Family-owned businesses are the backbone of the American economy. However, despite the job security and family legacy potential many of these businesses represent for the families that own them, the importance of careful succession planning is often overlooked. Closeout companies that specialize in selling overstock inventory are often small family owned operations. The kids often grew up around the business and watched their parents work day and night, buying and selling closeouts, excess inventory and overstock buyouts. Their parents probably traveled all the time, doing whatever was necessary to make the business succeed. Indeed, only about 30% of family businesses survive into the second generation, according to the Family Business Institute. Kids taking over a family closeout business of this nature may decide to downsized the warehouse, work fewer hours and have a smaller operation that offers them a better work/live balance. Typically, companies like this that deal in liquidation stock for sale are small businesses without a lot of infrastructure and levels of management.
While transitioning ownership and control can be difficult for any business owner, the leaders of family closeout and overstock inventory businesses are typically faced with the added challenge of managing family relationships, while preserving the culture and standards they have worked hard to establish. In today’s economy, there is a need for overstock liquidation buyers that buy canceled orders and obsolete inventory. If a family business has been operating with the same management for years, and never moved warehouses or grew into a larger facility, there will likely be large lots of dead stock sitting in the warehouse and these should be sold to inventory liquidators to make room in the warehouse. If the business changed with the times and is selling online or on Amazon, they may have sent too much inventory to Amazon and could be paying excessive long term storage fees to keep inventory at Amazon FBA. These products should also be reduced and liquidated to sell dead stock to closeout distributors or closeout websites that can better utilize the products. There is no point sitting with dead inventory that isn’t selling and costing money in storage fees. If you are a business owner hoping to pass your company on to the next generation, a few key considerations can help you successfully navigate the transition while maintaining family harmony and getting rid of closeouts and excess inventory before making the transition.
Family businesses that operate as a meritocracy are typically more successful than those that promote based on family relationships alone. Selling overstock inventory is not rocket science, but it does take planning and inventory management knowledge to make things work. Defining and documenting what you expect of your children and the future of the company is an important first step in succession planning. Perhaps they require additional education or training before they are ready to lead as closeout distributors. Or, you may find that retaining key employees or looking outside the family for additional expertise will help smooth the transition. Your children should have a good understanding of what is means to sell excess inventory in a challenging economy vs a good economy, they should have empathy for a small business owner having to liquidate merchandise below cost or downsize a warehouse and perhaps even deal with someone shutting down operations entirely. Whatever the case may be, understanding each family member’s strengths and weaknesses can help you delegate and separate responsibilities most effectively. There is a lot of competition in the closeout industry. When you are liquidating stock for sale it is important to be able to do business with a professional and reliable closeout buyer, and this only comes with training and experience. Just because your kids need a job isn’t a good reason to give them the closeout business. Closeout brokers often have years of training before they become really good at being able to understand the value of products being liquidated. When a small business is shutting down and liquidating it’s entire inventory, they will need some direction that can only come from having a long history of buying closeouts and selling overstock inventory.
Of course, no succession plan is complete without determining the best way to transition ownership. Regardless of what you decide, a comprehensive plan should be designed to serve the interests of all parties—including your estate. Companies that liquidate inventory can make it to the 3rd and 4th generation if the new owners are trained and understand the business. There will always be surplus inventory and discontinued merchandise for sale, for one reason or another. It may be canceled orders, or perhaps too much inventory was imported and it arrived late, maybe a small business cannot compete any longer and is either downsizing warehouse or completely shutting down operations. Whatever the case, there will always be opportunities to buy overstock inventory and there will always be businesses that need to sell off closeouts and liquidate inventory below cost. While there is no single transition plan that is right for all families, the most effective plans focus on maintaining family dynamics while allowing the family members most active in the business to continue in their roles without unnecessary interference from others.
Several techniques are available to move your family business into the hands of the next generation. These include setting up a grantor retained annuity trust, transferring your business shares, structuring an installment sale to one or more children or to a grantor trust or using life insurance as a planning tool. Whichever plans you make, your family must have the willingness and capacity to make them function, which may require education, skill development and ongoing conversation about how you want your business legacy to continue, your philosophy for buying and selling overstock inventory, and what it means to be closeout distributors in a struggling economy with businesses shutting down operations and downsizing warehouse. It is not uncommon for companies to need direction when closing down operations or moving 3PL warehouses and having inventory that has to be liquidated.
Giving up and passing on a family business is a major, life-changing event with a host of complex issues and potentially difficult decisions. While it may result in family strife, if done well through proper planning, it also has the potential to be a golden opportunity to realize business, family, legacy and philanthropic goals after years of hard work and sacrifice. If you need an inventory liquidator to help manage your inventory levels, consider a simple Google search using the following search terms: liquidating inventory, too much merchandise in warehouse, shutting down operations, how to get rid of extra stock, clear stock from warehouse, closeouts, closeout liquidators or overstock inventory buyers.
It seems that almost every article about family business points out the statistic that only one-in-three family businesses survive into the second generation. For those families aspiring to take their overstock and closeout business to the 2nd generation and beyond, this fact can be very scary. Unfortunately, there is no one secret to ensure you reach the 2nd generation, and every closeout business and family has unique features that determine what will make it successful. The closeout liquidation industry is good and you can have a successful business worth turning over to your children. However, there are many things you can do to increase your likelihood of success. They can be summarized under the four Ps – philosophy, planning, people and policies. You can liquidate overstock inventory in many different ways, but when an Amazon seller with too much inventory needs help they will look for a trusted and reliable closeout buyer that has been in business a long time. Second generation closeout buyers have a leg up on newer businesses that don’t have the same experience buying liquidation inventory, discontinued merchandise and business liquidations.
Once you get beyond the philosophy questions, the next step is planning. Planning in a family business occurs in the arena of family as well as business. From a business perspective, having a long-term vision for the business is crucial. A common understanding of that vision across the first and second generation will allow for a smoother transition. When you buy overstock there is a right way and a wrong way to do it. Training in how to be a professional inventory liquidator will prove invaluable when it comes to having experience in working with companies that are shutting down operations and liquidating entire warehouses filled with inventory. These are large deals that require skill and experience, and not all surplus wholesale suppliers have a good understanding of how the closeout process or liquidation process works. Closeout wholesalers – whatever generation they may be – must understand this.
Merchandise USA is an inventory liquidator specializing in buying closeout housewares, closeouts of toys, sporting goods and home accessories. We are buyers for excess inventory of lawn and garden products as well as canceled orders and discontinued inventory of all consumer goods. We buy overstock merchandise in all categories and we can help you reduce inventory if you have too much stock to clear from the warehouse or need help with too much inventory sent to Amazon FBA.