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How to Start a Liquidation Business

How to Start a Liquidation Business

Liquidation company provides services that help their clients liquidate their businesses when the need arises. A limited company’s affairs may be “winded up” through the legal process of liquidation in which a liquidator is appointed.

Note that not all creditors of the company will be reimbursed in the event of its liquidation. The procedure a business uses to pay off its obligations in the business world is by selling its products and assets.

The products are acquired at a discount by a liquidation firm, which subsequently resells them to the general market. The names of many of these companies brands are well-known to consumers, and they produce many of these products under those names.

Steps on How to Start a Liquidation Services Company

  1. Conduct Market Research

Conducting a market-based research question that is in line with your business purpose and objective is the first step to take for a company that provides liquidation services.

You should look for information that will help you grow your company, and make it easy for you to access tried-and-true operational procedures that will make running your liquidation business less stressful.

a. Who is the Target Market for Liquidation Services Company?
  • Corporate organizations
  • Business people
  • Entrepreneurs
b. Is Liquidation Services Company a Profitable?

Yes, a liquidation services company is profitable. As a matter of fact, the market is worth over $644 billion in the United States.

c. Are There Existing Niches in the Industry?

No, there is no existing niche in the liquidation services business.

d. Who are the Major Competitors?
  • American Merchandise Liquidators (AMLINC)
  • Quicklotz
  • Bulq
  • Mid Tenn Wholesale
  • Merchandize Liquidators
  • Continental Wholesale
  • GENCO Marketplace
  • BlueLots Liquidation
  • Direct Liquidation
  • Sullivan & Cromwell LLP USA
  • Snell & Wilmer L.L.P
  • Grasons Co Estate Sales & Business Liquidation Services.
e. Are There County or State Regulations or Zoning Laws for Liquidation Companies?

There are no zoning laws or county or state regulations governing liquidation services companies, but participants in this industry are expected to comply with all the rules controlling organizations with a similar mission in the county or state where their business is headquartered.

f. Is There a Franchise for Liquidation Services Company?

Yes, there are franchise opportunities for a liquidation services company, and here are some of them;

  • Grasons Co Estate Sales & Business Liquidation Services.
g. What Do You Need to Start a Liquidation Company?
  • A feasibility report
  • Business and marketing plans
  • Business licenses and permits
  • Warehouse space
  • Computers; laptops and servers
  • EIN (Employer Identification Number)/Federal Tax ID Number
  • A corporate bank account
  • Software apps
  • Employees
  • Liquid Capital
  1. Choose a Memorable Business Name

When looking to start a business, before you can begin to file the necessary documents with the constituted authorities or start your website, it is necessary that you come up with a name that you will be recognized with.

It is essential that the name you come up with can easily be pronounced, is unique and easily memorable. Some of the catchy business name ideas suitable for a liquidation business are;

Creative Liquidation Business Name ideas
  • Gako Bright© Liquidation Services Company, Inc.
  • Yello Belt® Liquidation Services Company, LLC
  • Martinez Jerome© Liquidation Services Company, Inc.
  • Denis Holier® Liquidation Services Company, Inc.
  • Justin Lake™ Liquidation Services Company, Inc.
  • Perry Notinham™ Liquidation Services Company, LLC.
  • Lucas Depay© Liquidation Services Company, LLC
  • Collins Frank® Liquidation Services Company, Inc.
  • Kempas Larry© Liquidation Services Company, Inc.
  • Ken Bee© Liquidation Services Company, Inc.
  • Morgan White® Liquidation Services Company, Inc.
  • Unai Henry® Liquidation Services Company, Inc.
  • Peach and Purpule® Liquidation Services Company, Inc.
  • Peter Pirus® Liquidation Services Company, Inc.
  • Leo Markson® Liquidation Services Company, Inc.
  • Feel Great© Liquidation Services Company, Inc.
  • Buy Off™ Liquidation Services Company, LLC
  • Derrick Lamar® Liquidation Services Company, Inc.
  • East Network® Liquidation Services Company, Inc.
  • Norman Brown™ Liquidation Services Company, Inc.
  1. Register Your Business

a. What Type of Business Structure is Best for a Liquidation Services Company?

There are several options when it comes to a business structure for a firm providing liquidation services, an LLC is the one the majority of participants in this industry considered best. The providers will always form an LLC in order to defend themselves in court.

b. Steps to Form an LLC
  • Choose a name for your LLC
  • File articles of organization
  • Choose a registered agent
  • Decide on member vs. manager management
  • Create an LLC operating agreement
  • Comply with other tax and regulatory requirements
  • File annual reports.
c. What Type of License is Needed to Open a Liquidation Services Company?
  • General Business License
  • Zonal Permits (Applicable in some cities)
  • Signage Permit.
d. What Type of Certification is Needed to Open a Liquidation Services Company?

You don’t need any special certification to start a liquidation services company.

e. What Documents are Needed to Open a Liquidation Services Company?

These are some legal documents that are required in order to operate a liquidation services business in the United States, they are the following;

  • DBA
  • EIN
  • Business and Liability Insurance
  • Federal Tax Payer’s ID
  • State Permit and Building Approval
  • Certificate of Incorporation
  • Business License
  • Business Plan
  • Employment Agreement (offer letters)
  • Operating Agreement for LLCs
  • Insurance Policy
  • Online Terms of Use
  • Online Privacy Policy Document
  • Contract Document
  • Company Bylaws
  • Memorandum of Understanding (MoU).
f. Do You Need a Trademark, Copyright, or Patent?

The requirement to register a trademark or for intellectual property protection may not always be necessary if you are starting up a liquidation services business. The nature of the business allows you to operate it successfully without having any need to sue anyone for using your company’s intellectual property without permission.

  1. Cost Analysis and Budgeting

a. How Much Does It Cost to Start a Liquidation Services Company?

Depending on how big you want your firm to be, the startup fees for a liquidation services company could be anywhere from $50,000 to $250,000 and above.

b. What are the Costs Involved in Starting a Liquidation Services Company?
  • The total fee for registering the business – $750
  • Expenses for obtaining licenses and permits, as well as the accounting services (software, P.O.S machines, and other software) – $3,300
  • Marketing promotion expenses for the grand opening of the liquidation services company in the amount of $3,500, as well as flyer printing (2,000 flyers at $0.04 per copy) for the total amount of $3,580
  • The total cost of hiring a business consultant including writing a business plan – $2,500
  • The total cost of the purchase of insurance (workers’ compensation, general liability, and property-casualty) coverage at a total premium (initial premium) – $2,400
  • The cost of renting or leasing operational office space – $45,000
  • Other start-up expenses include commercial satellite TV subscriptions, stationery ($500), and phone and utility deposits ($2,800)
  • The operational cost of the first 3 months (salaries of employees, payments of bills and software renewal fees et al) – $15,000
  • The cost of the purchase of software apps – $5,000
  • Working capital – $150,000
  • The cost of store equipment (cash register, ventilation, signage, and security) – $1,750
  • The cost of purchase and installation of CCTV – $2,000
  • The cost of launching a website – $2000
  • The cost of the opening party – $3,000
  • Miscellaneous – $2,000.
c. What Factors Determine the Costs of Opening a Liquidation Services Company?
  • The size of the organization providing liquidation services
  • The choice of a location
  • The essential licenses and authorizations
  • The type of facility
  • The expanded service options
  • The price of employing and paying a business lawyer and consultant
  • The price of the liquidation services company’s branding, promotion, and marketing
  • The expense of equipping the liquidation services company’s facility
  • The price of the insurance policy
  • Costs associated with registering a business
  • The expense of hiring and educating your employees
  • The price of uniforms
  • The price of the company’s grand opening for liquidation services.
d. Do You Need to Build a Facility? If YES, How Much Will It Cost?

Because it is a business that can be run from a leased or rented warehouse space or home garage if you have room, you do not need to construct a facility for your liquidation services firm. You can run your business from home, and only rent a shared office for show.

e. What are the Ongoing Expenses of a Liquidation Services Company?
  • Transport and logistics
  • Utility bills (internet subscriptions, phone bills, signage and software renewal fees et al)
  • Employees salaries.
f. What is the Average Salary of your Staff?
  • Chief Executive Officer (President) – $45,000
  • Human Resources and Admin Manager – $35,000
  • Account Manager – $32,000
  • Marketing and Sales Officer – $32,000
  • Liquidation Officer – $30,000
  • Client Service Executive (Help Desk Office) -$28,000 Per year.
g. How Do You Get Funding to Start a Liquidation Services Company?
  • Raising money from personal savings
  • Raising money from investors and business partners
  • Sell shares to interested investors
  • Applying for a loan from your bank
  • Source for soft loans from your family members and friends.
  1. Write a Business Plan

a. Executive Summary

Buy Off© Liquidation Services Company, Inc. is a registered liquidation services company. The business will be based in San Francesco, California and we have secured a well-positioned and standard warehouse facility in one of the most patronized locations in San Francesco.

We are well-equipped to provide low-cost liquidation services at different locations throughout California. It is our goal to offer low rates and fast buying off and courteous service to our customers.

b. Products and Services
  • Helping most businesses go through the liquidation processes
  • Buying and selling liquidated goods.
c. Mission Statement

Our mission is to provide professional and reliable liquidation services that will help businesses and most individuals go through the liquidation process seamlessly.

Vision Statement

Our vision is to build a liquidation services company – a brand that will become the number one choice for individuals, families, and corporate clients in the whole of San Francesco, California.

d. Goals and Objectives

The goals and objectives of the liquidation services company are to help businesses liquidate, and also sell off their goods.

e. Organizational Structure
  • Chief Executive Officer (President)
  • Human Resources and Admin Manager
  • Account Manager
  • Marketing and Sales Executives
  • Liquidation Officer
  • Client Service Executive (Help Desk Office).

Marketing Plan

a. SWOT Analysis
  • Effective structure in the marketing place
  • Experienced and qualified employees and management
  • Well-secured payment platform
  • Access to finance from other business partners
  • Water-tight strategies on how to expand beyond the major markets
  • Good returns on investment for our investors.
  • Financial constraints
  • A new business that will be competing with well-established liquidation services companies and traditional banks
  • Inability to retain our experienced and competent employees longer than we want.
  • Partnerships and mergers between established companies and startups are becoming more frequent
  • Good support structure for liquidation services companies in the United States of America.
  • The arrival of a new liquidation services company within our market space
  • Unfavorable government policy and regulations
  • Differences in management and culture are the biggest barriers to integrating liquidation business startups into traditional companies
  • Liability problems
  • Continuously changing consumer demands, as it relates to how they expect liquidation services companies to serve them.
b. How Do Liquidation Services Companies Make Money?

Liquidation services companies make money by offering the following services;

  • Helping businesses go through the liquidation processes
  • Selling liquidated goods.
c. Payment Options
  • Payment via bank transfer
  • Payment with cash
  • Payment via credit cards/Point of Sale Machines (POS)
  • Payment via online bank transfer
  • Payment via check
  • Payment via mobile money transfer.
d. Sales and Advertising Strategies
  • Send introductory letters and your brochure to corporate organizations, small business owners, and other important stakeholders in the city where your liquidation services company is located, to introduce the business and the services it provides.
  • Advertise online, on blogs and forums, as well as on social media like Twitter, Facebook, and LinkedIn.
  • Promote your services directly.
  • Publicize your company through newspapers, local tv, and radio stations.
  • List your business on yellow pages ads (local directories)
  • Encourage the use of word-of-mouth marketing (referrals).

Financial Projection

a. How Much Should You Charge for your Product/Service?

There is no fixed amount a liquidation company is expected to charge. The goods involved and the size of the company usually determine the amount you should charge.

b. How Much Profit Do Liquidation Services Company Owners Make a Year?

On average, a liquidation services company owner will make between $50,000 to $100,000 and above, per year.

c. What Factors Determine the Amount of Profit to Be Made?
  • The capacity of the liquidation services company
  • The location liquidation services company is covering
  • The management system of the liquidation services company
  • The business approach of the liquidation services company
  • The advertising and marketing strategies adopted by the liquidation services company facility – business
  • The number of years the liquidation services company is in business.
d. What is the Profit Margin of a Liquidation Services Company Product/Service?

The profit margin of the liquidation services company products is not usually fixed, it ranges from 10% to 15% per month.

e. What is the Sales Forecast?
  • First Fiscal Year: $350,000
  • Second Fiscal Year: $480,000
  • Third Fiscal Year: $600,000.
  1. Set Up your Shop/Office

a. How Do You Choose a Perfect Location for a Liquidation Services Company?
  • The demography of the location as it relates to small and medium-scale businesses that fold-up regularly
  • The demand for liquidation services in the location
  • The purchasing power of businesses and the residents of the location
  • Accessibility of the location
  • The number of liquidation services companies in the location
  • The local laws and regulations in the community/state
  • Traffic, parking, and security et al.
b. What State and City are Best to Open a Liquidation Services Company?
  • New York City, New York
  • Los Angeles, California
  • Brattleboro, Vermont
  • Tucson, Arizona
  • Silver Spring, Maryland
  • Rowland Heights, California
  • Portland, Oregon
  • Richmond, Virginia
  • Green Bay, Wisconsin
  • Dallas, Texas
c. What Equipment is Needed to Operate a Liquidation Services Company?

You should invest in software; it requires computers or laptops, an internet connection, a phone, a fax machine, and office furniture (such as seats, desks, and shelves), all of which can be acquired fairly used.

  1. Hire Employees

Plan to hire a competent Chief Executive Officer, Human Resources and Admin Manager, Account Manager, Marketing and Sales Officer, Liquidation Officer, and Client Service Executive when opening a liquidation business (Help Desk Office).

  1. Launch the Business Proper

No company offering liquidation services opens for business without first planning an opening party to formally introduce the business. If you have a limited budget, you may want to host a soft opening party.

If not, you may want to host a big opening celebration for everyone in the area where your company’s liquidation services will be located. With proper launching, you will formally notify residents of your community that the company is open for services.

a. What Makes a Liquidation Services Company Successful?
  • Ability to identify good deals
  • Willingness to take chances
  • Tenacity
  • Customer-centric business approach
  • Good marketing and sales approach
  • Strong vision
  • Passionate leadership.
b. What Happens During a Typical Day at a Liquidation Services Company?
  • The workplace is open and ready for services
  • Reviewing is required for the day
  • Workers go directly to their job descriptions
  • The company’s service offerings are promoted by marketers
  • Reports are written and sent to the high-ranked staff
  • The business is closed for the day.
c. What Skills and Experience Do You Need to Build a Liquidation Company?
  • Outstanding marketing abilities
  • G0od computing skills
  • The capacity to focus on details
  • Competent in managing and fostering human growth
  • Good book-keeping and accounting skills
  • Innovative leadership
  • Interpersonal and teamwork skills
  • Excellent interpersonal and negotiating abilities
  • Organizing abilities
  • Ability to handle issues
  • Good Supervisory skills
  • Experience in managing liquidation-related services business
  • Experience in managing people
  • Experience in business administration
  • Experience in handling relevant software.