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:
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
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.
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.