Pre-business-for-sale inventory -whew!

April 17, 2010

Don’t underestimate the inventory process in a business-for-sale transaction.  It can be daunting, contentious, and a deal-breaker.

The inventory process can be done by any number of people.  It can be seller and buyer, employees, hired counters.  The more vested the individuals in the process, the more accurate the count.  Having people count in twos, one calling out and one writing down is a handy method, helping to speed the process.  Obviously, in some cases, there are bar codes to be scanned.  Hopefully in every case there is a master list of unique items that require counting with the right cost assigned.  Get organized in advance.  (Note:  The buyer can merely accept the inventory maintained by the seller as accurate but I don’t recommend it.  At a minimum do spot checks to determine accuracy of the seller’s system.)

Whatever the methods, in the small business transaction, inventory may or may not be involved.  Some service companies may have only some paper and envelops to count.  The key is to have enough people with enough time if a physical inventory is to be done.

In a small business, often the inventory is done the day prior to sale, reducing the opportunity for shrinkage, need for adjustments for items sold before or after inventory and the actual close of the business.

Don’t underestimate the time it will take.  In a recent business for sale transaction, the store, approximately 1500 square feet with various display cases and inventory in back, took eight hours with four people to count.  Then there was a reconciliation of the count to the perpetual inventory.  It was still being reconciled when closing was to happen.  The answer was to close dependent on finishing the reconciliation within a few days.

It is important to do the count correctly, to give satisfaction to the business-for-sale owner and buyer that they have a good deal.  Usually the count adjusts the sale price one way or the other.  The value of the inventory, a.k.a. money, is important.

For more about inventory in the sale of a business…

http://www.bizben.com/articles/89-inventory-small-business-sale.php

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