Continuing my exploration of the items needed to prepare and present a business sale file I now come to item 3 on the checklist, an asset inventory.
Buyers will expect a business to come with all assets necessary to continue the business as a going concern. By preparing and presenting a list of fixtures, fittings, equipment and assets early in the sale this can be clarified and quantified. It may also assist both buyer and seller if anything is to be excluded from the sale. e.g. a personal vehicle or computer.
These days one would expect there to be some element of intellectual property (IP) in any sale, at the very least most businesses will have a website and a domain name or names. Then there may be specialist software and licences depending on the business concerned.
In general, with most SME businesses it shouldn't take too long to prepare an asset list. It should be made clear that the assets included in a disposal are subject to contract and it may be necessary to complete a far more detailed list for contract purposes. Things may change anyway with items being replaced, disposed of, updated etc. As our focus is on the marketing and sale it isn't necessary to be too detailed. For example, for a cleaning business you would not be expected to count every mop and bucket but more expensive items like vans, floor cleaners, ladders, vacuum cleaners, window-cleaning pole systems etc. should be included.
It is essential to note where any assets are leased, rented or on finance. A buyer would ask about this in due diligence but knowing this in advance will save time. A shiny new Ford Transit van may look good on an asset list but if the buyer has to take over financing of £300 per month he/she would wish to know.
So, compile a list, and like Santa in the well-known song, check it twice. One client forgot to put his telephone system on his list. It is reasonable to assume it was included in the sale but, of course, telephone systems are often leased and the lease may need to be transferred to the new owner.
November 12th 2014
Keith Green - selling businesses and advising SME business owners since 1997 and still enjoying it.