Why You Should Manage Your Inventory Before You Sell Your Business

One of the key things that a buyer will look for when you are trying to sell your business is a well-managed inventory –it shows the true state of the business in a way that few other metrics can do. Here are just some of the reasons why you should make sure that you are managing your inventory when you sell your business:

Records

With effective inventory management, you can quickly and clearly give an accurate view of the products that are coming into the business, and subsequently, leave it (presumably through sales). This can give the buyer a detailed view of the top-selling products, where the most profit comes from, any seasonal effects on supply or demand, and overall give a sense of what the day-to-day throughput is.

Finances

When it comes to your financial reporting, inventory is a key figure in the cost of goods sold calculation. Without going too far into accounting and different financial models, essentially the wrong figures for inventory can provide the wrong figures for turnover and ultimately for profits –both of which are crucial during the due diligence phase of the mergers and acquisitions activity

Costs

Showing that you have a microscopic control of your stock can also demonstrate to the buyer that things are in good shape –you are controlling your costs, you have a good supply system in place, and you are minimizing any waste that might occur through stocking items that have a limited shelf life.

Planning

Good inventory control also allows for better business planning and forecasting –allowing you to boost your valuation by clearly showing the likely future sales over any given period and the potential areas for growth. Better business valuation = more money for you when you sell, so make sure you have the data to prove what you say regarding the future of the company.

Value

To put it bluntly, your inventory is worth money. $5k of stock that you forgot about is $5k more than you could have made when you sold the business and $5k of value that the buyer got without knowing it. That’s extreme obviously –you are unlikely to forget about a significant amount of stock, but it is not extreme to think that you may have misvalue some stock. A box you thought contained one thing actually contains another, for example. Strict, accurate inventory management reduces the chances of this happening.

Pinnacle Pharmacy Group

At Pinnacle, we have been working on mergers and acquisitions in the pharmacy business and digital health sector for many years. We know from experience that our clients benefit from this focus –we have in-depth knowledge of the marketplace, we know the regulations that govern the sale of your business and we can help you to manage each step of the process.