Stock, Plant, Equipment and Vehicles
The Stock component of any business can in many cases be the deciding factor whether the business sells or not!
The stock must be valued at cost price and be currently saleable. If not a prospective purchaser will not pay for it. It must also be relevant to the size and turnover of the business. If there is way too much stock for the size of the business a prospective buyer will not obtain a reasonable return on investment so may be deterred from purchasing the business. Keep stock to a minimum, keep it turning over and take out unsaleable stock.
Plant and Equipment (including vehicles)
Plant, Equipment and Vehicles must be in reasonable condition, completely function able, well maintained and show their market value. There are usually 3 prices for these items. Firstly on the depreciation schedule there will be original purchase value and secondly, current written down value and thirdly real value which you have to determine. Plant and vehicles are depreciated for tax purposes so in many cases they are actually worth more than is shown on the depreciation schedule. If you are having trouble determining real value you can work out what it might fetch at Auction (15 to 25% of purchase price or get a Plant and Equipment Valuer to do it for you. Do not buy the latest greatest line of Equipment or Vehicle if it is not necessary. As most plant, equipment and vehicles are used to generate the business income they are included in the sale price.
Example: If you require a delivery vehicle or business vehicle get one that is reasonable and will do the job at a reasonable price. If the business is buying it or paying it off it can be a big expense that reduces your Net Profit. Used or less flashy $18,000.00 vs latest 4 X 4 of $54,000.00 saving the business $36,000.00.
Stock, Plant, Equipment and Vehicles must be valued realistically or it could cost you the sale of your business. Part of a purchasers due diligence is working out that these items are worth what you say they are and proving it. Trust is essential in the sale process