|
Maximizing The Sale of Your Business
Controlling
Your Stock
Stock can be
the killer. Sell out dead stock at any price because the purchaser
will not want it and it will only impede the sale.
Stock-Turn
Find out
what the “stock-turn” should be for your industry. That is, find out
how much stock you should have on your shelves as a percentage of
annual turnover. This is your stock-turn, and it is another
financial ratio that buyers and their accountants often focus on, as
an example, you might have $300,000 in stock, with a turnover of
$600,000. This is a stock-turn of 2, or twice a year. Compare this
figure with comparables in the industry. Is it too high or too low?
If it is lower than average, you are not turning your stock over
quickly enough. It could be a sign of dead stock or inefficient
buying habits.
If it is
higher than average, it is a good sign.
Look to see
what stock is turning over. Ensure that there is no stock hidden
somewhere that is not turning over.
Controlling
Your Stock Level Should Increase Your Nett Sale Price
Let’s
illustrate. Say your business is worth $600,000 including stock,
based on the future maintainable earnings method of business
valuation, where the total business entity is given a value as a
multiple of earnings. If stock is $200,000 of that figure and other
assets $200,000, then the goodwill is $200,000. If the business has
been overstocked and stock can be reduced to say $100,000, apart
from putting that extra income in your pocket you are actually
increasing the value of the business by $100,000 as the business is
still work $600,000 but the goodwill is now worth $300,000. See the
illustration below:
|
Business A |
|
Business B |
|
|
Stock Value |
$200,000 |
Stock Value |
$100,000 |
|
Other Assets |
$200,000 |
Other Assets |
$200,000 |
|
Goodwill Value |
$200,000 |
Goodwill Value |
$300,000 |
|
Total Value |
$600,000 |
Total Value |
$600,000 |
Call us at 09 630 1600, toll free on
0800 180 222, visit our website
www.abcbusiness.co.nz or email Managing Director Steve Smith
(AREINZ) on
steves@abcbusiness.co.nz |
