There are many layers to building a business. First, you need a strategic business plan, a location, and the capital to purchase inventory and equipment for your desired business. These costs add up, which may lead you in the direction of searching for a deal.
Enter the auction marketplace, which has increasingly become the go-to method for business owners looking to replace old items or upgrade to more practical, energy-efficient products. As the saying goes, you can find just about anything at an auction — and the same applies to liquidation auctions, a type of auction in which a business sells everything they own. Think of this as an estate auction — except for a business.
In this blog, we’ll explain how liquidation auctions work and which type of items you can expect to bid on.
From a business and commerce view, the process of liquidating involves a business selling off assets for monetary value. Many times, this is to pay back creditors.
Whereas a consignment auction involves using a third party, in this case an auction house, to sell individual items for your business, a liquidation auction involves selling everything in your inventory.
A business may liquidate assets for many reasons, including going out of business, closing a particular location, going through bankruptcy, or going through the foreclosure process. At the corporate level, this could be due to a reorganization or investor shakeup.
Companies also liquidate assets when they have excess inventory they need to move on from. Other liquidations feature returned inventory that can’t go back on shelves.
Some liquidations occur as liquidation sales, in which the selling of assets occurs over an extended period of time. This is similar to a going-out-of-business sale that takes several months to complete.
However, a liquidation auction is an expedited process that may only take a matter of weeks. Liquidation auctions are generally high-traffic auctions because the buyers can secure cost-effective deals. This allows up-and-coming businesses or established companies looking to grow to buy large quantities at a reduced price.
Liquidation auctions come in two types: voluntary or involuntary.
Involuntary liquidations occur when a business is unprofitable and closes its doors to pay down debt or other creditors or if there is a legal judgment against the business.
Voluntary liquidations can be used to describe a company in good standing auctioning off inventory for personal or business reasons. For example, a neighborhood store may auction off goods due to the owner’s retirement. In other cases, a corporation may sell equipment to make room for new inventory.
Government agencies often use auctions, called surplus auctions, to offload unused equipment. This is another example of a voluntary liquidation. These assets can include office furniture, machinery, and vehicles. If the government no longer needs these items, the auction process helps them get rid of items in a prompt manner. Police departments use auctions regularly to sell old cruisers sitting on their lot.
For federal auctions, the general public can bid on items through the United States General Services Administration.
Liquidating assets via an auction is a simple process. Most of the time, these auctions are a turnkey operation, meaning the auction house comes into a business and tags, identifies, and prepares each item for the auction. This makes it easy on both the buyer and the seller.
Once the auction is set up, buyers can inspect and view items on site or online by clicking on individual pictures. Many of these items have expensive price tags when bought new, so the items can come at a significant discount for new or up-and-coming businesses.
Liquidation auctions tend to generate more interest simply due to the diversity of items. For example, a restaurant liquidation isn’t just for other restaurant owners who want to add to their commercial kitchen. Because restaurants house a diverse range of items, many buyers can benefit.
At one of our recent auctions, the items included cake pans and muffin tins, a truck, office furniture, and kitchen accessories. In other words, not everyone attending is interested in restaurant equipment. They could be a florist looking for another delivery truck to add to their fleet or a home cook looking for a new set of baking sheets at an affordable price.
Depending on your town or city, buyers can bid on unclaimed property via government surplus auctions. In Oklahoma City, this happens every five or so years through the Oklahoma State Treasurer (we helped conduct the last auction in 2019).
In Oklahoma, items in bank safety deposit boxes are considered unclaimed property after five years of being unaccounted for. The state then holds an auction when it collects too much property and needs to clear out space in the vault. You can find incredible items at unclaimed property auctions, including gold, diamonds, collector items, and coin collections.
At Dakil Auctioneers, Inc., we have nearly 30 years of experience helping individuals and businesses liquidate their inventory. We regularly handle many types of liquidations, including restaurants and heavy machinery.
If you’re looking to offload items from your business, contact our office at 405-266-2709 to get the process started. For buyers interested in liquidation auctions, you can keep tabs on what’s on the docket by visiting our upcoming auctions page.
