You’re looking at buying a vintage car. It’s in excellent condition, and when you take it for a test drive it purrs like a kitten. But the day you pick it up, the car won’t run at all. What happened? Whoops, gas not included.

Your working capital is like the gas in this vintage car. Will the person who buys your business get your cash reserves? What about accounts receivables, accounts receivable and inventory?

The car buyer is expecting a vehicle that runs—not an extra surcharge for gas. Same goes for some business buyers who want a smooth transition and business as normal after the sale.

Think about what to include when selling your business and examine purchase offers carefully for stipulations. Plan a “sell my business” session to sit down and look at some of these inclusions.

Some sellers expect to walk away with the accounts receivables. They figure, “I did the work for these sales. Those payments belong to me.”

That’s fine. There’s no right or wrong—it’s what you negotiate with your buyer.

Most times when people think about selling their business, the first thing someone will ask is, “How much is it worth?” The next question ought to be, “What’s included in that value?”

For instance, a buyer might offer to pay $10 million for your business, including the cash, inventory and receivables. If you have several million in those assets, your net take home will obviously be much less.

Set yourself up for successful negotiations. Before putting the business on the market, work with a CPA and figure out the normal/optimal working capital for your company. Remove any extra cash, diligently collect your accounts receivable without starving the business. You don’t want to leave excess assets on the table, but you also want your buyer to be a success.

Consider which physical assets will be included as well. If you want to take any personal effects (vehicle, computer, memorabilia) clearly state that when your M&A advisor is putting together their marketing materials, or take them off the books before you go to market.

Understand the value potential of patents and other intellectual property. Will you include those in the sale? If the idea is unproven and the buyer isn’t willing to pay for it, you might set up a royalty agreement.

Equipment leases will also affect the sale price. A buyer can assume those leases, or the seller can pay them off and sell the equipment free and clear. We’re in negotiations for a sale right now, and how we handle the leases will have a $400,000 impact on purchase price.

Understand the value of all your assets, so there are no surprises at closing and you don’t leave money on the table. And remember, you don’t get what you deserve—only what you negotiate.

Scott Bushkie is President of Cornerstone Business Services, a low-to-middle-market M&A firm. Reach him at 888-608-9138 or [email protected]

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A thought-leader in the industry, Scott developed the Cornerstone Process to offer investment banking M&A-level services to the lower middle market. The result is a closing ratio that’s more than double the national average.