If there is no one to buy your business, you shut it down. In a liquidation you sell off your assets, collect your accounts receivables, pay of outstanding debt, and keep what’s left, if anything for yourself.

The primary reason to consider liquidation is that a business lacks sufficient income producing capacity apart from the direct efforts of the owner and apart from the value of the business assets themselves. That is to say, that the value of the income produced by the business is worth less than the market value of the assets used in the business. No one would pay more than the business value of the assets. In general, small business producing nothing more than a “living wage” for their owners are unlikely to be sold to anyone other than, perhaps, a key employee. 

In businesses that have little “hard value” other than accounts receivable, liquidation produces the smallest return for the owner’s life long commitment to the business. In businesses with few accumulated assets, liquidation is a last ditch method of of getting money out your business. Smart owners plan ahead to ensure that they do not have to rely on liquidation as a last resort to fund their retirement.

 

 

 

Tags: business successor, departure objectives, exit your business, leaving your business, retirement, sale of your business, transfer of business ownership, transfer your business