Question about closing a business

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Haynie

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I honestly believe there are some wise and thoughtful folks around here and thought I would pitch this out and see what your thoughts are.

We closed the service side of our business in April of this year. We did not close it because we had too. We closed it because we wanted too. This was my father-in-laws dream. Now I have A LOT of inventory and special tools to get rid of. I would like return on investment but know it will not happen so I am willing to take a little hit. Since I don't have to sell at super low going out of business prices to pay bills and stay out of bankruptcy I am not going to. Folks from other shops have a different mind set. they are offering 1/4 dealer price on items. I already marked items to the point where the buyer will double their money or more when they resell it. These folks are wanting 300-350% profit on what they buy.

Do you think this is just a sign on the times or am I being unrealistic in my expectations of getting some return on my investment?

Do you think being in a small town has something to do with it?

On a positive note I think I have figured out what is going on with my metal lathe. It is not the lathe, it is the operator.
 
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just a guess, but it is likely people trying to take advantage of what they see as an opportunity. They probably assume you HAVE to close and want to take advantage of what they SEE as a desperate situation. If you don't HAVE to sell item, hold your prices until you can get what you want. I would guess that it would be WORSE in a large town/city where it is even more impersonal.

my $0.02
 
We just lost sixty thousand dollars on our house we sold in Texas just to come back to California. It has not been easy and escrow here has not yet closed.
 
There are many businesse that close facilities under similar circumstances and sell tools and equipment. It has been my experience even in good economic times these are usually sold at a deep discount. Pieces are usually sold "as is" with no warranty which also lowers the value. Markups of 100% are not uncommon on new equipment so why should someone buy from you when they can buy from the manufacturer? I have witnessed 2 million in inventory store items sell for 40-50 thousand. You may get your price eventually, but i expect you will wait a long time.
 
It's your stuff. If they don't want to buy at your price, don't sell. Especially if it is a want to closing and not a have to.

My 1/2 cents worth.
 
what kind of inventory/equipment are we talking about and what are your prices.

It always helps me to actually see what the deal is for me to be able to say its fair or not.

Now, for instance. I just bought a Grizzly 10" drum sander for $400 brand new. If I were to sell it, I'd likely ask in the $350 range since it's brand new . If I've been using it a couple years, I'd likely be asking below $300.

Would I sell it low enough for someone to buy and resell it? likely not as I wouldn't be in a rush to move it (That SomBi is heavy for a "Small" sander)
 
One thing you might consider is a reputable auction house. When my father passed away almost 2yrs ago we were left with a considerable amount of various collectibles. Being the executor I've spent entirely too much time trying to get the most I could for his "accumulations". Some of his collectibles went to the appropriate dealers which in some cases were 1 1/2hr away. Searching on-line and calling dealers was eating up my time. The rest, I found a very good auction house and resigned myself to just let the stuff go for what the market is willing to bear. Some items went for more than we initially thought, and some not. After almost two years you just have to let go and I'm still not done yet.
 
There really are a lot of factors to consider. What type of equipment, how old, condition, what is the current demand for that equipment etc. If you are selling it to someone who is going to resell it then they would expect to double their money at a minimum. Also, sellers in your situation tend to over value the items due to either lack of knowledge or personal connection to what they are selling. That is why many people hire someone to do it.

Also, if you are promoting it as a Going Out of Business sale then there is an expectation by many people that prices will be dirt cheap. It's like a garage sale. If you promote it differently you may get better prices.
 
Here is an example. I sent this out and am getting seriously low balled in price. Every thing is a few hundred under dealer cost and with the way oil prices keep going up if I was still in business I would jump at these prices. The MSRP is selling the oil out of the drum. If they sell it by the quart then they stand to make substantially more.

We were parts and service dealers for Mercruiser, OMC/Johnson/Evinrude, and Volvo Penta our new parts inventory is going less than dealer cost as well. Just had someone say they are thinking about the inventory and tool. I have heard it before so am not holding my breath.

Maybe I am thinking about this all wrong.
 

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I would have to say since this is not a halve to situation, you have the power (the upper hand) to sell at your own price. The folks which want to buy and sell for a profit realize there is profit to be made. Maybe you could consider selling it off yourself or subcontracting one person to help you sell it off.
 
No going out of business talk here. Everyone who asks I say we decided to close because it was someone else's dream.
 
Closing....

Haynie said:
I honestly believe there are some wise and thoughtful folks around here and thought I would pitch this out and see what your thoughts are.

We closed the service side of our business in April of this year. We did not close it because we had too. We closed it because we wanted too. This was my father-in-laws dream. Now I have A LOT of inventory and special tools to get rid of. I would like return on investment but know it will not happen so I am willing to take a little hit. Since I don't have to sell at super low going out of business prices to pay bills and stay out of bankruptcy I am not going to. Folks from other shops have a different mind set. they are offering 1/4 dealer price on items. I already marked items to the point where the buyer will double their money or more when they resell it. These folks are wanting 300-350% profit on what they buy.

Do you think this is just a sign on the times or am I being unrealistic in my expectations of getting some return on my investment?

Do you think being in a small town has something to do with it?

On a positive note I think I have figured out what is going on with my metal lathe. It is not the lathe, it is the operator.
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It depends a lot on what the items are. I have bought some common items for next to nothing at store closings. Fast moving items might hold the price a bit better but unusual or slow moving things are likely to go begging for buyers.

Tools and fixtures kind of depend on whether there are other businesses opening in the area. We had a closing down here a couple of years ago and the shelves were all sold well before they were empty.

If you don't care how long it takes you to get rid of the stuff, then you don't have to move much on price. Try for awhile and see what sells.
 
Please understand one fact. A tool, vehicle, even equipment that is used in a business, depreciates.

For example;
You go out and purchase the Uber Super Duper Lathe Extraordinaire. $5,000.
Now with this purchase in your head it is worth $5k. To your accountant it is on paper only valued at half that amount. On paper they will create a point of depreciation and how the value goes down. In time the value will be $0.00 This is all an operation of number crunching.

Now you are being besiege with low ball offers. Perhaps other than just being cheap ba****ds. They may think that you have an accountant and most of these tools have gone through the balance sheet.

If anything, get with your accountant see how in the long run via Taxes you may come out golden.
 
I have done this and I am still in the middle of doing this for the cabinet business I owned and shut down. My situation is a lot different in that the market here has collapsed. There are few shops left that make thier own cabinets or any work for those that exist still. My question is what is your time worth. If your willing to do the work and take the time to get to the best market for your return, you may realize the asking prices. I love the "I have cash" remarks. My response is "Good I want planning on taking food stamps or children" Of course I may have an attitude:eek:. I have told people that before I would sell it to them that cheap I would give it away free to some one who would appreciate it more. You will have to decide how much work it will take to get your asking price and how fast you can get it. If you stick to your guns on the price will it take several years to get it all sold?

Mike
 
Tools vehicles and equipment depreciate. Fortunately/unfortunately inventory does not depreciate. Fortunately because I bought it several years ago and I sell it today for the same or more. Unfortunately because the tax man knows it.
 
True but

Haynie said:
Tools vehicles and equipment depreciate. Fortunately/unfortunately inventory does not depreciate. Fortunately because I bought it several years ago and I sell it today for the same or more. Unfortunately because the tax man knows it.
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What kind of business was it...sole proprietorship, corporation, partnership? Talk to a tax professional, there are things you can do.

I know a couple of them but can't tell you unless I know what your business structure is. Whether or not you are staying in business and just closing part of the business also makes a difference.
 
the economy blows right now. i think you would be lucky to get pennys on the dollar for most things.

you could accidently spill some gas on the stuff and..... just kidding. :wink:
 
Disposal

Russianwolf said:
Just because a tool is fully depreciated on the books doesnt mean it has no value, only that it has been fully expensed.
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That's right, but selling the tool might work out somewhat different for tax purposes. Since I have a sole proprietorship I wouldn't even bother selling the tools I would just let them revert to personal ownership and keep them.
 
As a long time manager of a boat and yacht chain, I can say with certainty that E-bay is your best bet. The OMC parts are hard to come by. It'll take a LOT of effort, but the old 2 stroke Johnson/Evinrude parts will likely go for (mine did) MSRP, and in some cases even more.

Volvo Penta parts will bring about 25 percent below MSRP.
 
Did ebay research yesterday and have been off and on since October. So many boat shops did not survive the "downturn". Their stuff is on Ebay for bad prices. Lots of people hurting right.

Last year a guy came in interested in buying the whole place. Pursued it pretty hard then dropped out of site. I figured he was one of the many who were either fishing for a screaming deal or lost his shorts when things went south. He came in yesterday wanting me to send information to his accountant and was all business. If this falls through I may research Ebay more closely to find a niche or I may sit on the inventory, except for the petroleum products.
 
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