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Buying A Liquor Store - When Do I Perform The Inventory Count?

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Comments & Replies: 7     Views: 10534     Posted By: Peter Siegel MBA  



Topics: Buying A Business, Escrow Closing Issues     Tags: buying a business, escrow bulk sales, inventory



The only time to get an exact and accurate inventory count, and valuation, is at the time the business is being transferred.

To do so beforehand, would mean that any merchandise sold after inventory is taken, but before close of escrow - assuming the store remains open and some merchandise is sold before the deal is finalized - would enable the seller to collect the proceeds from any merchandise sales as well as receiving the wholesale value of that merchandise, even though it no longer is part of inventory and cannot be transferred to the buyer.

As an example, if a bottle of scotch whiskey is counted during inventory, and included in that count when inventory value is made part of the escrow, but actually was sold while the escrow was being conducted, the buyer will have paid for it, but won’t have it on the shelf to sell when he or she assumes ownership.

Typically, the store is closed for the inventory count to avoid this problem. Alternatively, the store can remain open while escrow is conducted, with the store clerks making careful note regarding the sale of each item, so the inventory count can be adjusted to allow for what was sold.

Contributor: Business Appraisals, Valuations Advisor

After business hours or on slow days. I know that is hard to do with your business but those are the best times.


From the past transactions, we usually see the buyer and seller perform inventory count within 48 hours from close of escrow or at least a day before the close of escrow. In the opening escrow, buyer and seller usually agree on a rough estimate of the inventory amount and once parties complete the inventory count, then the escrow holder is notified of the exact figures so it can be incorporated into the escrow closing documents.

Contributor: Business Broker, SF Bay Area

Usually I recommend doing the Inventory the night before Close of Escrow. Then next morning you can take the Inventory information to Escrow to have them update the final price based on the actual inventory. There are Inventory services who will do the Inventory lot faster than you would do it on your own. If the Seller keeps the cost information handy that speeds up the process. Otherwise you can use the retail value divided by the normal markup for that kind of an item to arrive at the cost. If there will be a gap between when the Inventory is done and the date for close of escrow, then have Seller keep track of the sales during the interim period and then reduce the Inventory count by what Seller sold during that period. Usually Seller can arrange not to purchase any new inventory during those few days.


Usually the inventory is done the night before closing – buyer/seller can do inventory together OR there are companies out there that will do it for you.


I would assume you did a cursory inventory assessment prior to entering into any contract to purchase as a start. We always try to do a final inventory the night (ideally after hours) or day before closing and then all proceeds (upward or downward) are adjusted by escrow. This way "you get what you pay for" and there's no shenanigans.


The only time it really makes sense is the weekend before the close of escrow. Then have escrow scheduled to close Monday morning with the buyer taking over Monday morning. Any other time frame creates the possibility of inventory being sold between count and escrow closing. The professional inventory services are set up to do the inventory very quickly so that it does not take a week. The buyer should take pictures of the inventory while it is being taken so that when he takes over Monday morning he can compare the inventory on that date with the pictures. It would not be honest to have inventory disappear Sunday night. When the keys are being turned over Monday morning. If the keys could be turned over at the end of inventory that would be ideal. Escrow then closes the next morning. Even if it does not close the next morning, the buyer and seller treat everything as if it had.


  Helpful Resources To Assist In Selling And Buying California Businesses

Taj Randhawa, Business Broker Specialist - Gas Stations, Liquor Stores

If you are interested buying or selling a gas station, liquor store feel free to phone me for a consultation. My vast experience & specialization in gas stations & liquor stores helps me in serving my clients with full confidence, trust & sincerity. Serving Central Valley, SF Bay Area. 559-259-4247.

Jaime Ortega: Cannabis Industry Consulting & Due Diligence

We offer Cannabis Industry Consulting & Due Diligence Services to business buyers, owners, sellers, entrepreneurs throughout CA. We offer assistance with: licensing issues, cultivation facilities, products/ services, dispensaries, corporate strategy, & project management. Call 866-591-7802 for info.

Janet Carrera - Escrow & Bulk Sale Services - SF Bay Area

Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.

Chris Seaman, Business Broker - San Diego County Area

Founded in 1994, First Choice Business Brokers has accelerated to become one of the most successful Business Sales Organizations in the world. Our team of agents have gone through extensive training to become experts in the field of business brokerage. Call Chris at 858-578-4111 for more info.

Matt Sadati, Business Broker, SF Bay Area, Northern CA

I have Engineering and Law, JD degree, with over 30 years of experience in all phases of entrepreneurship. During the past 15 years my concentration has been in business of mergers and consulting. I have owned and operated over 33 businesses each having one to 30 branches.

Willard Michlin, CPA, Certified Fraud Examiner, Due Diligence Services

Willard Michlin, CPA #106752, offers buyers step by step training & assistance in doing Due Diligence Services when they are thinking of making an offer, or are in process of investigating a business purchase. He helps to determine the actual net profit even when there is cash. Call 800-864-0420.

Bob Hughes: Business Broker, Palm Springs Area

Bob Hughes is a business broker & is President of Hughes Properties. Hughes has a wide variety of entrepreneurial experience with the personal ownership & sale of numerous businesses, and has sold over 200 small & mid-sized businesses in the Riverside County marketplace. Call Bob at 760-323-8311.

Bob Baumgarten, Business Broker: Orange, LA Counties

National Business Brokerage is a full service brokerage company that has been serving buyers and sellers of Southern California businesses since 1994. We are dedicated to providing the highest standards of professional service for our clients. Phone Bob direct at 949-588-8727.


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