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Discussions > Buying A Liquor Store - When Do I Perform The Inventory Count?
Buying A Liquor Store - When Do I Perform The Inventory Count?
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Posted By: Peter Siegel MBA 
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 - Peter Siegel, MBA with BizBen & others discuss this topic.
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 - Peter Siegel, MBA with BizBen & others discuss this topic.
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.
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.
Contributor: Janet Carrera - Escrow Services - SF Bay Area
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.
Contributor: Rick Carlson, Business Broker - Southern CA
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.
Contributor: Willard Michlin, CPA, Due Diligence Services
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.
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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. |
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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 805-428-2063. |
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Ryan Clark, Business Broker, Southern California The Veld Group provides a refreshing approach to Business Brokerage, Mergers & Acquisitions and Business Consulting and Valuations. From Your Street to Wall Street, we cater to Main Street Businesses as well as more complex Strategic Firms and Start-Ups. Phone Ryan at 310-652-8353. |
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Rob Hartman: Business Broker, SF Bay Area Business brokerage services in the SF Bay Area. I bring skill, integrity and energy to all of my clients and our projects. I'm accustomed to working with a wide variety of clients and their businesses; large or small, simple or highly complex. Get a free consultation by phoning 650-279-3097. |
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Manjit Singh: SF Bay Area - Business Intermediary Assistance in the San Francisco Bay Area. Contact me about buying or selling a restaurant, liquor store, gas stations, markets, and c-store businesses. If you are looking to buy or sell a SF Bay Area liquor store, market, c-store, restaurant, etc phone me direct at 510-417-9429. |
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George Lanza, Business Broker, At Plethora Business Sales Plethora Businesses, a division of A Premier In Services, Inc., is a Business Intermediary Consulting Firm headquartered in Orange, California. Plethora specializes in the listing and sale of small and medium sized private businesses. |
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Mike Brewer: Liquor License Brokers, ABC Consulting Services Liquor license brokerage and consulting services. We provide: Alcohol License Transfers Application Consulting & Processing, Liquor License Purchases & Sales, City Zoning Permits & Land Use Entitlements, Public Convenience or Necessity Findings and Letters. Phone Mike Brewer direct at 800-437-1100. |
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