CONSIDERING A GOING OUT OF BUSINESS SALE?



If you want to sell your retail business you may want to consider a going out of business sale, or store closing sale. When it's time to retire, or move on to something else, many retailers try to sell their business as a going concern. However, it can be difficult it to profitably sell a retail store. The major asset of most retail businesses is inventory. A buyer of a retail business, usually, will not pay wholesale prices for inventory that has been on the sales floor. In fact, most buyers will only pay half, or less, of wholesale for most inventory. In addition, many buyers require the seller to finance some portion of the selling price. This can be a significant risk for the seller. If your store is doing well and making a profit, selling as a going business may be a good option. However, it takes, on average, about 2 to 4 years to sell a going business. If your sales are declining and you're not generating a profit, it will be more difficult. Business consultant, Debbie Allen, one of the world's leading authorities on sales & marketing, recently stated that, "a business that does not generate profits may do well with a going-out-of-business sale". (http://retail.about.com/od/ exitstrategies/a/selling_mistake_2.htm). In many cases a total retail liquidation sale can get you more money than selling as a going concern, selling to a bulk buyer, or selling it at auction.

If you decide to conduct a going out of business sale, there are many factors to consider to achieve a successful and profitable result.

To maximize your sales and avoid problems during a retail liquidation sale, you must be prepared. If you can get 100% or more out of your original inventory cost from a GOB Sale, you will have a good result. To accomplish this, it's very important to be prepared before the sale begins. Most of the income from the sale will be at the beginning of the sale when your inventory selection is high and your discounts are low. You must be ready for your customers on opening day. All of your organizing, merchandising, and advertising must be complete before then. It is usually best to close your store a day or two before you start your sale to make sure you are ready. In many locations a "Going Out of Business Sale" permit may be required. You can contact your County or Town's Clerk office for more information. Some require this permit to be issued well before the sale begins. It's a good idea to review how your registers or POS systems calculate multiple discounts, and make sure all cashiers understand and know how to accomplish this.

Organizing, advertising, and merchandising your inventory, fixtures, furniture and equipment requires a different approach than regular retail. At the beginning of the sale you will want to organize and merchandise your store to highlight the most desirable merchandise (with the lowest discount) and you will want to highlight the highest discount merchandise (dent & ding, and least desirable items). Each week you should advertise the current discounts. It usually works best to advertise the % discount rather than the discounted price. You will also need to organize and advertise fixtures & equipment as thesale progresses. As space on the showroom floor becomes available, display and price the fixtures. Try to make every day of the sale look like opening day. Every day, keep the store and merchandise clean, organized and accessible. If it looks like junk, it will be treated like junk. Make sure all items have a regular price on them, and that it is easy to determine the sale discount and sale price. Be diligent and relentless!

The timing and rate of discounts for your merchandise is crucial for a successful sale! The first week of your sale will probably generate the most sales. At the beginning of the sale you will want to have your "A" & "B" items at a low discount, and your ding & dent items at a big discount; and your less desirable and out-of-season items in between. From that point, as the selection decreases, the discounts should increase. If you discount your inventory too quick your discounts will cut into your profit. If you discount your inventory too slow you can lose momentum and your overhead will cut into your profit. The right timing for discounts can make the difference between a good result and a poor one.

For a great financial result, you will need to list, price, display, advertise and sell your fixtures, furniture and equipment. During a GOB sale, these items become merchandise. They need to be marketed locally to stores and individuals. You can advertise them in the classified section of the local papers, in local "shoppers papers", and on the internet. In addition, it is best to market them regionally to stores similar to yours. This can be done using direct mail, and email. This will get you the highest price. Prepare a list of each item and give it an "asking price" and a "minimum price". You can usually expect to get half or less, the original price that you paid for the item (depending on age, condition and desirability). They will also need to be displayed in the store as they become available. Make sure they are clean and organized. In many stores the value you receive from these items can be substantial.

Each week you will need to prepare the advertising, work with ad reps, and track all ad costs as the sale progresses. The national average of advertising costs for this type of sale is 4% to 8% of your projected sales. Evaluate the media to be used (newspaper, direct mail, tv/radio, internet, etc.) and prepare the appropriate ads before you sale begins. All advertising should use the phrases "Going Out of Business" and "Everything Is On Sale!", prominently. These phrases can make your ads stand out from the rest. In general, spend more of your ad budget at the beginning of the sale (more ads & bigger ads) than you do at the end of the sale.

All sale signage (inside and out) is crucial for a successful sale. Exterior signage should include window signs and banners that will let the public know you're having a sale. Banner permits may be required in some areas. The window signs should also inform your customers of the current sale discounts, that you have fixtures for sale, and the liquidation sale policies. Interior signage should inform your customers of the current discounts and sale prices for your inventory. Interior signs should also be provided and displayed that will inform your customers of the liquidation sale policies (such as accepted forms of payment, all sales final, no returns, etc.) and that fixtures and equipment are for sale. All of these signs should be prepared and in place by opening day of the sale. A word of caution: If you have too many signs, they tend to be ignored by your customers. Give careful thought to the preparation and placement of all signage.

Many small retailers can conduct a successful GOB Sale on their own. If you and your staff are a "well oiled machine", you may be able to conduct a successful going out of business sale without the services of a liquidation consultant. However, if regular retail has been a struggle; or you have a large inventory, and/or lots of fixtures, furniture & equipment; you may want to enlist the services of an experienced and reputable liquidation consultant. In many cases, a consultant can help you get more for your inventory and fixtures than you can going it alone. In many cases, the extra money their experience can help you generate will pay for their service. Plus, you will have the peace of mind that every detail and opportunity is being taken care of. Before hiring a consultant, do your homework and ask a lot of questions.

However you decide to proceed, be prepared and stay focused until your doors are locked, permanently.

By Tim Stortzum Independent Consultant working with DWS Retail Sales, Inc.