In Exit Strategies, Valuations

Brad Kirkpatrick

In the lower middle market, most buyers want some gas left in the tank.

They’re looking for a normal level of working capital, which would typically include inventory and receivables, minus accounts payable, averaged over 12 months.

Problems occur when business owners get lax on working capital. They pay bills immediately while letting customers delay payment.

When they sell, what could have been working capital of $500,000 has ballooned into $900,000. When it comes time to sell, you’ll have to fight for that difference.

Not ready to sell? Talk to us now about planning ahead and enhancing your value in a future sale.

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