We have accumulated a significant amount of slow-moving inventory over the last decade that still sits on our balance sheet at cost. How do we address this inventory bloat on our exit runway before a buyer forces a fire-sale write-down?

Question

Tyler Smith · Accepted Answer

A balance sheet bloated with obsolete or slow-moving inventory is an easy target for prospective buyers. During due diligence, buyers will audit your inventory and force write-downs, which can lead to a dollar-for-dollar reduction in your final purchase price.

Do not wait for a buyer to find this during their quality of earnings review. You must proactively audit and clean your inventory on your exit runway. Start by categorizing your inventory into active, slow-moving, and obsolete.

For obsolete inventory, take the hit now. Write it off and physically remove it from your facility. For slow-moving inventory, run promotions, bundle it, or sell it off to liquidators to convert it back into cash.

Next, establish clear inventory management processes. Document how inventory is received, tracked, and valued. Use your weekly scorecard to monitor inventory turns and aging metrics.

This operational discipline proves to a buyer that your working capital is managed efficiently. A clean, accurate balance sheet shows that your reported assets are real and that your cash is not trapped in dead stock.