Selling Your Business

When it comes time to sell your business, you will need to come to the negotiating table armed with facts and support to back up your position on your company's valuation. Focus your energies on the following areas when considering an appropriate working capital target:

• What is normal for the industry?
• What is working capital as a percentage of sales?
• What special terms cause the company’s working capital to vary from normal levels?
• How significantly does inventory vary on a month-to-month basis?

Also be wary of the following common due diligence working capital findings that could indicate a requirement for higher working capital:

• Lack of sufficient receivable or inventory reserves
• Cut-off issues on an interim basis
• Individual accounts that should be excluded, such as accrued interest
• Missing accruals such as vacations, payroll, bonuses, warranty, sales allowances, etc.

The information provided herein is not intended as legal, accounting, financial or any type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.