David C Barnett Small Business and Deal Making M&A SMB

Working Capital Adjustments on Closing

Jun 11, 2025
Discover how working capital adjustments can complicate small business sales. Uncover the frustrations buyers face when realizing they need more operating capital. Learn the importance of normalizing balance sheets for accurate negotiations and valuations. Explore proactive preparation tips for sellers to enhance their business’s marketability. Finally, gain insights into tracking financial metrics and the significance of networking capital for potential buyers.
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ANECDOTE

Seller's Working Capital Question

  • Justin asked about net working capital calculations from the seller's perspective in asset sales.
  • He noted this issue is common but not well covered in small business transactions.
INSIGHT

Asset vs Share Sale Differences

  • Small businesses are usually sold via asset sales to avoid transferring liabilities like personal loans.
  • Larger businesses often sell as share sales due to complexity and ongoing contracts.
INSIGHT

Seller Retains Cash, Buyer Gets Inventory

  • Sellers typically retain cash and accounts receivable as their own money in asset sales.
  • Inventory and some assets often transfer to the buyer to keep the business running.
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