5 reasons it may be time to liquidate your business
Liquidating a business is not always an easy decision to make. Most people enter a business with hopes and dreams of success and longevity. The reality of it is some businesses will thrive and succeed for decades or longer, other entrepreneur efforts will be shorter lived and go bankrupt quickly. Knowing when to liquidate a business is important because waiting too long could cause deeper financial troubles than the ones already emerging.
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5 reasons which may be contributing factors to help determine when the right time to liquidate a business include:
1. Expenses exceed revenueIt is expected businesses are more likely not to generate a profit the first year or two. However, once it gets past the three-year mark, and profitability appears to be a long shot, it might be time to get out before debt accumulates too high. If there is a noticeable trend of expenses exceeding revenue that doesn't seem to be easing up, then it might be time to liquidate the business and try to recoup some of the losses while assets still hold worth for resale.
2. Debt is unmanageableWith a new business, some level of debt is expected, but when it grows to the point where it becomes unmanageable then it might be time to rethink strategy and see if it is possible to reduce debt and turn over a profit. It this seems unattainable, or the sales forecast looks to be stagnant in the future, it could be a good time to liquidate before no value is left in the business and any proceeds from liquidation would have to go towards debt.
3. No room for growthIf a business has reached its highest level of profitability and it isn't very lucrative and shows no potential for future growth, liquidation may be a good option. In order to succeed, a business objective should be to strive towards continued growth. If growth is stagnant, no new sales are coming in, and/or the product or service has reached the end of its life cycle, then getting out through liquidation is a potentially better option.
4. Retirement/no qualified buyersRetirement is one of the top reasons why an entrepreneur might let go of their business. Sometimes a business can be sold and a profit made, or at least an even break; however, if there are no qualified buyers, heirs are not interested in operating the business, and/or an owner is truly ready to sell, liquidation might be the better option as an exit strategy.
5. Get out when going's goodMany businesses are built around trends, technology or other fleeting concepts. Progression in these kinds of industries is fast and the business is set up with the intention to reap the rewards for the short-term and then get out before the industry busts.
Any one of the above-mentioned reasons may contribute towards knowing when it is time to liquidate a business. The decision to dismantle a business may not always be easy, but is sometimes necessary to do.