easiest to sell everything to closeout websites and understand the closeout process for selling online. Just about everything from customer lists, to office equipment, website domains, buildings, social media accounts, and trademarks will have some value. Liquidation buyers will review everything you have and make you an offer for either part of the inventory or everything at one time.
You will likely be so wrapped up in the many details of winding down your business that the loss won’t really sink in until it is all done and you wake up one morning with nothing left to do but reflect upon your failed small business. When this happens, most experts predict that you will go through the same five stages of mourning and grief that people universally experience: Denial and Isolation, Anger, Bargaining, Depression, and Acceptance. Going out of business is difficult, especially if your personality is Type A and you were always busy buying and selling closeouts, making deals to liquidate excess inventory, and working with other excess inventory buyers to clear inventory from warehouses shutting down.
The five stages of grief for a failed social entrepreneur directly relates these stages to a small business failure, with a slight variation to: Denial, blame, regret, etc. Once you’ve fully recovered from your small business failure shutting down operations you’re ready to start again. This can mean anything from another entrepreneurial venture, to joining an existing start-up, to getting a traditional job with a traditional company. The restart can be easier said than done, but if you learn from your failure you will likely end up in a better place than you were when you started the business that failed. The Harvard Business Review article, Strategies for Learning from Failure, examines how companies learn from failure and identifies effective and ineffective approaches. You may start another liquidation buying company but on a smaller scale. If having too much inventory in the warehouse was a problem you might consider becoming a closeout broker and liquidating inventory without handling it. You can even become a sales rep specializing in selling closeouts and excess inventory for importers with too much stock on hand.
Merchandise USA buys and sells closeout merchandise and specializes in selling old inventory that no longer has any value to you. If you don’t need the merchandise anymore, it is best to liquidate and get rid of it to make room in the warehouse for new products. The closeout process is easy and painless, and we are specialists when it comes to liquidating excess inventory and buying end of line stock. Whether you have too much inventory in the warehouse, business is slow due to the pandemic, if you are shutting down operations entirely, or if you are closing down an Amazon seller Central account, we can help. We are professional inventory liquidators if you need to move out excess inventory.