Unlike cash, inventory is almost always sold with an active business. However, just because it is
included in the sale doesn’t mean it is included in the price. A price for a business is typically
stated "$x plus inventory" This is usually done because inventory can (and does) fluctuate every
single day, so it is important to be clear in the negotiation process how much inventory is
included.
However, even when it is clear inventory will be counted and paid for in addition to
the core price, there are still a number of issues to work through. The first, and most basic, is
the dollar value of the inventory and how it is measured. That may sound like a basic question,
but the answer will differ across businesses.
Some basic questions to ask:
– What is the method of valuing inventory? (LIFO, FIFO, Average)
– Age and condition? Anything obsolete?
– Is the quantity too low or too high?
– Don’t leave it until closing day to find out there is disagreement over the inventory
value!
Need more information? Call us at 204-478-7266, ext. 110. or click
https://www.bealbusinessbrokers.ca/buying-a-business/ to download our free e-book on
buying a business.