A going out of business sale is conducted to liquidate inventory held by a business. These sales allow retailers to recoup some investment for inventory and consumers to purchase goods at rock-bottom prices.
Step 1: Investigate State Laws
Many states have laws pertaining to going out of business sales. These laws are often established, published, and managed by a state's attorney general. For example:
- In Ohio, a business' position must meet certain criteria, such as losing its lease or being in bankruptcy, prior to advertising a sale as a "going out of business sale." Additionally, sales may not last more than 90 days total.
- In Missouri, going out of business sales must be registered with the attorney general's office no less than 10 days before beginning. Registration must include a list of items to be sold, and new inventory cannot be added after a sale begins.
Check with your state attorney general's office to determine which, if any, rules and regulations apply to your sale.
Step 2: Set Door Closing Date
The second step to holding a going out of business sale is to establish the date upon which you will officially close your doors. This refers to the date after which you will conduct no further business involving the public, meaning that you will not offer any products for sale. This does not mean that you have to have the business wrapped up in its entirety by this date.
Step 3: Gather Inventory
Step 4: Consider Sale Rules
Next, think about how long you want the sale to last. This requires considering:
- The amount of inventory you have to sell: The more inventory you have, the longer you might want the sale to be.
- The number of price reductions you would like to offer: Many going out of business sales have several price reductions during their duration. For example, for the first week items may be offered at a 45% discount, the second week a 60% discount, and the third week a 75% discount.
- The length of time you want price reductions to last: How often do you want to lower prices? Reductions can last a few days to a few weeks, depending on the amount of inventory you have and how long you are permitted by state law to hold your sale.
Step 5: Set Sale Date
Once you have set a date for closing your doors, know state laws regarding the sale, and have identified how long you want to run the sale, it's time to set the start date for the sale. To do so, count backwards for the length of time you plan on running the sale from the date you are closing your doors. For example, if you plan on closing your doors on March 15th and want to run your sale for two weeks, your sale should start March 1.
Step 6: Fulfill Legal Obligations
Next, if your state requires you to identify the items you will offer for sale, register your sale or complete other obligations before being legally able to have a going out of business sale, now is the time to do so. This ensures that these requirements are met before you begin advertising or holding your sale, thereby assisting you in avoiding fines or other problems.
Step 7: Create an Advertising Plan
Every sale, including going out of business sales, require advertising. First, determine what types of advertising you think you will use. Consider whether forms of advertising you've used in the past will suffice or if you need to invest in new methods.
Then, identify how much available cash your company has on hand. This will help you approximate how much you would like to allocate to advertising for your sale. Because you will likely need funding to wrap up your business in other ways, this budget should not account for all of your company's remaining cash. To determine how much you want to spend on advertising for your sale, consider:
- The typical cost of those advertising methods: Since you've likely used advertising in your business operations, you are probably familiar with the cost of specific methods. If not, research how much a specific advertising method costs in your location.
- How much or how often you want to advertise: Determine how much you want to use a particular advertising technique. This will help you calculate its overall cost.
Once you've identified these three factors, calculate the total amount it will cost to advertise your sale. To do so, multiply the average cost for an advertising technique by how much you intend to use it. For example, if a radio advertisement costs $1,000 per airing and you would like to air two advertisements, then your budget will be $2,000.
Step 8: Implement Your Plan
You've planned all you can and fulfilled legal obligations, now it's time to set up your merchandise on your sales floor. It's also time to hang the posters or other in-store advertisements, such as price reduction notifications, throughout your store.
Simultaneously, initiate the advertising techniques you planned earlier. This may mean mailing flyers or scheduling radio slots. To increase turnout, you may consider beginning your advertising a few days prior to the sale actually starting.
Holding Your Sale
Planning ahead for your going out of business sale helps ensure you'll meet state legal requirements. It also makes it more likely that you'll have a larger turnout and sell more inventory.