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The Importance of Inventory Valuation When You Buy or Sell Dealerships

Inventory Valuation for Buy and Sell DealershipsWhen buying or selling a dealership, you want to be sure the transaction results in the best possible outcome. An important part of achieving this objective is ensuring that the associated inventories, specifically the auto parts inventory, have been appropriately analyzed and valued.

As part of the transactional process, the parts inventory is usually reviewed. The problem is that the calculations are often done only a few days before selling and does not allow for proper investigation.

People often assume that the auto parts inventory refers only to the dealerships spare physical parts, used to service customer’s vehicles. That, however, is not the case.

Many parts will be on the books that do not necessarily carry value. This includes: damaged parts, parts being used for work that is currently in progress, parts that need to be returned, obsolete parts, shortage claims, pending credits and the core value on parts that have deposit values.

These parts will affect the saleable value of the inventory. For example, you could have $150,000 of inventory on the books, but of that, only $120,000 will be saleable, due to the above items.

The key is ensuring that the inventory on hand is current, saleable, and will transfer to the incoming dealer per the asset purchase agreement.  If you are thinking of selling the dealership, make sure you bring us in prior to negotiations, so that we can help make sure nothing is lost in the transfer of ownership.

As such, the more time that you have to do an inventory review, the more accurate your numbers will be, allowing you to negotiate a better deal, no matter which side of the transaction you are on.

If you are buying, you want to be sure you aren’t paying for parts that don’t hold their value.

If you are selling, knowing exactly how much your inventory is valued at will allow you to get a price closer to the actual amount. It will also give you an opportunity to dispose of the unsaleable inventory in advance, using various options such as manufacturer Return Inventory Management programs.

At Pro Count West, we are highly equipped with the knowledge and experience needed to ensure that you optimize your inventory value in a buy/sell agreement. We will help you identify saleable and non-saleable inventory as well as find other opportunities to redeem some of the value on non-saleable, where possible.

To find out more about our Buy/Sell Inventory programs, contact us today!

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