Questions About Inventory When Selling Your Business
Depending on the type of business you own, there are many different questions that I will ask a business owner about his inventory to determine how I will proceed in my evaluation of the business. Inventory can vary from ready to sell items such as groceries and consumables, to raw materials such as wood planks to make furniture.
Questions that I will ask the seller are: do you have any type of software that tracks inventory? How often do you order inventory? What are your margins and price mark-ups? Do you keep vendor invoices to substantiate your costs? How much inventory do you need to conduct business? What is the minimum amount of inventory that you need? Is any inventory damaged, old or obsolete? If needed, can you sell off some of your inventory before the sale?”
If a business for sale is manufacturing company, other questions should include: What type of materials do you use? Are they fragile? How long does it take to make your product? How much raw material do you usually carry? At what stage of completion do you have current projects? How much labor and raw materials are involved in those current projects, and how much cost is involved? How much in completed products do you have?
Inventory can be a critical component in a business sale. Questions that a Business Broker asks a business owner will help in reducing confusion on both the seller and buyer’s part, and can help with reducing complications with the business transaction itself.
Another question that is often asked to me is whether the inventory is included, or added to, the sale price of the business. This is another topic that I will address in another blog.