In a typical Asset Sale, the purchase price usually includes “usable, salable inventory.”
The keywords there are Usable and Salable.
The Closing Table Surprise
A few days before closing, we conduct a physical inventory count. The buyer and seller walk the warehouse together.
This is where the fight starts.
- Seller: “These widgets cost me $50,000. They are perfectly good.”
- Buyer: “You haven’t sold one in 18 months. They are obsolete. I’m not paying for them.”
If the buyer wins (and they usually do on obsolete items), that is $50,000 of value that simply evaporates from your balance sheet.
The “Cash Conversion” Strategy
If you have inventory that is slow-moving or obsolete, you need to liquidate it before we go to market.
Why?
- Scenario A (Keep it): You keep the $50k of old stock. The buyer values it at $0. You get $0.
- Scenario B (Sell it): You run a fire sale and sell that stock for 50 cents on the dollar. You generate $25,000 in cash. You get to keep the cash.
(Note: In most deals, the seller keeps the cash in the bank at closing. So, converting a “zero value” asset into “any cash” is a net win).
Action Plan
- Run an Aging Report: Identify anything that hasn’t moved in 12 months.
- Discount Heavily: Offer it to your best customers at a steep discount or sell it to a liquidator.
- Scrap It: If it won’t sell, donate it or scrap it. It clears up space and makes your warehouse look organized (see Month 20: Curb Appeal).
Don’t ask a buyer to pay for your hoarding. Convert it to cash today.