The purchase of a business is always complex, and one area that can cause issues for a potential buyer and the business seller is the evaluation of the business. This critical part of the business transaction can mean the difference between paying too much or buying a business that is in trouble without realizing it.
For instance, a good deal of the evaluation of the business might be held in inventory. In some sectors, the value placed on the inventory is above the purchase price of the business.
As a potential business buyer, you should understand what is included in the inventory and also what method you will use to do a evaluation. Do the inventory evaluation at the close of the sale, and this value should remain very close to the estimated inventory you and the buyer agreed upon at the start.
Also, be sure to do a physical count instead of depending solely on the value reported by the inventory software the business currently uses.
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