Most business sale will have to deal with the stock of goods and materials in one way or another.
As such, stock valuations are generally part of most business sales.
But what to expect when it comes to attaching a value to the stock you're selling along as part of your business sale?
That's where we come in.
In this guide, we'll give advice regarding the value of your stock and what to do if your new buyer doesn't want to buy it.
Agreeing on Stock Value
Typically, stock value is agreed between the seller and the buyer of the business as they progress through the negotiations of a business sale.
If there are any disputes in this process, or you would like to ensure that you are placing an accurate valuation on your stock, you can utilise an independent stock valuation firm.
But rest assured:
In most circumstances, both the buyer and seller are mutually motivated to progress the sale, which means this process is relatively straightforward.
Additionally, the party you're selling your business through will be on hand to help any stock negotiation and ensure the progress of your sale.
In terms of the actual valuation method:
This is normally calculated by analysing the current stock.
This will bring you to what is known as a ‘live stock’ value.
This brings you to the cost price of your stock with a consideration of its current saleability.
This protects your buyer from paying for stock that is not longer saleable.
This is a pretty important little safeguard. Take this example:
A clothes retailer still has stock of last season’s fashion when a new buyer comes in.
Since it will be very difficult to sell off out-of-date or redundant stock, it will get calculated at a reduced value when compared to brand-new products or goods that are always relevant..
On the other hand:
This means it's important for sellers to consider when they're selling their business on if the nature of the business is reliant on external factors such as time of year.
At Intelligent, our business agents helping you with the sale of your business are more than capable of providing assistance and advice regarding this aspect of your sale.
What happens if the buyer doesn't want the stock?
If your buyer is looking to acquire your business and make significant immediate changes, such as a refit or to change the nature of the business, then stock is not likely to be part of your sale.
In these circumstances you will likely run down the stock until the transfer of your business, with any stock remaining sold independently or to an overstocked business firm.
Stock At Valuation (SAV)
On our website the majority of businesses are listed with the +SAV acronym – representing Stock at Valuation.
In essence this means that the value of your business is separated from your stock value.
Other related guides
We hope that some of the questions you had about stock valuations have been answered in this guide.
We are always available for more questions you might have. Please contact us and we'll see what we can do for you.
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At Intelligent, all our experts use a specific formula that will give you a free and highly accurate baseline valuation so that you've got a figure to work with that most realistically resembles the value of your business.