Category: Uncategorized

Inventory Concerns When Buying and Selling a Business

Inventory has the potential to be a point of contention when buying and selling a business. Taking inventory is an essential component of completing a transaction of this magnitude. However, there is the potential for the inventory count to prove divisive between the buyer and seller. If you sense there will be an argument about inventory counts or valuation, it might be best to rely on an outside party like an inventory management software to perform the inventory on your behalf. Otherwise, you run the risk of having the deal fall through simply because trust is lost over inventory count and/or quality.

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How Much is the Inventory Worth?

If you do not know how much your inventory is worth or whether your inventory valuation is accurate, it will be a point of conflict with prospective buyers. Sales agreements often specify dollar values for inventory as well as stationary property, intangible assets and equipment. The buyer might question whether the current inventory valuation is accurate. As noted above, the better course of action might be leaning on an unbiased, completely objective third-party to perform inventory counts and valuation to ensure accuracy.

Inventory Changes After the Count

Inventory is likely to change between the point at which it is counted and the actual sale date. If there is less inventory or more inventory than estimated, either the buyer or seller will feel as though an injustice has occurred. Adjust the closing price as necessary to reflect alterations in inventory and the deal will prove mutually beneficial.

Be Careful When Selecting an Inventory Counter

If you decide it is prudent to let an objective third-party inventory specialist perform the count, do not hire any old business for this important project. Ideally, the business buyer and seller will agree on an inventory specialist to perform the count. The inventory counter selected should be licensed by the state and have years of industry experience.  This company should have a database, the latest inventory counting technology and a track record of success.

What Happens if the Inventory is Higher Than Expected?

If it turns out the inventory is more than expected, the buyer can request for the inventory to be reduced. The other option is for the buyer to ask the seller to eat the cost of excess inventory. Plenty of sellers are willing to provide slightly more inventory than anticipated to grease the wheels of business and keep the deal moving along as planned. It is also possible for inventory to be high due to the inclusion of obsolete inventory. If inventory is no longer useful or egregiously slow to sell, the seller will be pressured to discount part of the current stocks.

Strive for a Mutually Beneficial Solution

Contention over inventory prior to the point of a business’s sale should not be a deal-breaker. The buyer and seller should be able to reach common ground without the deal falling apart. If each side is willing to budge a little bit on the issue of inventory counts and valuation, the sale can move forward, proving mutually beneficial to both sides.

 

About the Author:

Marla DiCarlo is an accomplished business consultant with more than 28 years of professional accounting experience. As co-owner and CEO of Raincatcher, she helps business owners learn how to sell a business so they can get paid the maximum value for their company.

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New Live Chat Support!

Chat

This Week we’ve added live chat support to CyberStockroom! If you need assistance with any feature or have a question or comment simply click on the ‘live help’ tab on the right to talk to us live.

We’re very excited about this new feature and can’t wait to talk to you!

Thank You for an Amazing 2012!

It has been an incredible year for CyberStockroom! In a few short months we have grown from our first beta testers to an international community of dedicated users.

Your feedback has been invaluable in helping make CyberStockroom truly great. You helped to shape everything from our new website design to amazing new features like super-responsive interaction, improved search, easy importing and timeline features. Thanks to your support we were featured earlier this year on KillerStartups!

We look forward to another incredible year in 2013. We’ve got a few projects that we’re working on that you should look out for:

    • We will begin launching our Mobile Apps this year so you can carry us in your pocket – you’ll even be able to use your smartphone as a barcode scanner!
    • We will be rolling out integration with popular E-commerce solutions like EBay and Amazon. If you sell your products or buy your inventory online, you won’t want to miss this!
    • Expect your stockroom to become even more customizable with features like international currencies and taxes, user-defined product parameters and more!

As always, your feedback is greatly appreciated. If there is something specific you want to see in the new year let us know!

Emad Hanna
President and Founder
emadh@cyberstockroom.com

Blog Launch

Welcome to our Blog!

We hope to be able to provide some useful resources and tools for our clients and for anyone interested in making their inventory management experience more pleasant. We will try to post regularly on this blog so please check back soon!