What is SAV (Stock at Value) and WIWO (Walk in Walk Out)?
You may have come across a business listed for sale and noticed the terms SAV (Stock at Value) and WIWO (Walk In Walk Out). What exactly do they mean?
When a business is sold as a going concern (ie the business will continue to trade as per usual when the new owner takes over) a line must be drawn in the sand at a particular point in time when the old owner ceases trading and the new owner begins.
The line in the sand is quite easy when it comes to income, rent and wages - but what about stock?
Let's sat you purchase all of your stock for the week on a Friday. Your stock includes things like coffee, meat, fruit & vegetables, beverages and packaging. You spend $3,000 and you expect this stock to last you until the following Friday when you will replenish stock with another round of orders.
If a new owner takes over the business on a Monday they will have $3,000 worth of stock less the stock that was used over the weekend. How do you value this when it comes down to the sale price?
There are two main options to consider:
1. SAV (Stock at Value) At a particular point in time (in this case, Sunday evening) a stocktake must be taken and a dollar value placed on the remaining stock. The new owner will pay a purchase price for the business plus they will add on another amount for Stock at Value.
2. WIWO (Walk In Walk Out) As most hospitality venues do not hold vast amounts of stock (because stock is mostly perishable items), some owners opt to not worry about a stocktake. When the new owner takes over, the stock on hand simply becomes part of the original purchase price of the business.
In situations where perishable food makes up the majority of stock (Eg a Cafe) WIWO is normally the easiest method. However if your business holds a lot of stock (Eg a Bar with hundreds of bottles of alcohol) SAV might be the better option for your business.