What Is SAV?
Have you been looking at business listings on the Internet and wondered what SAV meant?
It stands for Stock At Value, and it’s the value of the stock in a business at cost price. If you see a business listing saying “$price + SAV”, then you know the price of the business excludes stock.
It’s generally used for cafes, restaurants and retail businesses, where the business requires stock on hand to trade with. It’s not easy to estimate how much stock a business will have, but you can safely assume it shouldn’t be too much for a food business. With retail businesses, it’ll generally be alot.
But some of you may be asking, why do I need a separate figure for stock? Can’t we just lump it all together when buying a business?
Good question! Let me explain.
When a buyer goes out to buy a business, it’s not just a matter of writing a cheque out to the seller, and the seller handing you the keys and walking away forever. There is generally a lengthy process for the buyer to do their due diligence, finance and training before the business is handed over (i.e. settled).
During this time, the business would’ve bought and sold stock, which will vary the amount of stock to trade with. So on the day before settlement, the buyer and seller will get together to do a stocktake. Whatever the final amount they agree on should be close to the SAV, and is paid by the buyer on settlement.
Note: There is another common variation to this arrangement called WIWO.
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