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Ways to Sell a Business – 2. Fire Sale

A lot of businesses are liquidated because they are either under too much debt, or the costs incurred are unmanageable, or the business has ceased to be profitable, or the owner is not able to manage it anymore. When the business is liquidated, the owners pay off the pending debts, and look at either starting new, or opening another business with the money that comes in, and one of the common ways to liquidate a business is seen to be the conduction of a Fire Sale.

A fire sale is also called a quite sale or a going out of business sale where the business assets, the business location, everything related to the business is pretty much sold off. Here, the assets can be liquidated much faster by being sold at prices much lesser than the retail ones which leads to the quick buyout. Arising from the need of the business owner to exit from a market, or to pay the creditors in a very short time frame, fire sales have a few advantages and some disadvantages that need to be considering before zeroing down on this option:

  • Fire sales sell out a business in a very short span of time so the cost of employee payments, business taxes, interest on the debt on the business, and other overhead expenses are reduced to a greater extent which helps to save more money for the business owner.
  • Since fire sales function on the idea of charging less than the retail price for the assets being sold, the liquidation may not really bring in as much money as planned. In fact it is essential to price all the assets after some research to not lose out on the best possible bargains else, the whole exercise may turn out to be futile.
  • Some businesses are sold completely to other buyers, which again may lead to a low sale price instead of a desired one, which may or may not bring in the desired amount of money. Also, the existing business infrastructure and processes may not be as per the new owners liking or requirements, which may once again harm the cost that the sale would bring in.
  • Even though fire sales are considered a great option to go out of business, they do just that…put you out of business, so all the work that you have done in putting the company together ends right there. There may be compelling reasons to sell out a business, however, a fire sale will not just bring it to an end, and they may not get you the amount of money you needed to bring out of it. A lot of negotiation and compromise is required if a business owner plans to sell out their business in this manner. A careful consideration of whether this is the best way to sell out your business is very important before you take the step and start investing in advertising a fire sale to all.

Alam Qureshi is a Certified Business Intermediary (CBI), Certified M&A Professional and Broker of Record at ProClient Brokers Inc., Brokerage. He helps business owners learn how to sell a business so they can get the maximum value for their company. call us 416 364 5550 or CONTACT US to get in touch.

Date modified: 6-30-2019

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