How to count inventory the right way
For businesses that sell products, it's important to count the inventory before and after the sale of the business. But the counting process only needs to be as detailed as the buyer requires. We'll share three ways to count, pick which is best for you:
OPTION 1 - THE QUICK COUNT
Some buyers are fast decision makers. They walk into a business, scan the room with their eyes and exclaim, "I'll take it!" This buyer should consider a "quick count". Take detailed pictures of the inventory, and write up the closing documents referencing the pictures. This option can work well for high-trust fast-paced sales. But take caution. Buyers and sellers take on a higher risk than the other options. A seller could sneak out a significant amount of inventory, or simply not replenish it as it gets sold. Or after the sale, a buyer may claim there is missing inventory, when the inventory has simply turned from customer sales.
OPTION 2 - THE ESTIMATED COUNT
This option is more common than the first. The seller, buyer, and broker will meet onsite after hours and count the inventory together. They will number the shelves, take pictures, and then estimate the contents. The inventory note would read "Display rack #5, contains 54 types of candy, approximately 350 individual units". While together, all three parties agree to the numbers described.
In some cases you may even estimate a value for the line item. The value of inventory is based on the wholesale cost to purchase it (not the retail price), and the chance of it getting sold. Unsalable inventory isn't worth much.
OPTION 3 - THE DETAILED COUNT
Sometimes a buyer wants to document every item, one by one. The buyer and seller will generally pay for an impartial third-party company to do the count, documenting the items in detail, such as "Shelf #32, 11 king-size snickers bars". If after the count, the deal falls through, the seller should be able to recoup her cost from the earnest deposit held in escrow. (Contact us for more info on Inventory Count Best Practices)