When a Business Goes Bankrupt, Inventory Liquidators Must be Carefully Evaluated before Accepting Bids

When a business goes bankrupt, inventory liquidators must have the experience and the contacts to be capable of obtaining the highest return. This experience and the broad industry contacts for liquidation will also determine the firm’s ability to deliver the highest value to the company declaring bankruptcy when buying their inventory.

While there are many avenues and buyers that can be tapped by a skilled liquidation company, there are three primary profiles of inventory buyers that can be tapped. This of course depends on the nature of the inventory to some degree.

Current Customers

In the case of inventory that is part of the business’ normal sales product lines, the current customer base is the first line of liquidation opportunity. While a significant number of businesses will be able to conduct a closeout sale on the premises, many businesses lack the time or the financial resources to make the marketing plan successful. In this case of bankrupt inventory, liquidators can tap into the business’ customer base to offer items for sale at a different location. Quite often, these customers will deliver the highest return per item depending on the nature of the items and its availability elsewhere at competing prices.

Business Plan

Competitors

Competitors typically seek higher discounts off of selling prices when purchasing finished goods during liquidation. This is for a variety of reasons:

  • They carry a competing brand and wish to avoid cannibalizing future sales.
  • They may already have an adequate supply of what is being offered for sale and thus need incentives to buy excess quantities.
  • No existing sales channel for the liquidation inventory.
  • Insulation against a longer process of selling the inventory.

Despite all the risks, if a competitor can offer items via a closeout sale at a reduced selling price while maintaining their margin, they can improve their bottom line. The following circumstances will lead to the highest offer by a competitor:

  • The products are commodities that can be readily resold.
  • The products are common and widely sold and can be marketed to a variety of customers and/or market niches.
  • The products are well-recognized brands that will be in demand as surplus products in the secondary markets.
  • The products are in prime condition.
  • The industry is not in turmoil or a major downturn, and there is no excessive marketplace uncertainty or concern.

Other Options and the Importance of Choosing the Best Liquidation Firm

Residual opportunistic buyers will typically purchase inventory based on the intrinsic value of the inventory sold through surplus channels, the residual value of the inventory or the scrap or salvage value of the inventory. This all depends on the nature of the inventory.

Of course, when a business goes bankrupt, inventory liquidators that are highly experienced, connected and respected have a much wider net that they can cast to draw in potential buyers in the shortest amount of time. As a consequence, understanding the historical success of the liquidation firm is paramount to ensuring that they can deliver the highest sale price for acquiring the inventory of a business facing bankruptcy.

Taking bids from the top liquidation firms will help to reveal the highest return for the business, but it’s up to the business to take the time to do their homework on these firms to narrow down the choices to the best in the field. This helps to avoid dealing with less reputable firms that may take advantage of the pressure of bankruptcy proceedings to deliver a low bid that leaves money on the table.

Ideal Trading Corp is a liquidation company in New Jersey that offers services for businesses to convert their assets to cash. With extensive experience in commercial liquidation and auctioning, we provide outstanding results for business owners who are going out of business, facing bankruptcy and more. 973.343.6684 – Contact us today!