Navigating financial pressure: a guide to asset liquidation for your business
Every business encounters financial challenges at one point or another. But when the going gets tough, just remember that you’re not without options. One practical strategy that can help you weather the storm is asset liquidation.
Asset liquidation is a process of converting your business’s tangible or intangible assets into cash, providing you with the vital liquidity to bridge financial gaps until your business recuperates. However, this strategy demands careful planning and swift action. An accurate asset register aids in making informed decisions about what assets to sell off.
Asset Liquidation: The four principal categories
Broadly speaking, business assets that could be converted to cash fall under four categories:
- Current Assets
These include items that can be sold quickly for cash. If these assets aren’t essential to your operations, they can be used to cover immediate expenses, buying more time for recovery. Examples include accounts receivable, existing inventory, raw materials, manufacturing and packaging supplies, short-term investments, and offshore funds.
- Fixed or Long-Term Assets
Fixed assets are typically more costly and last for over a year. These can be streamlined and sold if they’re no longer required. If you own property, equipment or vehicles that are still needed, consider selling the asset for immediate cash flow and then leasing back.
- Intangible Assets
These are typically more challenging to value and sell due to their nature. They include intellectual property, goodwill, brand, and business ‘know-how’. While they are crucial to your business, selling them may be an option if the situation is critical.
- Other Business Interests
If parts of your business aren’t crucial to its core operations, they could be sold off without causing disruption. This includes underperforming divisions or non-core products or markets.
Remember that the liquidation value of an asset is typically below market value. Consider all options carefully before selling off valuable parts of your business. Always seek legal, financial, and business advice before making decisions that impact your long-term future.
Your business has the resilience to weather financial storms. You just need the right strategies to navigate these challenging times.
Consult with us if you’re unsure about the best course of action.