Funding Transitional Salaries for Sellers

Funding the salaries of sellers during a transition period can significantly impact the cash flow of a business acquisition. In situations where both the buyer and seller are required to draw salaries, like in the case presented, careful financial planning is essential. Buyers need to consider their cash structure, often contemplating whether to absorb a hit to EBITDA in the first year, take a loan from the bank, or negotiate terms with the seller for financing options. Balancing the investment and the necessary working capital becomes crucial to ensure that both parties can be compensated adequately during the transition phase.