How to run the inventory count at a manufacturing close

The method lives on working-capital peg and true-up. Pricing theory lives on inventory in valuation. Buyer sampling lives on analyzing inventory and WIP. This page is the floor procedure both sides should attach as an exhibit.

What has to be true the week before anyone walks an aisle?

The peg exhibit already exists. Ownership lists for customer tools and consigned inbound already exist. The QA hold list is current. The receiving and shipping docks know the cutoff hour. Travelers on open jobs are caught up, not rewritten the night before. The seller QoE companion already disclosed the inventory method so nobody "improves" FIFO during exclusivity.

If those sentences are false, you are not counting. You are negotiating with clipboards. Selling with excess inventory should have happened months earlier as a pricing conversation, not as a surprise bay of dead inserts the morning of close.

BizBuySell's 2025 year-in-review put manufacturing at a 223-day median close (Source: BizBuySell). That is a planning number, not a promise. Use part of it for a sample count during diligence so the close physical is a confirmation, not a first look.

ISM Prices 71.1 in August 2026 (Source: ISM) is why aged raw needs an age column, not just a weight. Fed utilization 76.0% (Source: Fed G.17) does not value a skid.

How should WIP be counted without turning percent-complete into folklore?

WIP is the manufacturing failure mode. Count by job. Read the traveler. Walk the parts. Agree a percent that a successor can finish. Value at cost incurred under the peg rule, not at the acknowledgment's margin. If the job is waiting on a customer-supplied insert that is three weeks late, say so on the tag. If the job is scrap that nobody wrote off, tag it as scrap.

Plant leads who will stay should not be asked to protect a seller bonus with optimistic percentages. Buyers should not be allowed to haircut every job because they are tired. The exhibit can say a third-party counter breaks ties on a sample of jobs. That is cheaper than a winter argument.

Quality of earnings explained may have already restated WIP policy. The physical still has to match the parts on the bench. A QoE paragraph is not a substitute for walking the cell.

How do cutoff, shipments, and "get it out the door" games show up?

A Friday shipping blitz to empty finished goods, or a Monday receiving freeze to starve raw, will show up if the cutoff memo is written. Write the hour. Write how in-transit receipts are treated. Write whether jobs issued from the cage after 2 p.m. are raw or WIP. Then follow it.

Sellers sometimes try to "help" the peg by finishing everything. Buyers sometimes try to "help" by delaying receipts. Both moves are visible. The true-up is supposed to measure a normal operating level under the method you froze — not a staged empty cage or a stuffed one.

Closing on a manufacturing business is the buyer checklist. Selling the company is the seller pillar. Neither replaces tagged lots.

What holdback should exist if someone refuses a real physical?

If the seller will not allow a close count, the buyer should walk or hold back enough cash that a miss is not their problem. If the buyer will not send a competent counter, the seller should not accept a later "we think it was light" letter. Competence means someone who can read a traveler, not a tourist with a phone.

Main Street manufacturing median SDE about $268k at 2.75x (Source: BizBuySell / Iconic) makes a $60,000 WIP miss expensive. An ebitda-1-3m precision shop talking a synthesized 5.0x–6.5x EBITDA band still feels a miscounted bay as cash. SBA 7(a) remains $5 million with a 10% injection (Source: SBA). The loan funds a project. It does not reprint a bay that was empty.

Stanford's $16 million / ~6.2x / ~25% margin median (Source: Stanford GSB) describes search-fund files that often have tighter controls. It is never a job-shop multiple and never a reason to skip tags on a 14-person cell.

How should the signed package feed the true-up and Form 8594?

The package is tag sheets, a kicked-item list, a WIP percent log, a cutoff certificate, and a calculator that applies the peg definition. That package goes to the accountants who compute delivered NWC. Inventory usually lands in Class IV on Form 8594. The dollar on that line should not contradict the physical you just signed.

Do not rebuild the count in a new spreadsheet the plant has never seen. Export from the system you used all year, then reconcile tags to that export. Renaming items mid-count looks like concealment even when it is housekeeping.

Illustrative only: 412 raw lots tagged, 19 kicked for age, 7 customer-owned fixtures excluded, 33 WIP jobs initialed, 4 jobs sent to scrap, finished holds listed and excluded. Delivered eligible inventory $511,000 versus a peg inventory component of $548,000. True-up math follows the peg page. Nobody "splits the difference" in the break room.

Educational information only. Jason Taken is a business broker. Counters, CPAs, and counsel own the sheets and the cash. No count guarantees a multiple or a close date. BizBuySell's 223-day median (Source: BizBuySell) remains a planning number, not a promise that your physical will fall on a convenient Friday.

How should a mid-diligence sample count change the close procedure?

Do not wait for the wire week to learn the cage. During exclusivity, sample twenty raw lots, a dozen open jobs, and the finished-goods holds. Age them. Ask who owns the tooling on those jobs. If the sample is ugly, rewrite E&O and WIP language before anyone prints tags. Analyzing inventory and WIP is the buyer sampling essay. This page is the close ritual that follows a honest sample.

A seller who already knows the cage is fat should have used selling with excess inventory as a pre-market cleanup, not as a hope that the buyer will "take it at book." Book is not eligibility.

IBBA's 83% three-offer statistic on >$5 million files (Source: IBBA) tempts some sellers to refuse a sample because "someone else will close." That is how you pick the buyer who did not walk the cage and then fight them for six weeks. Competing offers are a process fact, not a substitute for tags.

If the plant runs a second or third shift, count during a production window or you will photograph a staged empty floor. Night-shift WIP is still WIP. A Sunday-only count hides utilization the same way a Sunday tour hides a bay.

Census CBP 2023's 284,452 establishments and 68.4% under 20 employees (Source: Census CBP) means most files will not have a professional inventory team. Hire a third-party counter if neither side can read a traveler. That fee is cheaper than a true-up war.

What should a plastics, food, or electronics count add that a dry CNC cell can skip?

A dry CNC cell can often live with lot, alloy, and traveler. An injection-molding floor adds resin lots, colorant, regrind policy, and customer-owned molds. Regrind that the book still calls virgin is a kick, not a debate. Molds are tooling, not inventory, unless the exhibit says the seller owns them and they are being sold as assets.

A food or co-pack plant adds expiration, allergen holds, and slotting. Short-dated finished goods that cannot ship under the customer's spec are not eligible just because they are boxed. USDA or FDA registration questions belong to regulatory counsel; the count still has to tag holds.

An electronics or SMT file adds date codes, moisture-sensitive reels, and last-time-buy parts that are already obsolete in the market. ISM Prices at 71.1 (Source: ISM) does not save a reel that the OEM last bought in 2019. Kick it.

None of those extra columns change the rule: the peg names the class, the physical photographs it, the true-up pays. Quality of earnings may have already told you the method is messy. Messy method plus a sloppy count is how exclusives die.

ERP on-hand quantities that do not match tags are a finding, not a reason to trust the ERP. Reconcile. If the system is a junk drawer, the count is the system for one night. Do not "adjust the book to the CIM" after the tags are signed.

Illustrative only — not a listing. A 16-person molding shop: 2,400 pounds of customer-owned resin excluded, 11 molds tagged as tooling not inventory, 6 skids of short-dated finished goods kicked, WIP at cost on 14 tools. Delivered eligible inventory $188,000 versus a $241,000 inventory component. The $53,000 is a calculator. On an sde-under-1m commodity plastics file inside the BizBuySell manufacturing interquartile around 2.75x (Source: BizBuySell / Iconic), that miss is visible money. SBA 7(a) at $5 million (Source: SBA) does not reprint it.