Seven Techniques to Grow a Stable Business in the Liquidation Industry

Getting started in the liquidation industry can be a rush of excitement! Buying items for pennies on the dollar when all your friends are paying full retail is an awesome feeling. You are also, generally, working with higher volume and bigger numbers. Many people allow themselves to get caught up in the excitement. I certainly did when I was getting started! This can cause newbies to operate while in a sense of euphoria and to forget that they are running a business. A business in a cut-throat industry that is infested with plenty of sharks!

Whether you are brand new to selling, or you have been selling for a couple years, the seven techniques below were written in an attempt to cause a moment of reflection--to create a time that brings you back to being grounded in reality and to put processes in place to ensure that you are operating your venture as a business and not just a hobby. Enjoy!

Manage Yourself.

The hardest person to manage is yourself. That is because all of the excuses as to why you are doing what you are doing are not being challenged by anyone or anything. Below are just a few ways to force yourself to be more accountable.

• Plan your week prior to it starting. At BuyLow Warehouse, we have made it a habit to plan our week before it starts. We encourage everyone on the team to do this. Often, we review each other’s plans to have additional clarity and accountability on what will be accomplished. We also review and keep track of our completion percentages with each other at the end of the week.

If it is just yourself, no problem! Identify the top five items that must be accomplished during the week. Hold yourself accountable at the end of the week by tracking your completion percentage. If you struggle getting the important tasks done, adjust your schedule to create time to achieve them. If you hit your completion goal for the month, give yourself a reward!

• Work on the most important tasks first. As Mark Twain said, “If you eat a frog first thing in the morning, that will probably be the worst thing you do all day.” Research has confirmed that you should tackle your most difficult tasks first if you actually want to be most productive. Avoid self-imposed procrastination by doing the hardest things on your list first. More on this can be found at THIS ARTICLE on Business Insider.
• Solve small problems before they turn into big problems. Most big problems start out small with an opportunity to solve them before they become too big of an issue. Most people overlook them when they are at this stage because they fail to recognize the growth of the problem in the future. Squelch the problems before they turn into a major issue.
• Keep Learning. It is very important to continue to focus yourself to stay up to date and to continue learning. By infusing your brain with new ideas, you are able to remain creative and continue growing your business. I personally love to use podcasts for this, although books, magazines, blogs or other educational means can work as well. For additional ideas on holding yourself accountable, see THIS ARTICLE.

Buy Your Time Back

• Outsourcing. Outsource low return repetitive tasks before you think you need to. In today’s global, connected economy, it is very easy to find, train, and hire remote team members at a fraction of the price of local talent. Use this to your advantage! Hire an assistant that can handle the small simple tasks for you. This will help to keep your time focused on the highest return tasks for moving the business forward. Do this before you think you need it. If you wait until you feel the pressure, your effectiveness has already fallen off. An example of a task to outsource would be one that takes twenty minutes a day. Spend three hours outsourcing this and you have bought back 1.66 hours of your time per week. Develop this habit and if you have five of these tasks, for fifteen hours of work, you buy back eight hours of your time per week! That is a high return investment!
• Leverage Software. Another common method of buying some of your time back is by leveraging online software that can help save you time by automating or performing tasks faster. Time is your most valuable asset as you are growing your business. You need to do anything possible to buy back your time, even if this means spending a little money.

Selling & Supply

When it comes to selling your merchandise, no one is going to sell your merchandise for you. Hoping that you will sell your merchandise is not a business strategy. If you want to grow your customer list and sales, you must build your customer list from the start. Collect contact information from buyers, even if you do not sell the product type they buy yet. Record all relevant information and notes of conversations in an organized place so that you can reach back out to them in the future. There are many free CRM software solutions that you can use for this.

As your business grows and you begin to get more and more leads for potential customers, do not just “wing it”. Build a strategy around improving your conversion rate of leads to customers. This takes consistent and focused effort, but it can pay off with a huge return. For example, if (a) your average repeat customer profits you $50 per week, (b) you generate two-hundred customer leads per week, (c) and your current conversion rate is 1%... developing a strategy that moves your average conversion from 1% to 3% would result in four extra repeat customers every week which would be worth an extra $200 in profit every week! After one month, you would have an extra $800 in profit as compared to the previous month.

While your business is growing, take time to network with others in your industry. Network with potential customers, potential suppliers and other sellers. Focus on building long-term relationships with these people. You will want a large network of suppliers, even if you do not plan on using them immediately. You never know when something will change and you might need access to additional supply.

Talk to Your Customer and LISTEN.

Most of the time, it is very easy to find customers. All it takes is to ask people what they want or what they cannot find, listen to what they say and deliver that service/product with added value. The hardest part for most people is to listen to what people say. Most of the time, people are too focused on themselves or what they are going to say next to listen to what someone is telling them. You have probably heard it before, but you were made with two ears and one mouth for a reason. Use accordingly. I am a very highly task driven individual. One of the greatest break-throughs for my business was when I stopped being so focused on the task and started interacting and spending time with my customers. You can learn all sorts of new information from your customers and, during the process, turn them into raving fans!

Another problem is that people fail to listen to what is really being told to them by their customer. This takes both listening on a deeper level to the words your customer says, but also watching their actions. They may only hear what is said on the surface and not read into what their customer is telling them. For example, if a customer says he really dislikes a certain load type, but all he ever buys is that load type, then your customer likes that load type! You must listen to what your customer is telling you.

Both of these habits are a mistake which will cause you to miss out on valuable opportunities to serve your customer. A couple easy ways to stay in touch with your customer is to talk to them and ask specific questions while they are in your business, or to join focused Facebook groups that discuss your industry and then be active in those groups.

Practice Patience When Getting Started

I spoke about this in a previous article, but be patient as you are getting started in this business. As you start growing in this business, you will begin seeing deals on merchandise, different business models and working with some businesses that process a tremendous amount of volume of merchandise. It can be tempting to not allow a “deal” to pass up, but trust me, there is always a deal around the next corner. This business can be incredibly deceiving about the amount of work that goes into growing to that size because most of that work is behind the scenes (e.g., negotiating financing, securing equipment, negotiating consistent supply, building a network, managing a team, growing experience of turning lemons into lemonade, etc.). I remind myself regularly that it is better to do nothing, than to feel pressured to do something and lose money doing it.

• Stay patient as you get started. The temptation to ramp up quickly and process more volume of merchandise can be deadly for your business. More promising businesses have failed in this industry due to that than anything else. Below are some thoughts around managing your growth.
• Size of Location. Maximize your house or storage bay first, but preferably your house. By doing this, you will keep your overhead as low as possible when starting out. This will cause you to have less space, but it will also force you to learn how to keep your focus on selling your merchandise, because you will not have enough space to store the product for long periods of time.
• As you grow larger and start processing more volume, then move into a larger sized storage bay or a shared warehousing space. If needed, you can always find someone’s loading dock to rent if necessary. Ideally, you could find one with higher ceilings and power. Again, the goal is to maximize your space as you grow. Develop your supplier list, customer list, and skill set to be able to handle the increasing volume.

Only after you have built a stable foundation for your business, should you consider a small warehouse with a loading dock that requires a long-term lease to be signed. Remember, you are on the hook for paying the lease, even if your business closes and moves out. Do not take this obligation lightly.

Sales Channel Diversification.

I always will promote diversifying into a new sales channel sooner than later, but by doing it wisely. You must make sure that you complete the integrating of a new sales channel before moving on to another. This can be a very big undertaking and include marketing, customer service, additional square footage, new software, new staff, etc.

Focus on adding a sales channel that is closely aligned with whatever you are currently doing. Do not start doing something totally unrelated to what you are already doing. Starting something random will eat up your time and put your core business in jeopardy. For example, if you already sell on eBay, maybe find a software that helps you cross-post all of your listings on Bonanza. Since you already have the shipping logistics figured out, this is an easy and natural transition. I would not suggest trying to jump from eBay sales into a full-blown retail store unless you have already maximized the other sales channels available that are an easier adoption.

Buying Truckloads.

One of the biggest mistakes that I see is people rushing to buy a truckload instead of buying by the pallet. There are some things to realize about buying truckloads that many people do not realize. First, buying a truckload does not mean that you generate automatic savings on every pallet. What it does mean is (1) increased risk, (2) having increased square footage, (3) you must take both the good and bad, (4) not everything is going to sell at the projected price, and (5) depending on your sales channel this may require additional labor. You do not get to choose which merchandise you want when buying a truckload. You are getting it all. So before stepping up and plopping down a large payment with stars in your eyes here are some suggested guidelines.

• You must be selling two truckloads worth of merchandise for at least the previous two months with regular repeat buyers purchasing at least one truckload worth of this merchandise in each month. This means that you will still be buying one truckload worth of pallets which has to be changed to a less-than-truckload format to service your other customers. This will help keep you nimble and mitigate your risk as you grow.
• You must have secured enough space to receive, process and store the product until it sells. If you do not have a loading dock, you need to have one that you can use. If you are not prepared to receive a truckload, there is a good chance that this is a sign that there are many other parts of your business that are not ready yet either. You are trying to go too fast! You must know exactly how you are going to sell your product and have relative confidence that you will be able to sell it quickly. The longer it takes you to sell the merchandise, the less money you will make on it.

Keep the Main Thing the Main Thing

I see it all the time--a Newbie gets into this business and immediately starts buying more than they can handle because they want to start selling the items in many different ways. There are shiny objects for you to pursue all over in this industry. You must choose to focus on pursuing one or two of these and make that your main thing. Then, do not look left or right, until you have developed a solid foundation for the main thing your business does.

People allow themselves to get sidetracked and focused on the wrong things that do not produce sales. This is a mistake. It is easier to focus on setting up a new sales channel than to focus on what actually makes you sales. You must always focus on selling your merchandise. This is your main thing! You cannot buy more if you have not sold what you already have. By keeping your main thing in your focus, you will ensure your company is making money to grow. Do not get confused, however, this does not mean to not diversify. There is just a time and place for that.

Manage the Business-Side of Your Business

Remember that this is a business and not a hobby. It is very easy to start in the liquidation industry as a side-hustle. You must remember that you are starting a business and make sure that you are placing adequate focus on implementing the proper processes and tools to manage your business properly. Some of the things to stay focused on as you develop are as follows:

• Managing your Financials. You should have a way of managing your profit and losses each month. This is a habit that you should develop early once your business is making enough money to do so. You can either buy a software program and do this yourself, or outsource it to an agency that specializes in it. If you outsource it, you can get someone to do it for less than $400 per month, but just make sure they know what they are doing. They should help you set up your chart of accounts properly and reconcile each of your accounts each month. You will be glad they did come tax time.
• Tracking Inventory. You will not be able to get an accurate reflection of your financials each month without tracking your inventory. This is one of the hardest things to do in this business, but without doing it, you will not know whether you are making or losing money. This is a key area that you should find and leverage a software solution. The money spent on the software subscription will save you hours and be more than worth it.
• Collecting Sales Tax. You should be doing this day one of your business. However, some businesses wait until they are doing more consistent volume each month, you cannot wait too long. If you are selling online, you need to research the new Economic Nexus laws that were recently established to ensure you are in compliance in each state. This is not something that I would run out and register for immediately upon starting. You have some time to build up your sales in each state. Insurance. Selling liquidation merchandise carries many different risks that you need to ensure you are protected from. A good insurance agent can help ensure that you are covered. Make sure that your product is covered while in transport to you and while in your possession. Also, ensure that you have liability protection in case someone wants to sue you for something that you sold them. It happens and you must be covered.

Keep a Weekly Scorecard of How Your Business is Performing.

As you grow, it is important that you keep data to refer back to. We have done this through keeping a weekly scorecard. Every week there are certain metrics that we track. This has proven invaluable to us and we reference it regularly when trying to decide to move forward with a new decision for our business. Our motto is to track it, even if we do not know that we need it yet. I would rather have eighteen months of data once I figure out that I need it; than to not record any data and then need it at a later date. Just make sure that it is not taking you too long to record the information.

• Implement a business management structure. Regardless of whether you are one person or more, I strongly suggest that you implement a business management structure that offers a cadence and format to weekly meetings and working on your business, not just in it. At BuyLow Warehouse, we use a system called “Traction”. Many small and large businesses have adopted this model to their business with great success. I highly recommend you do the same.
• Write Basic Processes. If there is something that needs to be done on a recurring basis, write a process so that you can do it quickly and correctly each time. This process can then be used as training materials once you hire someone to help you grow your business.

In summary, it is very important to grow your business with a defined purpose and direction. The habits above have aided BuyLow Warehouse to grow our business and to survive significant challenges. Some of these lessons were learned because we did them and in hindsight, we are very happy that we did. We learned other habits because we did not do them and suffered the consequences. It is our hope that we can help you avoid some of the same mistakes that we made by not adopting these habits. Ultimately, there is no silver bullet to growing a business in the liquidation industry. You must remain fluid, humble and adaptable. Things change constantly and you must be willing to change with them or risk becoming obsolete.