What should I know about the parts inventory at an elevator service business?

Start with a physical count. Ask to walk the shop and any storage spaces or vans, and compare what you see with the inventory listing in the books. If the two disagree, ask your accountant how the difference is explained.

Then ask what each group of parts is for. Some stock is tied to specific buildings or older equipment whose manufacturers no longer supply parts, and it can be hard to replace. That stock may be valuable to the business precisely because customers rely on it, or it may be leftovers from a job that ended long ago. The seller should be able to tell which is which.

Look at movement. Parts used every month are a sign of healthy demand, while pieces that have sat for a long time may be obsolete. Ask about returns, warranty claims and any parts held on consignment for a customer or supplier that are not really the company’s. Finally, ask how inventory is financed. If a lender or supplier has a claim on the stock, that affects what you receive. Your lawyer can check for security interests, and your accountant can tell you how obsolete stock is treated in the books.

Key takeaways

• Compare a physical walk-through with the inventory listing in the books.
• Ask which parts are tied to specific buildings and which sit unused.
• Confirm no lender or supplier has a claim on the stock.