When most founders think about selling their business, they imagine a big number on a term sheet. But the real number that ends up in your bank account? That’s a different story—and working capital is one of the biggest reasons for the gap.

If you’re not thinking about how working capital affects your transaction early on, you’re risking a surprise that could cost you hundreds of thousands of dollars. I’ve seen it happen. In fact, I’ve lived it—and I’ve helped other founders avoid it.

Here’s what you need to know before it’s too late.

Working Capital Impacts What You Actually Take Home

Working capital isn’t just a finance term. It’s the difference between the check you think you’re getting and the one you actually cash.

“Today we're talking about something that a lot of entrepreneurs do not contemplate when they're moving towards a transaction—working capital and the impact of working capital adjustments.”

Working capital is calculated as current assets minus current liabilities, and buyers expect a certain “normal” level to be left in the business at closing. If your business doesn’t meet that level, the difference comes out of the purchase price.

Here’s an example I shared in the episode:

“A $10 million company needed $650,000 of working capital, but they only had $450,000 in the bank, which resulted in $200,000 of the transaction price being left in the company.”

That means the seller didn’t walk away with $10 million. They walked away with $9.8 million—and maybe didn’t see it coming.

Why This Happens More Than It Should

Too many founders focus on revenue or EBITDA and forget the cash mechanics of the business. But working capital is a buyer’s lens into your company’s real financial rhythm. And if that rhythm is off, it costs you.

Here’s where things usually break down:

• Accounts receivable that are aged out and unlikely to collect, but still show up on your books

• Accounts payable that are underreported or inaccurately reflected

• Inventory bloat or irregular purchases that skew your normal operating capital

“That’s basically cash sitting there waiting to come into the business, but you haven’t executed your collection process, thus driving working capital impacts in a negative way.”

This isn’t just about finance. It’s about how well your processes work—billing, collections, payables, and operations. Clean processes = clean working capital = clean exit.

How to Protect Yourself (And Your Exit Value)

Start early. Working capital isn’t something you adjust at the closing table—it’s something you build into your business 12 to 24 months before you sell.

Here’s how to start:

1. Establish a clear working capital target.
   Know the level buyers will expect and track toward it consistently.

2. Clean up your balance sheet.
   Get rid of old receivables, settle open payables, and align your books with your actual business reality.

3. Fix your processes.
   If you’re not collecting cash fast enough or dragging out payables, those habits will cost you when the math gets real.

4. Model your exit waterfall.
   Run the numbers as if you were closing tomorrow. What gets paid, what gets held, what goes to you?

“It’s important to normalize the balance sheet and really focus on the execution of the individual processes that are going to help you drive working capital.”

What Clean Working Capital Really Gets You

The reward for all this work? Confidence and leverage.

If your books are clean and your working capital is predictable, you don’t just avoid losing money—you gain negotiating power.

• Buyers trust your numbers

• There are fewer surprises at close

• You get to keep more of the value you’ve built

“If you have a clear understanding of what working capital needs exist as you enter the transaction, then you’re not surprised... and you don’t have anything taken out of the actual purchase price.”

The earlier you take control of your working capital, the smoother—and more profitable—your exit will be.

Final Thoughts

Most founders spend years building their company and just weeks preparing to sell it. That’s where deals go sideways. Working capital may feel like a small line item, but it has a big impact.

The best time to get ahead of this is now—not after you’ve signed a letter of intent.

What to do next:

• Review your current working capital position

• Clean up your receivables and payables

• Talk with your CFO or accountant about setting a normalized working capital target

• Run mock waterfall scenarios so you know what actually ends up in your pocket

Because in a transaction, what you keep matters more than what you sell for.